The Bitcoin Standard Podcast 97. Bitcoin Strategy with Michael Saylor

Link to the video: https://youtu.be/eRvBj7j24B0

Saifedean Ammous: Hello and welcome to another episode of The Bitcoin Standard Podcast. On today’s podcast we have a special guest coming back for the third time, the one and only Michael Saylor, having basically bought up all the Bitcoins. He’s here to tell us about what he thinks of the Bitcoin market, how things are going, his expectations for the way going forward, then we’re going to also discuss my new book the Fiat Standard which Michael had an enormously important role in helping me develop and finalize into the final book. So Michael, thank you so much for joining us.

Michael Saylor: Thanks for having me, Saife.

Saifedean Ammous: So I guess a good place to start is just your general ideas about the Bitcoin space and the Bitcoin market and the developments since the last time we spoke. I think the last time we spoke was in February. It’s been now almost 10 months so it’s been a while. So a lot has happened.

Michael Saylor: Has it been that long? February, really?

Saifedean Ammous: Was it February or March, April? Yeah, a lot has happened. So I presume your bullishness is still intact?

Michael Saylor: Yeah. So you want my summary for the past six months?

Saifedean Ammous: Yeah and I mean whatever you find worthwhile.

Michael Saylor: Yeah well I mean I think if we just focus upon what’s going on: the China crackdown took place, the hashrate moved to the United States, we drewdown to 80–85 exahash and now we’re back up hitting all-time highs again. So I think the overall mining network has redistributed itself and further decentralized itself and has been a Western drift of the Bitcoin network. So I would say geopolitically we saw Bitcoin drift West, and I would say, economically, and that’s all been a good thing. I think we’ve seen a substantial Western embrace of Bitcoin since May, even. If we look at the political winds that are blowing clearly there’s a lot of support. There was a fear I think six months ago that we might have government antipathy toward Bitcoin in the West. The most informed criticism was Ray Dalio’s, Well it’s so good someone’s going to ban it. First it was, Well I don’t get it, I don’t like it, it’s bad. And then became, I guess it’s not bad. And then it became, Well I guess it’s not going away and it works but it works too well. Then it became a Jamie Dimon, Ray Dalio, It’s just too good. Even Frank Giustra. Eventually everybody kind of revolved around or settled upon the narrative that, Yeah it’s not bad, it’s good, but it’s too good and that’s why I’m afraid of it. And I think in the last six months we see in fact the opposite has happened: the administration’s in favor. We’ve got supporters of Bitcoin in the administration. It seems to me like Biden was a positive check, the entire set of administrative regulators were positive checks. Most of the noise around regulation is really just the altcoiners, right? The DeFi people, the security token people, the staking protocols, the stablecoin issuers, and they want to generate a bunch of noise that regulators are hostile, but I can’t see any activity in the past six months from a regulator that was, in my opinion, hostile to Bitcoin. I think that the politics right now are such that you have kind of Crypto versus Bitcoin. You have all the altcoins versus Bitcoin, and generally if the altcoins could drag Bitcoin into the debate — if it’s bad for the altcoin, they want it to be bad for Bitcoin so that all the Bitcoiners will support their position. So I think you see a lot of that, where people will try to re-characterize utterances by regulators as being bad for Bitcoin when in fact they’re not bad for Bitcoin — they’re bad for security tokens, DeFi exchanges, unregulated Crypto exchanges, NFTs, or something else — but not Bitcoin. I think the other dynamic you see here is a little bit of tension between the entrepreneurs that control the industry in the first decade, and the institutions coming in the next decade. Like, everybody in the world agrees that digital currency is a good idea. I mean the Chinese want digital currency. I think every country wants it. Even the US wants it. We just can’t agree on whether or not you should be an FDIC and chartered bank to issue it, and what are the licenses you need to issue a digital dollar versus anything else — versus an analog dollar. So I think there’s a lot of noise that’s all about, Will the entrepreneurs continue to be able to do business unfettered? Or will they need to come public? Is it public investors or private investors? Is it public companies or private companies? Is it chartered banks or techno-entrepreneurial banks? Is it onshore or offshore? I think that in the past 30–60 days, the thing that’s surprising to me is actually there’s so much general support for everything in congress, in the senate. The narrative was they’re going to ban it — I think that my observation is: they don’t want to ban anything! Which actually means that you have the administration in the middle, you have the politicians on the liberal side, and then you kind of have a Bitcoin maximalist on the other side which is to my mind interesting. I think that the volatility in the market right now is because Bitcoin is still conjoined with the rest of the Crypto industry. Like, as far as I can see the people driving the market in the near-term from day-to-day are large pools of hedge fund capital and investor capital, highly leveraged fast money that’s cross-trading Bitcoin versus every other altcoin offshore and in DeFi with huge leverage, and their time horizons are one minute to one week. Like for example, if you look at minute-by-minute trading patterns of Bitcoin versus ETH, they’re trading in lockstep almost every 60 seconds. Like you’ll see a dump in the market in ETH and it’ll be reflected in Bitcoin in 30 seconds. And so that’s interesting, and I’ve seen that correlation going on for a while irregardless of news. And of course I think that a lot of people have a lot of money and they have a lot of leverage. You can trade with 20x leverage. In theory, if you cross-collateralize through a DeFi exchange, you could trade with even more than 20x leverage. So there’s a lot of fast money with a lot of leverage trading across the CeFi Crypto exchanges and the DeFi exchanges, and they’ve got Cardano and Dogecoin cross-collateralized to ETH, and it seems pretty clear to me: someone’s got a big block of Bitcoin tied up in ETH, in the ETH network, and when ETH trades down, Bitcoin’s trading down almost like they’re a fused currency pair or fused asset pair and they couldn’t dis-integrate that in the near-term. Over the long-term, like months, quarters, years — yeah — but in minutes, hours, and days, it seems like there’s a lot of integration there. So what do I think in general? Obviously I’m bullish on the asset class. It seems to me that we’ve got remarkable consensus that Bitcoin is digital property, we’ve got remarkable consensus that Bitcoin is the one universally accepted commodity, we’ve also got a consensus growing that everything else is a security, by the way, Saife, which — if you roll the clock back 12 months, I think it wasn’t clear — but I think right now, out of 6,500 Cryptos, I think that you might have a debate over 12 of them being property, and it looks like everything else is a security. And if you’re a proof-of-work coin that’s a fork of Bitcoin or something like that, maybe there’s a debate about whether it can be property — half of them aren’t, half of them are. But everything that’s got an ICO, everything on proof-of-stake, everything related to DeFi, all of the functional coins, all the staking tokens — it’s pretty clear the view of the regulators is: if there’s staking involved it’s a security, if there’s DeFi involved it’s probably a security, if there’s a central organization, if there’s a venture capitalist involved it’s a security, if there’s a central development head it’s a security — any of those things are securities. And I think a lot of people don’t want to embrace that reality, but that is kind of the reality. And so we’re in this very interesting tension where what should theoretically happen is: most of the altcoins should disappear or they should disappear, a few should become publicly listed, privately listed security tokens with disclosures and different rails, a lot of the entrepreneurs should exit — they get squeezed out of the market — a few entrepreneurs can become public, like, cross the chasm. Can you get an FDIC license in order to issue a stablecoin? Right? That kind of stuff. Can you actually get the appropriate license? Can you hire the right lawyers in order to get through that chasm? And some do, but 98% don’t, and what I see coming from the president’s working group and all the regulatory — if you read the stablecoin memo, if you read the denial of the spot ETF, if you read the Crenshaw memo — which was issued by a commissioner of the SEC, Caroline Crenshaw — and if you parse all the testimony of the regulators in congressional hearings and public speeches, the conclusion you come to is: there are two things that are acknowledged that the world wants. One thing the world wants is it wants digital dollars — stablecoin digital dollars — and it wants $10 trillion of it, $20 trillion of it? Like, we’ve got a $160 billion dollar stablecoin market with Tether and Circle leading, but what the world really wants is it wants $10, $20, $30, $50 trillion of it — I mean, they want to replace their lira and their pesos. Every currency in the world, they want to flip from local currency to dollars, and they want to go from analog dollars to digital dollars. I don’t trust the peso or the lira so I want the dollar, but I don’t trust the bank so I want it out of the bank. So if I were to go and interview a thousand people on the street in Africa or South America or Asia and I said, Would you rather convert your local currency to the US dollar? And would you rather have your dollars in your hand versus in your bank? I think that you’d have like 95%-98% consensus that everyone would rather have custody of their own currency and they’d rather have the strongest currency in the world. And the US dollar is the strongest currency in the world for two reasons: one, because you can trade across borders. You can trade between Libya and Lebanon and Turkey and Paris and the US with the dollar, and you can’t do it with the CNY or the euro or the local currency. So the worldwide global medium of exchange. And the second reason they want it is because it’s losing value the slowest. I mean, maybe there’s like two or three — I don’t know, maybe the Swiss franc or something — there might be two or three currencies that look a little bit stronger, but it looks like you’ve basically got currencies pegged to the dollar, and then you’ve got currencies getting weaker than the dollar at a gradual rate, and by the way, you’ve got some getting weaker to the dollar at the gradual rate that’s shielded by capital controls. Like, I think the CNY is getting weaker than the dollar but there’s capital controls so it’s not so obvious — it’s pegged, but with capital controls. And we know like the Argentine peso is pegged with capital controls and it’s still getting weaker at a rapid rate. The 100 pesos to the dollar is the official rate, 200 pesos to the dollar is the unofficial rate, and it was 20 pesos to the dollar 36 months ago. So I think what you see is: the dollar is setting the standard — everybody pegged to the dollar that’s got no capital control they’re just weakening at the same rate, the ones with weak capital controls are weakening 10% faster, and others are weakening 10%, 20%, 30%, 40%, 50% faster and they’re literally collapsing. So that’s the currency story: everybody wants digital dollars and they don’t trust their banks. And then the property story is — and this not uniform, right? — I think that smart people that are informed know they want to swap out their weak property for strong property or their weak asset for strong asset, but there’s a lot of debate there. So you know what I would say: I would say every property is weaker than Bitcoin so sell your real estate, sell your equity, sell your bond, sell your gold, sell your silver, sell your commodities, so your collectibles, sell everything and buy Bitcoin. But generally not everybody fully understands that — I don’t know, we’re 2%, 3%, 4%, 5% into the education. And Saife, everybody in the world understands that the dollar is better than their local currency. There is not a debate. 1.5 billion people in China, everybody in Brazil, everybody in Argentina, everybody in Africa—

Saifedean Ammous: I’m sorry to tell you, but unfortunately I know from Lebanon there is significant debate about this. People have maintained the idea that their lira is going to be recovering against the dollar as the lira has gone from 1,500 to 25,000 — there’s still people delusional enough to say, Oh 25,000, well this clearly undervalued now and we’re going to come back to 12,000.

Michael Saylor: Okay I’ll defer to you since you’re on the ground there and I will retract my statement. I’ll state it [this way]: absent extraordinary patriotism — idealistic patriotism —

Saifedean Ammous: Brainwashing is another word for it.

Michael Saylor: Let’s just say even like 80% — the great majority of people absent the patriots and the idealists know that they’d like to swap out their weak currency for a strong currency. On the other hand, there’s a lot of debate in the US or in other markets about, Do I want to hold the S&P Index? Or do I want to have a second investment property? Or do I want to own some gold? Or do I want to own commodity baskets? Now, let’s come back to the whole point, though: I’m talking about regulators. If you parse very carefully Gary Gensler’s public statements — no less than five or six occasions — he said there are two things that stick out, two things that are very important, maybe three things: I’m going to reduce everything that’s been uttered by the most influential regulators in the world to three things. One thing: Satoshi’s innovation is real. Which is another way to say, We have created truly decentralized digital property in cyberspace that is not owned and controlled by any company, any individual, or any government. We have common property pari passu to gold or land or commodities. That’s the first innovation.

Saifedean Ammous: The immaculate conception as we like to call it here.

Michael Saylor: And it’s another way of saying, If I understand securities law and if I understand law and if I understand finance then I will acknowledge that you can create digital property assuming that you have a fair permissionless network without an ICO or a central party or an investment contract. So we know that Bitcoin has done it, it may theoretically be done again by somebody else — maybe a fork a Bitcoin — probably your best argument would be a fair fork of Bitcoin now. If it were to fork right now then maybe the thing that was created could also be deemed as property — I’m not saying it would succeed, right? Here’s your best idea: what if the Chinese government forked Bitcoin and then made it illegal to use the first fork but the second fork they kept in China, and then they didn’t interfere with it any other way. And maybe if Elon Musk forked Bitcoin inMars and you had Marscoin Chinacoin and Bitcoin, and all three of them started from the state of the network right now, and then they had some geographic, political reason to be separated, and you could hold that China wall or that Mars wall up — and there’s nobody in Mars, but if there was — if you could do that, then maybe you have another digital property, right? Maybe.

Saifedean Ammous: The bar set for altcoiners, basically. This what you gotta do.

Michael Saylor: That’s a good way to say it: Satoshi set a high bar — but that’s the bar! The Bitcoin standard, the Satoshi standard, is a fair distribution without an ICO without intent to profit on the efforts of others that is just a community property. So that’s the first thing to take away. The second utterance: to be able to trade 24/7/365 at the speed of light with zero friction is useful in the world of commerce. That is to say, I think that Gensler recognizes — and I think any fair regulator or economist or politician recognizes — that there’s a benefit to be able to move stuff at the speed of light friction-free 24/7/365. The digital transformation of the economy, or Fintech, if you will. And for that to manifest itself effectively right now, you need a digital dollar, you need a digital currency. And I’ve said before — why? Because there’s a hundred million companies that have collectively invested trillions and trillions of dollars in accounting systems and installed those systems over 30 years so that they can trade with each other. And because of the inertia of the accounting systems — the systems inertia, the corporate inertia, and the existence of nation states — it means that it is either illegal or impractical for all the economic actors to not trade in currencies. So as long as the EU and the US exists and as long as the US dollar and the euro are legal tender and as long as companies like SAP and Oracle run the accounting for Disney and McDonald’s and Pfizer and the US government and the payroll etc. — as long as that happens, then you’re going to use dollars and euros. But what we know, what we recognize is: that not being able to move them on the weekend with a computer is holding back the worldwide economy. Even today just about every day, I pick up the phone and then I have to approve wire transfers — like, this a 30-year-old way to move money around — 30 years. So we still have a situation where it’s very challenging to move currencies as a medium exchange. So the second thing that everybody wants is: they want the digital currency. And they want a small amount of local currency — digital rupees and digital pesos and digital niara — as long as there’s a nation state that exists you need a small amount of that. Hold it for a day, right? Digital bolivars. And then they want a larger amount like a month to a year’s worth of digital dollars. And then after that what you want is you want something to hold over a lifetime: digital property. So I think that the first observation is digital properties and innovation. The second observation is we need digital currency and people need to trust this stuff — and nobody trusts stablecoins right now issued by entrepreneurs offshore. The never ending Tether FUD — never ending. And Tether is an entrepreneurial company — I’m glad they exist — and they exist to meet a need, and if my choice was to have money in a bank in Afghanistan or hold Tether dollars on my phone then I would prefer the latter than the former. It’s pretty obvious why they exist. But if J.P. Morgan issues a trillion dollars of stablecoins, it’ll be good for the industry. It’ll be good for the world. At the point that you have a Silvergate Bank, a publicly traded bank — they just raised $480 million dollars last week by the way — a publicly traded bank with an FDIC license that issues hundreds of billions and then trillions and then tens of trillions of dollars of US dollars? That’s the bargain that it takes for the US government to trust the coin moving — that’s just the expectation they have. And it’s not an unreasonable one, because there’s no way that Facebook or Google or Apple or Amazon will ever move trillions of dollars of stablecoin around from Tether — it won’t happen, right? And there’s no way that you will see Microsoft and Amazon and IBM and Pfizer do cross-border payment remittance unless they have access to a stablecoin from a Bank of America or Citigroup or whatever. So if you’re looking for the big use cases for these things, you’re going to want to have massive amount of stablecoin for global remittance, for payments between 8 billion people, and for the hundred million companies to trade with each other. So that’s the second observation. And the third observation that you get over and over again is: most everything else is a security. If there’s an ICO and it was issued in expectation of earning a profit and it is a small group of people — if we’re depending on the efforts of others — it meets the meets the definition of an investment contract. It’s a security. So what we’re waiting for is clear guidance about: if you’re currently owning securities or you’ve issued one, what do you do next? If you’re trading them, what do you do next? If you want to issue a stablecoin, what do I have to do to get to a stablecoin? And that creates a lot of regulatory uncertainty and overhang if you’re a Crypto trader, if you’re a DeFi exchange, if you’re a security token — all of those. But where is there no overhang? If you just want to own Bitcoin as digital property for a hundred years and hold it as a store of value, it’s crystal clear: it’s not going to be banned. It’s not even banned in China! I mean, per official guidance, the Chinese don’t want you to trade OTC. It’s a capital control issue. They have this issue with mining Bitcoin which is silly, but I have yet to see a bright line edict in Chinese that says you cannot own digital property. They haven’t said it. In fact they’ve said the opposite. And everywhere else where there’s regulatory action, it seems to me that it’s all touching on stablecoin issuance, stablecoin transfer, it’s touching on tax, it’s touching on securities laws, and leverage. And the frustration of the other token holders and the entrepreneurs is obvious and high, and I think that Bitcoin suffers due to the volatility that’s induced by being conjoined, literally — like, there might be billions of dollars of Bitcoin that’s actually linked as a trading pair as collateral to ETH, and every time it moves, everything is moving up and down literally second-by-second, minute-by-minute. And you know, it’s illegal to trade with 20x leverage on the NASDAQ — it’s illegal. But in fact what you have in the other Crypto markets is 20x-100x leverage, and you can cross-collateralize that stuff. The regulators have yet to give clear guidance. I think they don’t really want to crash the market. I mean, they could literally crash the market. But I think that that’s a 36-month thing, Saife — I don’t know if that helps.

Saifedean Ammous: Yeah. I think it’s very astute what you said that the alts are trying to drag Bitcoin into this, and I think your average altcoiner is usually out there complaining about Bitcoin consuming so much energy and Bitcoin is boiling the oceans and Bitcoin’s outdated and we don’t need Bitcoin and we need to move on. And just yesterday I saw some guy from one of the most centralized crippled shitcoins — which I won’t name explicitly — making a proposal for how to advance Bitcoin by moving off proof-of-work in order to reduce electricity consumption. So they’re always so concerned about Bitcoin: they need to change Bitcoin and they think Bitcoin is dead and they want you to not invest in Bitcoin because they want you to join the gains — until the regulators come about, at which point they start getting angry at Bitcoiners because Bitcoiners aren’t supporting us and Bitcoiners are cheering on the SEC and Bitcoiners are being statists. And it’s pretty interesting, and I think that you also see that as well from a lot of the organized lobbying. I think a lot of the D.C. coin people, their modus operandi is to try and get — I mean, nobody lobbies for Bitcoin. That’s the thing — a very few people. Like, if you get Bitcoin, you realize it doesn’t really need you to lobby for it much, and you realize there’s a very high opportunity cost for investing in lobbyists, and you’d rather just stack sats with it — because Bitcoin is clear. It’s very clear that — as you said — Satoshi’s innovation is real, the immaculate conception, it wasn’t a security, it was obvious it wasn’t a security, it was just a digital form of property that emerged organically on the Internet, nobody controls it, so there’s no point behind wasting money on lobbying, but there is a lot of incentive for altcoiners to spend a lot of money on lobbying because it’s very clear that their altcoins are securities and so there’s a lot of incentive to try and bundle in the altcoins with Bitcoin in order to try and pass it off as — and you know, everybody wants their altcoin to be part of the small number of alts that are like Bitcoin. Well, ours is decentralized — ours and Bitcoin are decentralized, but all these other ones, let the SEC tear at them. I’m also wondering: what do you think in terms of — I think in a sense, the attack on Bitcoin — many people, many Bitcoiners have been pretty paranoid about the idea that governments are going to attack and it seems even the China thing as you said. Yeah, they banned the mining, but they haven’t banned ownership and they haven’t thrown anybody in jail because they own Bitcoin. They haven’t criminalized it. It’s not like owning cocaine. You’re not getting searched and arrested for it. But it seems to me like fiat world is fighting back in a sense perhaps by people who are from the fiat world — I’m not saying this as kind of a conscious conspiracy — it’s just intellectually, they think of it as the fiat coins, the alt coins, because they’re centralized, they allow us to do more tricks, they allow us to have more leverage, they allow us to have more credit, more financing. It looks to me like that is kind of the attack on Bitcoin. Like, people who are not excited about the prospect of hard money and escaping fiat are thinking of boosting all the non-Bitcoin coins. Like, you think of somebody like Elon Musk coming in and choosing to pump Dogecoin. I think that’s not entirely unrelated to the fact that a lot of people coming from traditional finance are in the fiat mindset of, Money needs to be controlled by a group of people.

Michael Saylor: Well I think that if the Bitcoin community just embraced the idea that Bitcoin is digital property and is going to coexist with digital currencies issued by the United States or Europe or China, then 99% of all of the resistance and friction just disappears completely. And then what you realize is your debate is with gold and your debate is with real estate and your debate is over whether you should buy the S&P Index, and this just becomes an investment decision. And then everybody that doesn’t want to own Bitcoin because they want to own Apple stock just looks like they like Apple stock, right? Like, if you want to invest in a VC venture, if you want to invest in a hotel, if you want to invest in a stock, if you want to invest in a collection of Picassos, these are all just different investment decisions that you made in lieu of buying Bitcoin. If you characterize it like that, then it becomes a lot less controversial, a lot less heated. Just step back and let the battle of the currencies take place between the currencies. I mean, the real battle right now is between the dollar and the peso and the niara and the RMB, etc. — all the currencies. And there’s no reason — if Bitcoin doubled every year for the next decade it still wouldn’t be but a small fraction of the money in the world. So for the next decade, we could simply be good citizens, watch digital property grow from being one out of $500 trillion dollars — we’re 1/500th of the property in the world or something like that — why not just become 20% of the property in the world? If we’re $200 trillion and there’s $1,000 trillion we’ll be 20%, so at the same time — like, if I’m gold, the gold people, they want us to agree that we’re both sound money and the enemy is the Fed. Okay well let’s think about that for a second: I’m going to basically give the goldbugs 90% of the money — they’re gonna they’re going to be worth $10 trillion, I’m worth $1 trillion — and we’re both going to collectively agree that we want to topple 100 million businesses, all the accounting systems in every nation state in the world together. Like, why would I even bother? Why not simply just destroy gold? Why not just take the $10 trillion of gold and go from $1 trillion to $10 trillion? Try walking into the boardroom of Disney corp or Coca-Cola and telling them that, We’ve decided that we stand for toppling nation states and the currency and what we want them to do is buy Bitcoin — I’ve said this before: you literally could line up everybody in every corporation in the world, hold a gun to their head and say, You have to stop taking dollars and switch your accounting systems. And you have to shoot them all. Because even if they wanted to, they couldn’t. Nobody can change the fact that the world runs on dollars and the accounting systems are wired for currency. So we’re picking a pyrrhic battle. Like, we’re going to war over nothing, because if you just understand Bitcoin is property and you accept the fact that, Okay well what’s the negative? The negative is: if I transfer it and I sell it I have to pay tax on it — that’s the negative. What’s the positive? You’re not supposed to sell it! Like, the worst thing you could possibly do, in my opinion, is encourage people to give up their Bitcoin. So it’s not a problem that you have to pay a tax if you just never pay it. The current tax code implies that you should buy [Bitcoin] and hold it forever. And the current tax code of currency implies you should get rid of [currency] as soon as you can, because there’s no cost to get rid of it. So if we simply looked at the world like that, then we would stop wasting so much energy. If you’ve looked at every single banker, every time they say, Well is Bitcoin a currency? Well I mean their answer is, No, it’s not a currency. Jerome Powell can’t admit it’s a currency. Christina Lagarde is saying it’s not a currency. And then the Bitcoin community oftentimes recoils in horror like, Yes we are! Yes we are! Why do you want to be? Why can’t you actually be property worth $10 million dollars a coin and not be a currency? If I told you you could basically go from zero to $10 million dollars a coin and everybody will help you along the way — every company, every government, will help you along the way to become worth $10 million dollars a coin — or, you can fight with everybody the entire way, and if you succeed you’ll have toppled every government and every political group and every company and destroyed the entire 20th century economy, but you’ll have your currency. Like, what’s left? If I rip every single company to zero and I destroy every country and every political system, you’ll have your currency, but what are you going to buy with it when every company is non-existent and every government doesn’t exist? You can’t even buy bullets to defend yourself in the post-apocalyptic anarchy that follows, because bullets get manufactured by companies that use accounting systems that run on dollars. So I guess my point really is: it’s not a battle to fight. Ultimately, there’s a view. The view is: well, the politicians have too much power and they use the currency to abuse that power — yeah. And the solution is: you basically demonetize everything in the world that’s in the physical realm and you demonetize all the currency derivatives and you just do it gradually in such a way that every company and every government that’s smart enough to buy into it benefits from it, and then one day you wake up and instead of 60% or 70% of the wealth in the world being a currency derivative, it’s 10%. And when 10% of the wealth in the world is a currency derivative and the rest is digital property, then inflation won’t be so much a problem anymore, right? Very shortly, inflation’s not going to be — like, people in Venezuela don’t have to worry about the government forcing them to hold the bolivar and inflating it because the bolivar has already lost so much of its energy that, at this point, when the government can no longer print the money and inflate it, what you really have to worry about is the government just seizing your property at the barrel of a gun. They’re just going to expropriate it, right? Any government that prints too much currency eventually loses their currency privileges, their currency collapses, and so what you’ve got is this rippling succession of currency collapses, and eventually what happens is you get down to like three or four currencies, and every single year the currency is 10% less of the economy than it was before. And at some point we’ll be down to the CNY and the USD, maybe. Maybe there’s like four currencies left, and instead of — how much money is denominated in USD right now? You’ve got you’ve got all the USD, you’ve got every other currency pegged to the USD, you’ve got $100 trillion dollars of sovereign bonds or whatever, then you’ve got $50 trillion dollars worth of currency derivatives that are equities, then you’ve got all of the commercial real estate which has got rents that are capped at CPI, so they’re currency derivatives. So if I stacked everything up, I have like $300-$400 trillion dollars worth of currency derivatives all pegged to the dollar, about, and if Bitcoin grows to be $100 trillion to $200 trillion, then you would have $100 trillion in currency derivatives pegged to the dollar — and now the ratios shift, right? And as the ratios shift, then inflation gets to be less of an issue because the currency collapses. Like, when do politicians realize they can’t inflate the currency? I think that in Turkey and in Argentina and in Venezuela they’re figuring it out right now, right?

Saifedean Ammous: You’ll be astonished: in Lebanon, nobody has any idea that inflation is a problem. It’s truly shocking. Like, nobody thinks the money printing is a problem. People see that all the money in their hands has been printed in the last two years, the money supply has gone up about eight-fold in the last two years — eight-fold increase, so about percent increase in the last two years — and you will almost never hear anybody mention inflation as being part of the problem. It’s astonishing. But yeah, you’re right: eventually they’re going to figure it out.

Michael Saylor: When their currency collapses, right? Like, for example: what would be the market to issue Argentine sovereign debt right now in New York City? Not very high, right? So at that point you have to switch to taxation or rationalization. You have to start to rationalize your expenditures down—

Saifedean Ammous: And physical printing — physical printing is what they’re doing.

Michael Saylor: It becomes taxation, or you go to rationalization, or you go to expropriation and confiscation. We’re going to get there, and when that happens, the result is a function of lots of things that are above my pay grade. But if I was sitting in any country right now and I wanted to do the best thing for the world, I wouldn’t say, Buy Bitcoin so that we can defeat your central bank. I would say, Buy Bitcoin because it’s better than buying a building. If I was sitting in Turkey and I was giving a presentation and Erdogan was listening, my message would be: you know, you can invest in a building or a company, but Bitcoin is probably a better investment — it’s even a better investment than gold because Bitcoin is pure digital energy. It’ll be good for Turkey, it’ll be good for you, it’ll be good for the Turkish lira. Don’t you want everybody in Turkey to get rich? Like, Bitcoin is an export: digital energy is an export industry. Whereas investing in a building or a piece of land in Istanbul is a domestic industry. So I think that it doesn’t matter who you are: everybody pretty much gets the idea that we’re better off if we have 21st century clean export industries that are generating huge cash flows or huge benefits to the domestic economy. So I would say: [Bitcoin] is property by law. It’s a legal definition that’s defined by the Communist Central Party, by the IRS, by the EU in Brussels. You can either embrace that and say it’s property — Okay, it’s better property. Let’s go ahead and replace the other $500 trillion dollars of property with a better property. Why don’t we grow 500:1, and somewhere around 200:1 or 300:1 we can come back to our political debate about whether we like the idea that governments can have a currency? Like, if you don’t like the idea that the government gets to designate the currency while you can run for office and you can you can try to change that — but at this point in time, the likelihood that you’re going to get the EU or the Chinese party or the United States to abandon their currencies is next to nothing, and all you’re going to do is you’re going to divert 99% of your energy from something constructive. And the constructive thing is to stop people from making mistakes of buying a second rental property as an investment or buying gold —

Saifedean Ammous: Or a checking account. Or a savings account, which is the same thing these days.

Michael Saylor: Right. You don’t need to be the enemy of the people or the enemy of the government to promote digital property as a better idea.

Saifedean Ammous: Yeah, I must say you’ve kind of won me over a lot on this regard — you may not be able to tell from my Twitter and my public pronouncements — but I sympathize with the idea that we’ll cross that bridge when we get to it. It’s still a very long way away, and at this point I think the comparative advantages of Bitcoin is just that it is a much better form of property and a much better store of value — and the political implications will come later. And I think the engineering side of me sometimes begins to think we’re better off just focusing on this engineering aspect of it rather than just thinking about the political implications because A) the political implications are just going to get people in trouble, which we don’t want. Especially when — if you’re holding the royal flush in your hands and you know that this is going to win eventually whatever happens, it is just going to win out against all the other combinations of cards that you could come up with — then you don’t need to be going around telling everybody that you’re going to be winning. In fact, generally it’s a very bad tactic to celebrate victory before it happens. And I can see the point that, Yes, I think you’re absolutely correct on the demonetization of gold — it’s something that I think doesn’t really appeal much to me being a hard money person, Austrian economics — but I think it’s reality at this point, and I think clinging on to gold was probably the biggest financial mistake that I’ve ever made. Even after I heard about Bitcoin for many years I still considered, No no no — it’s still tiny, and gold is the big deal, gold is the real thing, there have been pretenders against gold before. But I think this is it — it’s over. I think Bitcoin is only about a tenth of gold at this point and that’s just within throwing distance by Bitcoin standards, so it’s clear that gold is being demonetized. It’s not rising as everything [else] is rising. You keep pointing out that lumber and copper and nickel have been rising more than gold, and so that’s an enormous $10 trillion dollar market of people who still save money in gold and still buy gold and at this point you may as well be holding fiat currency. In fact you are in a sense holding fiat currency because central banks hold about a sixth of all the world’s gold, so you’re just basically pumping central bank bags when you’re buying gold — that’s the reality of it. They control the market for gold, they control the market for settlement and clearance of gold, they won’t let there be free markets in gold so that you could have a bank built around gold, moving gold around is still enormously expensive, it can’t compete with fiat or Bitcoin in terms of moving it around and in a global economy that’s a death sentence, and I think in the last century you could have resisted that death sentence because you didn’t have an alternative to gold. But now we do: we have Bitcoin. And I think I also agree with you on the fact that the US dollar is going to basically eat all the other fiat currencies. It’s very obvious that all over the world people would rather hold dollars and I think it’s just a matter of the same analysis that I use in the Bitcoin Standard about the hard money driving out the easy money definitely applies for the dollar and all the other currencies. The US has an enormously larger margin for inflation than all the other currencies because the currency is just so much bigger. And so the Turkish lira, Erdogan needs a whole lot of inflation in order to squeeze out a tiny little bit of extra money, whereas the US government needs a very tiny little bit of inflation to finance itself and its military. So I think I agree with that, but I’m wondering, like: how do you see this playing out? Do you really think that the central banks are going to just legalize and allow their banks to hold on to digital currencies? And how does that fit in? You said J.P. Morgan is going to issue $1 trillion of stablecoin, but won’t it just be central bank digital currency? Why do you even need J.P. Morgan? Because you look at the Chinese model with a digital yuan and you can see with the universal basic income stuff coming along, why do we even need J.P. Morgan? Why doesn’t the the Fed just add an app to the Google and Apple Store and everybody can get a dollar?

Michael Saylor [timestamp 50:54]: Well I mean first of all the government couldn’t do it if they wanted to. If you go back and parse Jerome Powell’s comments on the subject six months to four months ago he was pretty much saying that in about four years we’ll study it and maybe in eight years we’ll do something. And then I think Christina Lagarde at the same time said, Well we’ve decided we’re going to start studying it. And the Chinese were testing it. So in terms of the spectrum, the Chinese were were sort of aggressively testing it, the Europeans were thinking about studying it, and the Americans weren’t even thinking about thinking about studying it yet, to paraphrase. There’s no political consensus. There’s no political will in this country for the for the central bank to actually issue currency. You can see that the utterances of senators and congressmen for the past three months: they recoil in horror at that idea. You can also see it with the withdrawal of the name of the candidate for the OCC: did you see she just withdrew her candidacy because she had articulated support for such a notion as you just described and nobody wanted to see that. So keep in mind that — you think the banks, you think J.P. Morgan, Bank of America, Citigroup, or the like, you think they would like to see it? So sometimes I think we just we’re too imaginative in our conspiracy theories. You can’t simultaneously have a strong banking lobby that’s your enemy and then also imagine the government overcoming the same strong banking lobby to also be your enemy, right? So if you see the world in that adversarial way you think the worst, but a different view is this, which is: it’s not bad for the United States dollar to spread around the world. It’s not bad if the banks start issuing the dollar. And if people could move the dollar faster on some kind of high-speed Crypto rail then maybe that’d be good for Bitcoin. Everybody advances together. So what do I think will happen? Yeah I mean I think that you’re going to see big banks — it’s not clear to me whether J.P. Morgan or Goldman Sachs will jump on this as aggressively as Silvergate Bank. It’s not clear. But it is clear that someone’s going to get on this very aggressively: it’ll either be like an Avanti moving forward or it’ll be a Silvergate Bank who’ve already said they’re doing it — I mean they’ve been very explicit about it. Or it’ll be a J.P. Morgan or a Bank of America that’ll do it. Again, governments have to be very adept at doing things and oftentimes they’re not, so I don’t expect any of these governments to do it effectively, even in China. I don’t think the Chinese government is nearly as effective as their private sector. I mean we saw that with the Alipay, Alibaba, WeChat-type issues: they still have companies and there’s still tension between the companies, the regulators, and the central party. There’s a federal level of the Chinese government, then there’s a provincial level — it was provincial politicians supporting Bitcoin mining in China, and then there’s regulators, and then there’s companies. So it’s just hard, and ultimately you have to have the technical wherewithal to do it. But I guess even then it doesn’t really so much matter what any other regulator thinks. The single most important entity here is the United States and the administration, because if the dollar is the world’s reserve currency, then the digital dollar as defined by the administration and the regulators, treasury, etc. are gonna set the standard for how digital dollars move. And I think it’s pretty clear what they want. What they want is: either you’re an FDIC-approved bank or some public regulated entity that meets the same standards. If you read the SEC denial letter on the spot ETF, what they say over and over again is they’re troubled by the fact that Bitcoin trades on Crypto exchanges that do not meet the standards and abide by the principles of national securities exchanges, and those principles include ideas like: don’t lie, cheat, and steal from the customer. So if you look at the principles there, they’re basically saying: we want transparency and a set of principles and we want them to be abided by in the Crypto exchanges. And with the stablecoins they’re saying: we want to be able to trust that just like a bank and we don’t want some — I mean, the real nightmare scenario would be some entrepreneur offshore has $10 billion in capital. I could have $100 million dollars in capital, I could spin up Yo-Yo Coin and have $10 billion of Yo-Yo Coin. I could mint an NFT on it and I could trade it to myself three times from $100,000 to $3 million to $10 million, I could print it all with basically wash trades, I could lever it up 20:1, have $25, $30, $40 billion of Yo-Yo Coin and then I could use it to back a stablecoin and the stablecoin becomes $200 billion or $500 billion worth of US dollars. That’s the nightmare scenario where: you’ve got nothing at the bottom, you’ve got a Cryptopunk that circulated six times in blind wash sales that was levered up to an altcoin that was levered up to a stablecoin that was released, and now that stuff gets into consumers’ wallets and it gets used for commerce and it becomes a systemic risk. So you can’t blame the regulators in that way when they say: we don’t like the idea that there’s blind wash trades with no surveillance agreements, and we don’t like the idea that the stablecoin issuers don’t meet our standards as banks. And the Crypto community will say, Oh yeah well that’s the regulators attacking Bitcoin. This has nothing to do with Bitcoin! Like, I saw today some Cryptopunk thing traded for $10 million dollars, okay? But if I sold it to myself six times and I started by buying it for a nickel, how much is it worth? Who could say? There’s no way to even figure out whether the person that owned the thing sold it to themself. Like it used to be my concern in an auction would be: you’ve got your best friend bidding on it. But we’re much worse than that: we’re at a point right now in cyberspace where you could spin up a hundred versions of yourself and you could be bidding against yourself, selling to yourself, buying from yourself. What’s it worth? It’s like: what do you want it to be worth? How do you know? It’s opaque, right? So I think that these opaque markets are a challenge, and for the industry to grow up you’ve got to go to the point where there’s more transparency. Securities have transparency, banks have transparency, regulators have transparency. I think ultimately, all this stuff has a huge impact on high-velocity digital assets like NFTs and stuff like this that’s high-velocity. Bitcoin, if you’re holding it as digital property properly understood is low-velocity. The whole idea of Bitcoin is I just buy it and I hold it like I own a building for 27 years. And if you’re holding low-velocity money for 27 years then is that a threat to anybody? Not really. I mean, you kind of get to the — maybe at the end of the day you’ll get to a point where someone will be concerned about that capital moving out of a capital control environment, but it’s like so far down the list of regulatory priorities compared to all these other things like rigged auctions and hyper-levered self-dealing that I think that it’s almost like not even worth being on the radar right now.

Saifedean Ammous [timestamp 1:00:21]: Yeah I think a lot of Bitcoiners worry too much about some of the noises from the regulators, but I think it is far more concerning for these other projects and shady dealings. Moving on a little bit to the Saylor strategy: what do you think of the Saylor strategy? — well first of all, what do you think about the El Salvador situation in general? And also, what do you think about the volcano bond that they’re issuing? It is kind of the application of the Saylor strategy to the sovereign level. Does that kind of make you revise your analysis of the dollar and Bitcoin? Because I mean they are essentially doing the same thing: they’re issuing a billion dollars of bonds and then they’re using half of that, at least, to buy Bitcoin.

Michael Saylor: My view would be: you should issue a billion dollars of bonds and buy a billion of Bitcoin. My strategy is very simple and orthodox, which is: buy Bitcoin with cash.

Saifedean Ammous: Yeah they’re doing half a billion on infrastructure and stuff which is —

Michael Saylor: That just makes a sovereign debt.

Saifedean Ammous: Yeah, it’s 50% sovereign debt.

Michael Saylor: It’s something safe. The truth of the matter is I don’t have an opinion on that. And I wouldn’t endorse everything done by everyone that happens to have Bitcoin attached to it. It’s like you’re asking me about the business plan of a Bitcoin miner. Well, would i buy the Bitcoin mining stock? Some yes, some no, but now you’ve moved into the realm of securities. If you pick — do I endorse PayPal versus Square versus Coinbase versus FTX? That’s a securities issue. Do I endorse a miner? That’s a securities issue. Do I endorse any country doing anything they want? No. But what do I endorse? I think they should buy Bitcoin. Here’s what I think makes sense: you should buy Bitcoin with assets. I think that makes sense. I think that it makes sense to deploy 24/7/365 light speed systems to move assets around. By the way, even the dollar, right? So for example, I think it makes sense to have a digital wallet that has dollars on it and has Bitcoin in it and it moves on the Lightning Network at the speed of light. But you know what? I would endorse you moving on the WhatsApp network too, or the Apple Pay network, or if Google, Apple, Amazon, Facebook, if they all agreed to just move Bitcoin and digital dollars on their own networks, I’m open to that. Now, is that better than Lightning? Like, now you’re back into a proprietary competitive issue. What’s better: Lightning or Apple Pay? What’s better: YouTube or Twitter? If I had a choice of Bitcoin versus the other thing, I always choose Bitcoin. That’s better. Here’s the distinction: it’s an ethical distinction. Bitcoin is property. Property is ethically superior to a security. Like for example, if you ask me: should I own Bitcoin or Microstrategy stock? The answer is: Bitcoin is a property, Microstrategy stock is a security. When you’re buying the security you’re taking management team risk, competitive risk, execution risk. You’ve got Nexus in a nation state, Microstrategy is a US-regulated company, Twitter has got a headquarters, so does Apple. So look, when you go to El Salvador, well El Salvador is a nation state. So should I live with my Bitcoin in El Salvador or live with my Bitcoin in Florida or live with my Bitcoin in Lebanon? — I mean, very complicated question. I don’t really think there’s one answer. I think you’ve got to respect everybody’s choice when it comes to these things, if they have to make a choice. I would applaud the idea that you’re buying Bitcoin. Anything that’s buying Bitcoin I applaud, but I’d rather actually see you say, I took a billion dollars worth of cash and I bought Bitcoin. And then I’d rather see you say, I borrowed a billion and I bought Bitcoin. I think the purist approach is the best approach. When you’re asking me, Would I endorse a bond that’s going to invest in _____? Well if the _____ is something other than Bitcoin then you’ve just enticed me to make a securities statement. Like, should you or should you not do that?

Saifedean Ammous: Well I’m not asking you if you should buy it or not, I was asking it in terms of the previous question where were discussing the evolution of the dollar and Bitcoin. I guess the question here is: this if El Salvador — and this not entirely out of the question — if they go and announce that [they’ve produced] a new currency, if they revive their old colón but this time it’s 100% redeemable for Bitcoin, basically all they need to do is just change the denomination on their Chivo app from being satoshi to being colón. They could make it so that one satoshi is one colón, and then anybody in the world can download that app and send Bitcoin to it. And then that complicates things because now the colón is a foreign currency and that changes the treatment of it in US law. If I’m not mistaken, then you can use that as a currency because it is a foreign currency. So it’s like you’re buying and selling euros. And then probably legally and taxation-wise, does that change the analysis that you’ve offered? What do you think?

Michael Saylor: I think it’s above my pay grade, Saife. Like, getting into the creation of new national currencies is a bit above my pay grade. I have a different point of view: I think that all the currencies are going to go away except for the dollar and the RMB. Like, when everything is reduced to the end game here, it seems to me like you’ve got the dollar, you’ve got currencies in the Western world pegged to the dollar, and by the way the Chinese currency is pegged to the dollar right now, okay? So if I look at it, I’m not sure how much effort I would spend on creating another one. I mean I think that ultimately everybody’s going to dollarize, and if they’re not going to dollarize — maybe the Chinese can stand against the US dollar. I mean, they’re making a good run at it, but the only way that they’re actually pegging to the dollar is through capital controls. If their capital controls fail, the CNY is going to collapse against the dollar. So it seems to me that if you look forward a decade, you’ve got 8 billion people that have a couple of digital currencies in their wallet: they have the local currency they hold for a couple of days, they have the worldwide currency they hold for a couple of months, and they have some assets and Bitcoin is the king asset. There are other assets — I’m not I’m not saying other Crypto assets — but for example, maybe you want to own a share of stock in Apple. If they ever tokenize Apple stock then maybe that’ll be an asset you would hold in your wallet. Now 80% of the world can’t buy securities. They can buy Cryptos but they can’t buy securities, because securities aren’t tokenized — they don’t trade 24/7/365. Let me ask you this question: what do you think the world needs more? Apple and Google token? Or Dogecoin, Son of Dogecoin IV, the Puppycoin token? Like, going forward, Puppycoin the world could do without, but probably Google and Apple the world still wants. So I actually think the only reason you have so many Crypto assets is because they trade 24/7/365 and they’re egalitarian and everybody can hold them, and people can’t buy Facebook token or Apple token or Google token in Africa on a Saturday afternoon friction-free. So it’s possible, when the dust settles, that the SEC will actually create a path for securities to roll off of NASDAQ and New York Stock Exchange and trade 365 days a year, 24/7. And if that happens, then you’ll have assets, you’ll have some property, and maybe you’ll have a gold token — if you’re silly — I don’t know, a Bitcoin token, a something token, and you’ll have some security assets, and that’s your portfolio of investments. That’s your treasury portfolio. And then you’ll have your wallet, your your checking account, and that’ll be dollars and pesos or dollars and euros or something like that or dollars in CNY. And you can see why: I mean, we’re not going to make Apple Computer go away in the next five years. We need Apple Computer. We’re not going to make the Chinese government go away. We need the Chinese government. Some stuff will go away: weak companies will go away, weak tokens will go away, weak currencies will just collapse. But wherever the currency collapses that means the government collapsed, right? I mean, didn’t you just tell me that people still like the lira in Lebanon? So when the government completely collapses, then the Lebanese currency will also be gone. Until that point, what you’ve really got is just a question of ratios. Like, what portion of your money is in each of those things? And if 57% of your money is in Bitcoin and 22% of your money is in equity tokens and then 10% of your money is the dollar and 1% of your money is in the local currency, then that seems rational. And you just move that speed of light. So I guess what I would say constructively is: we would be better to spend our bandwidth focusing upon the macroeconomic situation which is: in 10 years Bitcoin’s up 161% a year, gold is up 1% every year for 10 years, the S&P is up 14%, long bonds are up 2.3% percent. So the real issue is: how do you let 8 billion people pick their mix of those macro assets? And we can see what’s happened the past 12 months right gold’s down 3%, Bitcoin’s up 163% percent, S&P is up 27%, bonds are down 6%. So what you really want to do is you just want Bitcoin to continue to demonetize monetary assets. Real estate’s monetized, equities are monetized. Why are they monetized, Saife? Well one reason they’re monetized is because you can’t buy real estate and you can’t buy equities on Binance. Like, Binance does a really good job of trading stuff, right? Like, here’s what we should like about the Crypto world: they really push really hard this idea of, Let’s upload any token and let you trade it 24/7/365. I mean, between FTX and Binance, they kind of put all the traditional exchanges to shame, right? If you want to liquidate your property, it’s 6–12 months and 6% fee and mountains of paperwork. So it’s really hard to liquidate it once I’m into it, and it’s hard to buy it. How do you buy a piece of Las Vegas real estate if you live in South Africa? You can’t, right? So I feel like the discretionary money is finding its way into Crypto tokens, but it’s quite possible if we tokenize all the other assets in the world that then there’s a different balance. There’s too much money in currency derivatives and there’s not enough money in other things, but if we demonetize some of the other things — like, if you’re international, you’re more likely to buy Apple stock if it’s tokenized in a Crypto exchange, but you’re less likely to buy Apple stock if you live in America once you trust Bitcoin, right? So we have this war of capital and a flow of capital and capital is going to flow from traditional assets to digital assets in one system while while capital flows from Crypto [non-Bitcoin] assets back into traditional assets in another system if all 8 billion people in the world had equal access to everything, which they don’t. I think the short of it is: when you get into this issue of currency wars, you’ve moved into debates between nation states, and I just don’t think it’s a good use of time. I think it’s much more constructive for us to focus upon getting people to reallocate energy from the 99% of the assets which are not currently Bitcoin and not currently digital, and if they just sweep them all to digital then you’ll see a rationalization of investment portfolios.

Saifedean Ammous: Yeah I think ultimately what is driving all of this, the reason people have to be trading all this stuff is, as you call it, money is like an ice cube. I think if the US dollar was inflating every year and the supply was increasing every year at only 1%, I think that would just kill all of these markets. If the supply was increasing at 1% the value of the US dollar in real terms, we’d be probably going up by 2%, 3%, 4% depending on obviously what good you’re looking at, but I think for most people holding on to dollars at that point becomes a very good option. It’s no longer a melting ice cube — of course that’s a very very big if, we’re not going to move to that kind of world — but I agree with you and I don’t want to be too much of a devil’s advocate here and I don’t want to be putting you on the spot, but I think there’s a bit of an unstable equilibrium: as long as the dollar is inflationary we’re going to have all of that money moving around looking for a home, and the only way this resolves is when it finds its home in the best asset. And the tricky part here is that there’s no stopping this train. You said if [Bitcoin] doubles every year for the next 10 years it’s going to be at around a thousand-trillions which is a quadrillion dollars which is currently, in today’s dollars, it’s double the size of all the assets that are in the world. Even if it goes up 150% percent [per year] it’ll be at around a thousand-trillion or a quadrillion in about 18 years. So by that time, I think there’s no escaping the political implications of the fact that you’ve basically eaten up the bond market. And really I think the main course here — the grand prize — is not so much the dollar as much as it is the bond market, because the bond market is what allows the dollar to be inflationary. It’s what allows governments to continue to borrow.

Michael Saylor [timestamp 1:17:43]: I guess my point here is: why would you want to extrapolate out 20 years, imagine a revolution in the world, and then invite someone to assume you’re correct and therefore shut you down now? Wouldn’t it be smarter if you simply focused upon demonetizing gold? Because you might be wrong. I mean, there’s a certain arrogant presumption to assume that you would know what the world will look like in 15 years. There’s a different world, which is: what if everything just becomes digitally transformed and Bitcoin grows as digital property and we have digital assets in the form of equity tokens and Apple stock spreads around the world and then capital flees from this currency to that currency — you know, everybody thinks the dollar is going to weaken, but the dollar is going to strengthen before the dollar weakens. And what if what happens is everything gets digitally transformed and capital moves faster and the world gets rational and if capital flows out of sovereign debt it’ll flow out of other nations’ sovereign debt first which will strengthen the dollar which may actually have the countereffect? So capital is going to flow out of all these things. If capital does flow — let’s say capital flows out of bonds and the bond market collapses. Well the yields are going to triple and then there are a lot of people that are holding capital in value stocks that are going to sell their value stocks and they’re going to migrate into the bonds again, right? And so you’re going to have all sorts of trading for the next decade to two decades and it’s very difficult to know what’ll happen, but there is a pessimistic view which is: well, I’m sure it’s going to pretty much collapse the world and we’re either going to get away with it or please stop us. Or there’s another optimistic view which is: the world’s going to get more rational and as the world gets more rational capital is going to be allocated more rationally and political systems are going to be rationalized and as the world gets more rational things will get better. And at some point — if you believe in the political process — at some point people will spend less money or they will rationalize the tax in some way and there’ll be some peaceful resolution to the thing. So? So be it. Like, we still do need companies, right? You still need companies. So at some point Apple stock’s going to be worth something. Even if it goes to a dollar there’ll be someone that’ll think it’s a good investment. So you need companies. You still need countries. Like maybe they’ll reorient: maybe Canada will break into French-speaking and English-speaking or not, but you still have political systems. Are bonds destined forever? I mean, there’s still a place for bonds. It’s just different bonds at different rates. If bond yields go up then capital will flow back into them.

Saifedean Ammous: The argument that I make in the Fiat Standard is that what’s driving the bond market is not the credit-worthiness of the borrower but rather the demand for a store of value. The reason people are buying Greek bonds and Brazilian bonds and up until very recently Lebanese bonds is because where else are they going to put their money? They still don’t know about Bitcoin and they just think that there aren’t any good ways where you don’t get equity risk. But now with the discovery of Bitcoin it becomes a much more compelling place than lending to all these governments. So yields will go up but then governments won’t be able to service those yields and so I think we’ll likely witness the bond market shrink. And yeah I mean I think there’s also kind of a middle ground between my view and yours here which is that governments will just learn discipline and they’ll be able to buy Bitcoin, they’ll be able to save themselves by buying Bitcoin, and they’ll continue to be able to operate, but they’ll operate responsibly and they’ll get a big boost from their Bitcoin holdings going up but it won’t be a system where they can continuously run eternal deficits. They’ll get a boost that’ll allow them to phase out their irresponsibility, hopefully relatively bloodlessly and smoothly, but then the big high time preference party of the 20th century has to come to some kind of end and the governments that managed to transition to some form of responsibility will obviously do much better than the ones that don’t.

Michael Saylor: Yeah. Yeah I agree.

Saifedean Ammous: Okay great.

Michael Saylor: I mean couldn’t you say that at the end of the day there’ll be three classifications of political reaction? There’ll be some governments that resist reality and they collapse and maybe they collapse into civil war or they just collapse into chaos. And there’ll be some governments that fight, resist, struggle, and eventually reconfigure themselves after great deals of pain and agony. And there’ll be some governments that look at the world and they transform themselves in an agile fashion and maybe they don’t get through without stress but they morph into something different and accommodate the world. What happens if a small country — the best example would be: what if a small country that still has a currency starts printing the currency to buy Bitcoin? The first one, right? There’s a little bit of room. Like, what if UAE or Saudi Arabia, what if they were to go and just start buying Bitcoin with their currency? I mean, in theory, couldn’t you, if you ran a country like Emirates, couldn’t you go ahead and buy billions — $2, $3, $5 billion of this — before anybody noticed? And it might never weaken your currency, right?

Saifedean Ammous: Yeah, they’ve got an enormous amount of excess capital. They’re hosting World Cups that cost them a lot of money. They could be buying Bitcoin and watching the World Cup on TV.

Michael Saylor: I mean a good model to consider is Norway and Sweden and other sovereign wealth funds, right? You’ve got regressive: you’ve got Cuba and Venezuela and North Korea and they’re not really good at embracing property rights. And then you’ve got the middle of the road conventional and their central banks are holding US sovereign debt or gold but mainly just sovereign debt. And then you’ve got progressive nations and Norway is one. Norway’s got a massive equity portfolio. Switzerland’s got a massive — they didn’t use gold, they actually used big tech as a store of value. KSA and UAE — in fact all of the Middle-Eastern countries — they generally have sovereign wealth funds that are holding diversified portfolios of property including equity. They own banks, they own big tech, sometimes they own like tons of property, real estate, REITs, not to mention commodities, oil rights, mineral rights, and the like. So I think generally the world is a more complicated place then we are able to predict. Like, you’re trying to predict what the market will do. Isn’t it the whole basis of Austrian economics that nobody can really predict the market?

Saifedean Ammous: Yeah, it’s human action at the end of the day.

Michael Saylor: And so everybody has free will. Like, Microstrategy can do what it did. Microstrategy stock was $120 and then we flipped and it’s up by a factor of five. And what did we do? We basically bought some Bitcoin and then we started issuing stock to buy Bitcoin. Isn’t that the same as a country buying some Bitcoin and starts issuing currency to buy Bitcoin?

Saifedean Ammous: Yeah. I guess it’s a slightly different because it devalues the currency when you issue more of it, but if you back it up —

Michael Saylor: No it isn’t! It isn’t slightly different because when you issue stock you devalue the stock, right? If you’re issuing equity you’re diluting the equity and if you issue currency you’re diluting the currency.

Saifedean Ammous: But the equity is a claim on the cash flows of the company.

Michael Saylor: And the currency is a claim on the assets of the bank that issued the currency.

Saifedean Ammous: If it’s redeemable in gold or Bitcoin, then yeah. So that’s what they’ve got to do: they have to go on a Bitcoin standard.

Michael Saylor: Let’s be extreme: what happens if UAE buys $10 billion dollars of Bitcoin and the price of Bitcoin then increases by a factor of 20? And next thing you know, they’ve got $200 billion dollars worth of Bitcoin and everybody in the world knows they’ve got $200 billion worth of Bitcoin.

Saifedean Ammous: Well, the first thing that’s going to happen is the Saudis are going to want to buy more, then.

Michael Saylor: Yeah so I think the point here really is: you can spend a lot of time fantasizing about how you never want any banks to buy Bitcoin and you never want any companies to buy Bitcoin and you never want any governments to buy Bitcoin and since they’re not going to ever buy any Bitcoin you’re the enemy of the banks and the companies and the government, right? And you see that narrative. Like: banks are the enemy of Bitcoin, companies are the enemy of Bitcoin, Not your keys, Not your coin, the government’s the enemy of Bitcoin. But the other possibility which just turns the entire thing on its head is: how would you feel if you woke up tomorrow and you found out that Goldman Sachs did buy $10 billion dollars of Bitcoin and UAE bought $20 billion of Bitcoin? Would you be angry? By the way, your Bitcoin would be trading at like $4 million dollars a Bitcoin. And you could be angry and say, No no no, give that back to us! I want to go back to $50,000 Bitcoin. Look, if institutions weren’t involved in Bitcoin, Bitcoin would be trading at like $8,000 right now if you look at the last 18 months. So we could unwind that and you go back to $8,000 Bitcoin or you can move forward, but it’s just a taste. So my what’s my big point here? It’s like, nobody can predict how the future will evolve except to make this one observation: people are generally rational and they take the path of least resistance, and so at some point it’s possible that someone’s going to buy the Bitcoin not because they agree with your most extreme vision of no governments and no companies and living together peacefully in one world currency — maybe that’s not why they’re going to do it. Maybe they just want the money, right?

Saifedean Ammous [timestamp 1:29:24]: Yeah, for sure. Bitcoin is far more popular than anarchist ideology, that’s for sure. I totally understand that.

Michael Saylor: So when that happens then the entire thing is going to tilt a different direction — inconceivable, right? You just don’t even know which direction it’s going to go, but the world is going to find its way forward. You know, when the lockdowns took place, right? There’s this phrase, Life finds a way — the Jurassic Park phrase. When the lockdowns took place, we shut down cruise lines and we shut down airlines and we shut down theme parks and we shut down movie theaters and if you’re an investor in the Disney corporation you could look at the Disney corporation and you could say, Well they’re in cruise lines — oh, and hotels — hotels, airlines, cruise lines, theaters, everything’s shut down. And if you’re an analyst you could say, Well it’s pretty obvious the stock is impaired, the company is impaired, I should just dump my stock or I should short the stock. But at the end of the day someone went on television and said, How’s Disney going to react? And Disney went on television and said, We’re just going to do Disney+ streaming. And they said, Well how many customers do you have right now? At the time of the lockdown they were like the 9th largest non-launch streaming service and it would have accounted for .1% of their revenue or 1% of their revenue and minus nothing of their profit. And you could just focus on that narrative. Or, you could get on TV and say, Yeah, well we think by the year 2025 we’re going to actually be growing 100% year-over-year. And everybody said, This is great! They’ve got a plan!

Saifedean Ammous: Pump it up!

Michael Saylor: Stock at an all-time high! And so the point really is: are you going to bet on everybody to lose and not come up with the right strategy? Or, what are the odds that they’re just going to find a strategy which is a winning strategy and a winning way to accommodate? I mean, nobody from Disney got on television and said, You know, streaming video will never replace theme parks. It will never replace the movie experience. We believe families need to come together in our hotels and be in our Disney world rides — I mean, they didn’t spend a lot of time wallowing in self-pity and dealing with that reality. They just completely change the focus, talk about the new thing, and move forward. So I think that everybody loves a winner and Bitcoin’s a winner and the winning strategy is: let everybody win with us, right?

Saifedean Ammous: Yes, definitely.

Michael Saylor: Everybody can win with us. I don’t care what governments — can governments win? Yes, all of them. Even the ones I don’t like? Even the ones I don’t like. Can companies win? All of them. Can the banks win? Yeah, sure they can. You don’t like that company because they censor this thing? They could still win. At the end of the day, if everybody wins with you and you have the most extreme values like multisig cold storage with guns and a cabin and your own source of water and your own food supply, you’re still going to be better off, right?

Saifedean Ammous: That’s true.

Michael Saylor: Your Bitcoin’s still going to be worth $10 million a Bitcoin.

Saifedean Ammous: Yeah my view on all of this is to tell people that Bitcoin is permissionless and that includes that you can’t stop people from selling IOUs for Bitcoin. People think about it as if we need to stop people from buying Bitcoin IOUs? Well no, it’s Bitcoin holders who are selling IOUs and there’s nothing you can do about it and I think generally as a Libertarian-leaning anarchist I don’t get upset at things that are peaceful. I can’t oppose people doing peaceful things that don’t hurt others, so I’m definitely with you on that. Now I wanted to talk a little bit more about your strategy for buying Bitcoin with debt. I think your appearance with this strategy was really kind of the glue that held the Fiat Standard book together. It’s what allowed me to finalize this book because it really made it all click to me that the way to win in Bitcoin is to stack — or [with] gold. With a hard monetary system, the way to win is to stack as many units as you can: get as many sats as you can, as many gold coins as you can, and the more you get, the more secure you are, the more you can feed your family, the better off they are, the more you can guarantee their future into the future when you’re not there, and that’s how you win. But then with fiat it really is the other way around: you want to stack a negative balance as much as you can. And you’ve said this before and it blew my mind, but really the point with fiat is to die with as much debt as you can. You want to keep on rolling on debt as much as you can throughout your life. And so: acquire hard assets and take on fiat debt. You want to have fiat as your liability. And I think that just makes a lot of sense and it’s really clarified my thinking about the Fiat Standard in that this is really how rich people get rich under fiat: they borrow in fiat. Poor people hold on to savings in fiat and then they witness their savings depreciate and the returns that you make from holding money in the bank don’t keep up with inflation. And if you’re borrowing, you’re benefiting from the fact that you’re benefiting from the inflation. And I come from a background where I used to think borrowing is bad and for the first few years that I’d heard about Bitcoin I first didn’t buy and then I didn’t borrow to buy and I thought I just wouldn’t borrow, but in retrospect that was probably the second biggest mistake other than holding on to gold, is that I could have borrowed Lebanese liras and bought Bitcoin. And I’ve run the numbers on it and it’s just an absolute no-brainer in retrospect especially when the lira has lost 95% of its value in the last couple of years and Bitcoin has gone up many many multiples. So I want to ask you: what do you think is the correct strategy to do in terms of debt? Because we had this discussion last time and it was in late February when you came here for the last time and you said, Things are going to be different from now on — we’re not going to get major drawdowns in Bitcoin. You said something like 30%-40% percent, probably. I said, Well I can see us losing 70%-80%. Since then we haven’t had 70%-80% but we did have 56%, which is a significantly large number. So a lot of people who might have taken on the strategy of borrowing might have gotten rekt and lost their Bitcoin. So what do you think is the correct strategy to do? So you want to borrow, but then if you’re borrowing you’re leaving yourself vulnerable to price fluctuations — you could get liquidated.

Michael Saylor [timestamp 1:37:12]: Okay, well I mean the first question is: who’s loaning the money to you? And what are the terms of the loan? So Bitcoin’s up 163% on average each year for a decade. If your time horizon is four years I think no one ever lost money holding Bitcoin four years. I mean there was like a two-year time period when it was pretty brutal, but otherwise. You want to have a four-year time horizon. And look, if you were borrowing — you could have borrowed money on your credit cards, right? You could have borrowed money at 15% interest and you still would have made 150% yield. So there’s almost no interest rate — nothing between 0%-15% — that would have been too much in that entire time period. Now if you look out for the next decade, what’s your forecast? I think that expecting a 20% appreciation is not unreasonable on the next 2, 3, 4, 5 years. Will it go faster? I mean yeah, you would expect faster than that, but what it means is that any interest rate between 0%-15% is probably fine as long as you have intent to hold for four years or longer, because you could in theory get a drawdown in 12 months that would put you underwater, so you can’t have any loan that comes due. So if you look at the loans that are safe, any loan you can roll forward for a reasonable amount of time is probably good. A home loan, a 10-year, 15-year, and 30-year mortgage against property is a no-brainer. The best sources of debt are subsidized by the countries, the nation-states. In the United States we subsidize debt against real estate property, especially conforming loans, but even non-conforming. We subsidize conforming loans via Freddie Mac and Fannie Mae and you could borrow money at 2.5% percent interest. It’s not marked to market, so if you had any equity in property you could pretty much borrow at 2.5% percent and you could invest it 161% percent, right? So what’s the risk of that? I don’t see the risk. Is Bitcoin gonna go up more than 3% a year for the next decade? If so, then it’s a mistake not to maximize any kind of home equity loan right now. The United States government is supporting the mortgage market even in jumbo loans via buying mortgage-backed securities each month. So even on jumbo loans and the like — I mean, isn’t the cost of debt for lots of things 3%, 4%, 5%? I think that any of these loans that are south of 8%, they seem to me like pretty good money for an asset which we can reasonably expect — it’s going up at 20x that rate, right? So if they’re not marked to market against the Bitcoin it’s a non-question. Now I think the real issue is: would you borrow against your own Bitcoin? Well if you borrowed against Bitcoin with a loan-to-value 25% percent you’re probably safe, but I would try to avoid — if I was going to be marked to market? I mean, the rules in the equity market in the US are you can’t normally lever up more than 50% loan-to-value, and there’s good reason for that. If you had $1 million dollars of assets and you borrow $500,000 and then you have $1.5 million in assets, if you were to get a 66% drawdown then you’re gonna get a margin call. So I think that when you lever more than 2:1 you put yourself in a situation where you can get wiped out. Obviously everybody in the Crypto community is leveraging between 2:1 and 20:1 or 2:1 and 100:1 and that’s why they get force-liquidated all the time, because they’re doing massive leverage. I personally wouldn’t — I’m not a real big believer in borrowing money that gets marked to market, because you get this destructive cycle where the asset trades down and if you ever do get a margin call and you’re uniformly in that, you could get liquidated — then you’re wiped out permanently. So I don’t think that’s a very good thing. But if I had $1 million dollars of Bitcoin and my choice was to sell $100,000 of it to pay my living expenses or borrow $100,000 dollars against it at 6%, 7%, 8%, I would probably borrow the $100,000, pay the 8%, and keep the million dollars of exposure than sell it, because if you sold $100,000 [of Bitcoin] — in order to sell it you would have to actually sell in some cases up to $200,000. Like, if you live in California and you have $1 million dollars of Bitcoin, you would have $800,000 of Bitcoin the next day — you would pay $100,000 in tax to the state of California, you would have $100,000 to live on, and your stack would be reduced to $800,000, right? So if, on the other hand, you were just to borrow $100,000, you would have a loan-to-value 10% and you would incur $8,000 in interest over the course of a year and you would have $1 million dollars [worth of Bitcoin] appreciating it whatever Bitcoin appreciates at. So if Bitcoin appreciates at 20% then you’d have $1.2 million the next year, right? And then you could do it again. You could do it ad infinitum at that level. So you just have to be able to stomach the volatility. The way you stomach the volatility is you keep your loan-to-value really low — really low. Even smarter idea though is if you’re a dentist or you have some kind of business — finance your cash flows! Like, you have a business, right? If you can sell equity in the business, that’s a way of financing the business, and if you mortgage the business, that’s a way of financing the business. And both of those have the benefit of not being marked to market loans. Well, let’s take the extreme: what if I offered you a $1 million dollar loan for 100 years against your personal signature? And the interest rate was 3%. Would you feel it’s risky to buy Bitcoin with that? Like, what’s the worst that could happen?

Saifedean Ammous: Not much.

Michael Saylor: Nothing, right? You’ll be dead in 100 years. The worst that could happen is in a hundred years — after you’re dead — the Bitcoin is worth less than $1 million dollars, right? Small chance. Maybe you can come up with some way Bitcoin goes to zero the day after you take the loan and you can’t pay the 3% interest — then I guess it comes due. So, slight risk of owning the Bitcoin. But you see, as that as the term of the loan extends — as the interest rate falls and as the collateral changes — debt goes from being debt to being equity. What if I just gave you the million dollars forever and no interest rate and no redemption rate? That’s equity, right? Would you take that and buy Bitcoin with it?

Saifedean Ammous: Yeah, probably.

Michael Saylor: Why wouldn’t you? Like, if you’re a dentist and your dental practice is going to grow 5% a year — you’re going to grow your top line 5%, your cash flow is 5%, and someone said they want to invest in your dental practice and buy half of it and they’ll give you a million dollars: would you give them half of your upside and then take the $1 million, invest it in Bitcoin, which you thought was going to grow at 20% a year for the next 20 years? You see: in that particular case what you’re doing is you’re diversifying your portfolio from a cash-rich value stock — your cash practice — to now a property portfolio. So when you’re really thinking about financing, the question is: what kind of money can you raise? And what strings come attached to it? And it’s different for everybody, right? It depends on what country you live in. If you live in the US you have Fannie Mae and Freddie Mac and you have — like, you need a car? You can pay for the car in cash or you can borrow money at 2% interest to buy the car. Well, everything is a choice of: do I own Bitcoin or not? If I pay for the car in cash it’s like I paid for it in Bitcoin, right? It may be worse — it may be like: if I pay for the car with Bitcoin, not only did I pay for the car but I paid for it twice because I’ve got to pay tax on the Bitcoin if I own the Bitcoin. So the worst case would be to give up $100,000 in Bitcoin to get a $50,000 dollar car. The next worst case would be I had $50,000 in cash, I could either buy Bitcoin with it or I could buy a car with it. And the best case would be I bought the car for nothing and I accepted a 3% loan against the car that I pay off over seven years and I kept the Bitcoin or I bought Bitcoin. So ask me a question: would I rather borrow money at 3% — sometimes by the way you can borrow money at like 0% interest to buy a car. Have you noticed? If the dealer has a subsidy, sometimes the dealer will subsidize the loan and they’ll give you a no interest loan or a 1% loan to buy the car. So Mike: should I borrow money to buy the car or should I pay for it in Bitcoin and not invest in Bitcoin? The answer is: I think I would take the loan! I would take all the credit you would give me and I would maximize the portfolio. I think the general principle, if you step back, is: in an inflationary environment, if the monetary inflation rate is 15% — and it’s at least 15% right now — if the inflation rate is 15% and the cost of capital is 5% and you have a use of proceeds, if you’ve got a property that you believe will appreciate faster than 15% — let’s say 30% — then all day long what you would do is you would take on debt and pay the 5%, you would invest the capital into the property yielding 30% percent, you would scrape the 25% arbitrage, and the only thing you would spend your time focused on is how do I negotiate the terms of the loan so I don’t get force-liquidated by a capricious lender? For example, if you could buy a house and the house was a 3% mortgage and you could either pay for it in cash or pay 3% mortgage in an inflationary environment, you would probably take the mortgage, right? Probably. Now, what if the bank had a clause in the loan that said: every month we can send an appraiser to your house and if we think that your house is worth less because it got struck by lightning or your neighbors moved in and they blare loud music or because the mayor instituted lockdowns in your city, if we think it’s worth less we can mark down the price of the house by 25% and then if it gets marked down below the value of your loan then we can call the loan and you owe us the principal immediately on-demand. Now would you take the loan?

Saifedean Ammous: No.

Michael Saylor: So the problem is the terms, not the loan.

Saifedean Ammous: That’s why borrowing on exchanges is the worst thing you could do.

Michael Saylor: Because the exchange could mark down the value of your collateral while you’re asleep based upon a manipulation and force-liquidate you and take your life savings. It’s like: you went to bed and Bitcoin was $49,000, and during the night it traded down to $16,000 for 13 seconds and then the exchange force-liquidated you and they took all your money and sold your Bitcoin at $23,000 and you’ve lost everything and now Bitcoin is trading at $59,000 again. And how do you feel?

Saifedean Ammous: Yeah, it’s happened.

Michael Saylor: Abused, right? Okay, so that’s the problem with mark to market, especially mark the market when you post your collateral in the hands of a counterparty. And that could even be some like Dogecoin guy manipulated the market down. Like, the real problem in the Crypto world is it could be Yo-Yo Coin levered up a 100:1, force-liquidated, rippling into ETH, rippling into Bitcoin — in fact, I’m certain that volatility from all these other Cryptos does ripple into Bitcoin. You can watch it. It’s like: someone hammers this thing 37% and the ripple is felt over here because Bitcoin is cross-collateralized — they’ve pledged this collateral to ETH which is pledged as collateral to Yo-Yo Coin or something and these things are all highly levered and traded all the time. So I think you’ve got to be really careful in general about pledging collateral that could be force-liquidated, but I think that if you can actually raise debt with fixed collateral — the best thing is: I mortgage a property, I mortgage a building, I mortgage a car, I mortgage a business, I borrow money on a personal non-recourse loan — something like that — and then I use that because you want long-term capital that’s got a low interest rate. But at the end of the day, the interest rate is really secondary. Like, whether you pay 4% or 8% at the end of the day isn’t really as important as whether or not the collateral is marked to market and force-liquidated on volatility. That’s really the material thing that’ll destroy you. The likelihood that Bitcoin will trade down for 50% for one minute sometime in the next five years is high, but the likelihood that it will trade down 50% and stay there forever is low. So you’ve just got to understand that. By the way, Saife, I think one more point to make which is important is: the monetary inflation rate is the risk of doing nothing. So if the monetary inflation rate was 7% monetary inflation every year and you were thinking about investing in something, you would think, Well there’s only a 7% cost to do nothing. But if the monetary inflation rate went to 21%, now the cost is 21% — you have to believe you’re going to get wiped out 21% of the time not to do something. And if the monetary inflation rate went to 60%, then you would have to believe that there’s a 60% chance of losing all your money in the next 12 months to do nothing. So let’s take Lebanon: in Lebanon, if the currency lost 90% of its value in 12 months and I gave you any other option, as long as the other option doesn’t liquidate you — it doesn’t wipe you out with 90% probability — you would have been better off to take the other option. So I think that the decision-making here, your thought about taking on leverage, becomes easier as the economy hyperinflates. Let’s take the extreme: I tell you that the local currency is going to lose 95% percent of its value in the next 12 months, wouldn’t you think you really just want to mortgage up just about everything? Because that’s like 2% a week, almost. So I mean, certainly, if you could get credit card debt or whatever, the local currency return on digital property is going to be 180%, 200%, 300% a year. Like, what does the number look like in Turkish lira or Argentine pesos right now for Bitcoin over the last 12 months? It’s probably pretty ridiculous, right?

Saifedean Ammous: Yeah, absolutely. Well what are your thoughts on inflation moving forward? Where do you see it going? Do you see us sticking around the 15%-20% range for the next few years or going higher or lower? Or do you just not know much about the future and prefer not to speculate? That’s a perfectly acceptable answer, by the way.

Michael Saylor: You know, on inflation — a couple of points. One thing I said today on Twitter is I said there’s four big myths: the first myth is it’s CPI. The second big myth is that it’s even a single number. The third big myth is it’s caused only by monetary policy. And the fourth big myth is that it can be cured by manipulating the interest rate. And I think that people have misconceptions about all those things on inflation. It’s caused by unhealthy policies of government, by the government meddling in the economy in an unhealthy fashion — that’s what causes inflation in the same way that inflammation is caused by unhealthy chronic practices in your personal life. And if you continue them, the inflammation continues, and if you continue with the government engagement with the economy, the inflation will continue. And you can’t just stop it by raising interest rates to 15%. If we jacked all the interest rates through the roof tomorrow, as long as there are tariffs and there are labor controls and there are manufacturing controls and there are travel controls and there are other government edicts and medical interventions, those things even without money printing — if the money supply didn’t expand at all — you still have inflation, right? If you do the simple thought test: if the money supply was constant and I pretty much made it illegal for anybody to work except on Tuesday and Thursday, the price of everything goes up. If I say that you have to have a seat in between you and the next person on an airplane, the price of the ticket doubles. Every single edict drives inflation, and we have more of them in our lives. Never in our lives have we seen so much government engagement with the economy, and that’s what’s caused the inflation rate. So with that as a caveat, since there is no one number, the closest thing we can get to one number is a single number for the rate of monetary inflation — the cost of capital — if we simply liquidated all the capital in the civilization and we reduced it to dollars and we said at what rate are we inflating that index? And I guess I’m persuaded it was 7% for a decade for in the US and Western Europe from 2010 to 2020. You know, Saife, this is interesting: if I look at the S&P Index it was about 10% for that time period. It’s 13% right now, but we include this massive 2020 — before COVID, about 7% percent — and I got a figure 7% was monetary inflation, 3% was some kind of productivity or something. That’s my best guess. And if I look at it right now in the past 12 months we’ve got 23%, almost 24% on the S&P Index, and that means at least 20%-21% monetary inflation. That doesn’t account for the dilution from issuing excessive debt and equities in the S&P 500. So if you allowed for that, then you could you could make an argument that we’ve got monetary inflation equal to the S&P or slightly, but we’re looking at monetary inflation in the Western world tripling. And if I look forward the next four years, there’s no circumstance under which you wouldn’t consider it’s got to go at double the rate it was from 2010–2020, so it’s minimally 15% a year I figure, and then logic says between 14%-22% is the best guess. And I would allow for a little bit of flexibility there. Like, I would swear no chance it’s going below 14% — no chance. But if you’re a pessimist you would say 22%-23%, and if you’re an optimist you’d say 14%, and then you would say that for four years and then maybe we’ll get some taper between 2024–2028 and maybe we can taper from 14% to 12% to 11% to 10%. But at the end of the decade, could we get back to inflating at 7%? Maybe — that would be success, right? And the catalyst for that would be digital transformation of the economy, the growth of digital property a la Bitcoin, the digital transformation of everything else of assets, the digital transformation of products. We’re distorting the economy so much, though, that we’re really changing the definition of GDP. For example, if no one goes to a movie theater ever again and if we eliminate 90% of business travel, then both of those are deflationary and we could say we have more business meetings and we watch more movies but the economy will contract. So I think that that will start to come into play. That’s like a hedonic adjustment in a way. Like, it’s not that different than your sirloin steak became soy burger or like meat derivative product — something, but it’s been so long that we forgot that we ever had the other thing so we don’t know to miss it. I think we’ll see some of that. When you get out more than a decade, that’s what makes this really difficult, but you want to plug in a number? Plug in 14%. But now I think that the wild card here is: that’s in the United States and Western Europe, but I really think that what we’re seeing is the system cracking on the fringe in Turkey, in Argentina, in all South America. You know, the interest rates in Brazil are what, 9% right now? And the interest rates in Turkey have been 15%-16%. So I think that in the developing world you’re going to see something different. If the US inflates at 14%, what people haven’t really factored in is that everywhere else they’re inflating 20%-30%. And the question is: what are the consequences? And I think there are two really big trends, which is: people are going to snap up digital currency — if it’s available, as much as they can get their hands on — and they’re going to snap up digital assets a la Bitcoin. And no, it won’t be everybody because, to your point, there’s so much stubbornness. There’s so much inertia. You’re really telling me there are people who are believing in the Lebanese local currency even today?

Saifedean Ammous [timestamp 2:03:45]: Yeah, it was stunning. Like, one of these blogs that I follow which generally has semi-decent analysis on economics — so they’re anti-price controls and stuff — they were saying the Lebanese lira is the most undervalued currency in the world and it should be at 12,000. And I’ve heard from many friends that a lot of people had sold their dollars at certain points. At 3,000, they thought, Oh, it’s going to go back to 2,000, at 15,000 they thought I was gonna get back to 10,000, and at 25,000 now they think it’s going to go back to 12,000 and they continue with it.

Michael Saylor: But you know, you can call this a currency war, right? This is like a war. so let’s come back to war: there’s conscientious objectors to wars. What happens if you’re against a certain war: Vietnam War, World War I? Tar and feather comes from what we did to people that were conscientious objectors in the Revolutionary War, so I think when things get to be wars, patriotism kicks in, and you end up with the leader of the country saying, It’s your patriotic duty to buy the bonds and to own your currency and to sell your foreign currency, right? So I think we’ll get some of that. But wars also have winners and losers too, Saife. So at the beginning of World War I everybody was on their side and they had a lot of conviction, but at the end of the day the war did end and there was a winner and there were losers. I mean, everybody struggled. But I think that here what we see is we see this conflict, but I think it’s important — if you want to be effective and maintain your sanity and not get distracted — it’s important to frame the war as the conflict between currencies and the conflict between assets. And ultimately, the struggle is the dollar versus the peso and the lira, and that’s nation states jocking with each other, and ultimately there’s gonna be a call to the state department by the president of a country saying, We don’t like the digital dollars circulating around here — stop it! Like, what’s the US secretary of state gonna say if the president of a nation that’s got a currency which is dollarizing or collapsing calls and complains to the ambassador? It’s going to become a geopolitical thing, right? Maybe we don’t like that, but leave that! — that’s above our pay grade. Like, it’s better for Turkey and Argentina and Brazil and Venezuela to work it out with the United States and the diplomats in Foggy Bottom is how they want to deal with that currency issue. And then the other war, the struggle is going to be Bitcoin versus stocks and equities versus real estate, REITs, versus gold versus commodities. And that’s gonna be a hard-fought one. And there’s there’s $100 trillion dollars at stake in both of those struggles for the next decade, right? That’s going to play itself out. But if you really think of it like that, then if you want to be effective, let the diplomats sort through the issue of currencies — that’s their job. And then if you’re an evangelist or or an educator in the world of Bitcoin, focus upon explaining to people why it’s better for you to buy Bitcoin than buy a house in Istanbul. It’s better to buy Bitcoin than buy a bar of gold. Help with those things. Because ultimately, you can win that one. That’s a battle you can win. And you gotta choose your battles and choose battles you can win that make you stronger — you don’t start by picking a battle you can’t win that you don’t even need to fight.

Saifedean Ammous [timestamp 2:08:13]: So what are your thoughts on small businesses? You’ve mentioned Tahini’s Restaurant — Bitcoiner’s favorite Middle-Eastern restaurant — adopting the Bitcoin standard. Do you have any tips in general for small businesses what they should do?

Michael Saylor: Well I mean you design define your treasury strategy and have a savings account and a checking account. So I would keep somewhere between one month to one year’s cash flows in the currency that most of your costs are denominated in. So if I had liabilities in dollars or CAD or euros or whatever, I’d keep a balance in those liabilities, and then all the excess capital you have I’d sweep into Bitcoin. Like, we have a target number — and normally it’s like $50 million — and I’m always talking to my finance people: are we more than $50 million? Do we have a little bit extra? And then we sweep the extra into Bitcoin. And then otherwise, if you’re a small business, if you can negotiate a credit line against Bitcoin, it doesn’t hurt to have one. Silvergate Bank gave a credit line and issues credit lines to people like Marathon, the Bitcoin miner, and they can borrow money against Bitcoin. So if you have a credit line against Bitcoin and you can establish a banking relationship, at some point that could be interesting. The other thing is: if you’re an inflationary environment, once you’ve adopted a Bitcoin strategy, you have a use of proceeds for capital. If you didn’t have a use of proceeds for capital then selling equity is dilutive. But if you have a use of proceeds for the capital that actually has a higher theoretical return than the growth rate of your business then selling equity is accretive. Like, Microstrategy sold equity — you saw just this week I announced we sold $82 million dollars of equity and we bought $82 million dollars of Bitcoin. Now, for 20 years we didn’t really sell much equity, and the reason why is we didn’t really need the capital so we’d just be diluting our EPS and diluting our cash flows. But if your small business is gonna grow at 10% a year and you think Bitcoin is going to grow at 40% a year, then if you sell equity at a fair price and you convert it to Bitcoin then in fact you’re actually strengthening your balance sheet and you’re increasing the growth rate of your business, right? You just quadrupled it. In theory, if you basically sold equity equal to your entire company and put it in Bitcoin, you just did a merger with a company growing at Bitcoin rate — 160% a year — with your small business growing 5% a year. Microstrategy did that: we took a $500M company with $500M in capital growing at 0% a year and we turned it into a $500M company growing 5–10% a year with $6,000,000,000 of capital growing 160% a year — that’s the Bitcoin strategy. So I think small businesses, if they can raise equity or if they can raise debt — like, again, if I was a doctor’s practice or a dentist practice or a restaurant, if you could borrow money against that at a reasonable term and convert it to Bitcoin I would do that. I would finance my equipment, I would finance my real estate, I would finance my cash flows, and I would do it with any combination of debt or equity. Now the caveat here is: anytime you do a financial transaction like that you’ve got to find a counterparty you trust that isn’t a vulture, right? I mean, you could do an equity raise where you thought you were getting a good deal but they insert a clause that says if you don’t show up to work on Tuesday we get to seize your business and everything. I once borrowed money to lease some computer equipment and I thought it was good terms like 6% or 4% interest, and when the when the lease came due there was a clause in the lease that required that we return all the computer equipment with all of the plastic face plates in perfect order with the serial numbers intact, and the face plates were worth like 15 cents and they had been removed like three years earlier and thrown away and so the bank basically tried to hit us with like a $4–$5 million dollar penalty cost which would have tripled the cost of the lease! Because on page 98 of the lease we were supposed to return a 15-cent face plate with a $3,000 computer. So my caveat here is: assuming how to do these equity transactions and assuming you can borrow the money from someone you trust that is not a loan shark, then you should take the capital and you should buy Bitcoin. If you don’t know how to do that — you’re in over your head — you’ll probably just hurt yourself. So it’s always possible to snatch defeat from the jaws of victory through poor execution.

Saifedean Ammous: That’s extremely valuable information, I really appreciate it. I think a lot of people will benefit from learning these lessons. Dorian has a very good question for you which is: have you considered taking on debt in currencies other than the dollar, since you think that they’re getting inflated faster and I think I agree — wouldn’t it make sense to use all of your businesses abroad and lever up on those?

Michael Saylor: It’s an interesting thought, actually. I’d have to talk to my finance people. Like, in theory, if we could take on debt in weaker currencies — like a credit line — that is a good idea. I think we’ve just been focused on other things, but it is good if you can get it to a size that’s material to be worth the trouble. Yeah.

Saifedean Ammous: All right, well you have to poach Dorian from my website — he works on my website. Now we have to enter a bidding war on him but —

Michael Saylor: Yeah, I give you points — very creative.

Saifedean Ammous: Excellent. All right, Marquita has a question for you.

Marquita: Hey guys! So my question was: in The Mobile Wave you predicted the dematerialization of certain industries like retail, books, education etc. When are you going to write a book that will help to explain how we’ll get into more digital finance and the demonetization of property and assets — all the things you talk about and evangelize about? Because I’m certainly waiting for it.

Michael Saylor: Yeah, thank you. I’m flattered — maybe at some point I’ll be able to settle down and write a book I’ve just been really busy. I think Saife has kind of got the book thing cornered! Whenever I have a choice, whenever anybody asks me, I give them the Bitcoin Standard and maybe I’ll give them the Fiat Standard. I think he’s done a pretty good job, so if I were to write a book it might be like derivative to him and then it would be kind of dilutive so I think most the people that I’m targeting — the politicians and the billionaires and the corporate executives — they have like one book in them, you know? They say, What should I read? I said, Read the Bitcoin Standard. But if I said read that plus my book or the third book, I don’t know that they would get around to the second or the third one! So I’m going to promote Saifedean’s book for the time being — and I am flattered. Maybe at some point if I feel like there’s something unique to say, but right now the world moves pretty fast and I kind of feel like my best role is to put things into like two-minute sound bites on Twitter and hope that I can get that to run a few hundred thousand times. I see Knut here. Knut wrote pretty good book, too. There’s actually really good authors in the Bitcoin community. I’m going to do my best to promote them.

Saifedean Ammous: Yeah, you make money and we write books — that’s a good deal I guess.

Michael Saylor: Yeah, but thank you.

Saifedean Ammous: All right, Browning you have a question?

Browning: I have a couple of questions. The first one is: do you think Bitcoin is money?

Michael Saylor: Yeah, I do think Bitcoin is money. But I think you can conceptualize Bitcoin as digital gold, as digital property, as digital money, as digital energy — all of those are reasonable metaphors. And if money is the universal, most desirable commodity that we use to exchange value, in theory it could become the unit of account and the medium of exchange and the store of value for all the capital in the civilization. And if I had to pick one thing to capitalize the civilization, I would say Bitcoin. If there’s $500 trillion dollars worth of stuff in the world and I was trying to figure out where the — you know, I think money is energy. Money is monetary energy — it’s economic energy, liquid energy in the civilization, and if I’m looking for a container to hold the energy, I think it’s Bitcoin — that’s the best container. I will distinguish that I think in the pure Austrian economic world where you had a single sound money like the gold coin in the theoretical world — if we lived in the idealistic world, then the currency would be equal to the money would be equal to the store of value is equal to the unit of account — it’s all equal. But I’m not sure we’ve ever had that. For example, like even if you go back to the Civil War you had the greenbacks versus the gold coin and I think for the last 10,000 years there’s always been a ledger credit account which is kind of like weaker money and then there’s always a stronger base layer money and then at some point there’s the paper money that’s not worth anything anymore. So I think that generally when there are nation states involved, political entities — it’s not just a nation-state, by the way: if you look at the history of robber barons right there the stories of like the robber barons would set up a mining town and then they would create their own monetary system of credits where they would credit the worker and then the worker could only spend that credit in the company store. And so companies created their own money and the like, so I think that whenever there’s a powerful entity, they create a currency that’s weaker than the base layer store of value money. And then invariably what you end up with is a currency is a medium of exchange that is inflationary and it’s losing value and it’s constrained. And then there’s a store of value asset that will hold and accrete value over time. The money decomposes into property and currency, we’ll say, and I think right now Bitcoin is really the property component of money, and then the US dollar is like the currency component of money, and in a hyperinflating economy like Venezuela there’s — still a currency, it’s just collapsing, and then there’s a property. But then in the middle what’s interesting is if the dollar is sitting in Venezuela it looks like a store of value to the Venezuelans because the dollar will hold value for like 3–7 years or 3–10 years and the Venezuelan bolivar will hold value for 3–7 weeks or less and then Bitcoin will hold value for three centuries. And so Ialmost look at these assets as having a different half-life. Like, what’s the half-life of your money? And I would say the half-life of Bitcoin as money is forever and the half-life of the dollar as money 10 years ago was 10 years and that half-life of dollar as money today is 3 years three years and the half-life of the bolivar as money might be 3 weeks or 3 days — I don’t know. But if we if we start thinking about these assets in that way then I think it’s kind of helpful because what you realize is there are very powerful political interests that will designate one asset, and as long as they exist, as long as the United States exists, they will have some influence. But you don’t have to be a victim to the orthodoxy that there could only be one thing that’s money. Once you understand that there are three things that could be money then you can simply mix your portfolio with a mixture of a little bit of the weak one, a little bit more of the mid one, and a lot of the good one. And I think that’s a very helpful metaphor for people.

Browning: Do you think that Bitcoin as digital energy is the most important attribute of Bitcoin, or the most forward-thinking concept about it right now?

Michael Saylor: I ran this survey on Twitter — I don’t know if you saw it. I asked people: is Bitcoin digital gold, digital property, digital money, or digital energy? It’s on my Twitter — it’s very interesting. So here’s what I think: I think that the most powerful concept is energy — and digital energy — because I think that the entire universe is made of energy. Like, the Earth is energy, a building is energy, matter is energy, and I think that energy is a more powerful idea than matter. Matter is a static instantiation of energy, but energy is the pure idea. So if matter is energy and energy is matter, then energy is the highest, cleanest, purest, most useful form. We talk about money — money is capital as energy. I can look at all the capital stock in the society and say all the buildings, all the companies, all the products, all the commodities, that’s one view of the capital stock. And the other view is the capital stock is all the money — and they should balance, sort of, in some way. And I could look at the world as saying it’s all the matter in the world and then I could snap my fingers and I can turn it into energy and then I could turn it back into matter — and that’s what Einstein told us. So I think that once you understand it as digital energy then you realize that it’s a lot more than a store of value. Right now if I wrap myself in digital energy I could move through cyberspace with with greater substance and credit worthiness. Like, I think that the solution, for example, to cyber security is: everybody has to post a certain amount of satoshis as their credit deposit or their security deposit, and then whenever you hit a website or DM someone or show up to a meeting or you post an offer or you make a comment, then you have that security deposit. And then if you break the rules like you lie or try to cheat someone then you would get fined by that platform like a speeding ticket or the like, and in that world that Bitcoin on a Lightning rail becomes digital energy which provides cyber security at the speed of light. And it’s a very big idea — a lot bigger idea than, I’m just going to store money in digital property instead of in a house, right?

Browning: That might be worth a short book!

Michael Saylor: It’s like: if I want to give form and substance and if I want to give consequence in cyber space, then I need digital energy. Right now there are no consequences to bad behavior, so there are a billion malicious attacks an hour and there are no consequences. And one of the problems is because we can’t convey digital energy in cyber space. But it’s probably beyond the scope of a quick answer. I would say right now, coming back to my survey, most people like 40% percent thought digital gold — that resonated with them. So digital gold is the narrative that the public is ready to embrace, and that would make Bitcoin 10–20x bigger than it is right now. You can argue that digital gold easily takes you from a $1 trillion to a $10 trillion dollar market cap — and maybe that’s fine. So we can basically double three more times or four more times before we outrun that idea. Digital property is the idea that we dematerialize every building and all the land and everything you could possibly own as a store of value, and that’s a bigger idea than digital gold. But digital money is even more powerful than digital property, right? It’s like all the economic energy. And so that’s a more powerful idea. People don’t really appreciate money right now. You could almost say this: since 1971, there’s been like a psychological ops attack on the value of money where the political system attempts to undermine the value of money — I mean, money’s gotten a bad name because what is money? If it’s the dollar and the dollar loses 7% of its value a year for 50 years then the idea that money is valuable has been kind of systemically undermined for two generations, almost. But if money was properly understood — sound money — then sound money would appreciate in value and then once you understood it as sound money you’re like, Well, sound money means digital property that’s reasonably liquid for commerce. It’s a medium of exchange and not just a store of value. And I think that takes it from a $100 trillion dollar type value proposition to $250 trillion dollar or more value proposition. I think digital energy takes us to the next step which is: if I want to construct anything with substance in the universe, I need energy and the ability to move and store energy, to break it down to any scale, move it at the speed of light, and do it without friction.

Browning: Yeah it’s amazing!

Michael Saylor: That’s worth $500 trillion or more — that’s worth half of the civilization, presumably. Everything on the Internet is digital information: Google and Facebook and Apple, they’re moving digital information around. What’s the difference between energy and information? Information is non-conservative and energy is conservative. So if we had digital energy that respected the laws of conservation of energy — and it was truly conservative — at the point you’ve implemented conservation of energy in cyberspace you would be able to elevate the safety and the civility and the efficiency and the trust of all discourse in the civilization. So digital energy is kind of critical to the next step in the world, because you need 100 million businesses trading with 8 billion people at the speed of light for free with trust, and they can’t do it with digital information alone. You can’t trust anything! I can’t even open my DMs on Twitter or Instagram without — 99% of the shit in my DMs is malicious bots or spam or scams. Do you know that we take down 20–25 malicious spam bots on Google every hour? People keep posting on Twitter — they’re like, Someone’s impersonating you on YouTube and why haven’t you taken that down yet? It’s like: well I did 37 minutes ago. Like, literally every hour there are 20 of these things [that] get spun up and they show 18,000 people listening to Michael Saylor giving away free Bitcoin advice and giving away Bitcoin. There’s legitimately 18,000 spam bots and Google can’t stop them. And if it costs you, say, a $30 security deposit then you’d have to post $60,000 and you would lose $60,000 every time we reported you? That stuff would stop in a hurry if there was a $30 fine per malicious fake person. And so you could literally monetize all that malicious behavior and you could shut down 99.9% of the hostility online, and that’s just one little example. But of course, you can’t imagine just how much inefficiency there is in the world because of a lack of trust or the fact that —

Browning: I imagine it.

Michael Saylor: Sure you do. I’m sure you imagine it. Yeah so I guess I would say: digital energy is the most powerful idea and I’m a big fan of it because it’s apolitical. See, I’m not a big fan of digital money because it’s political and digital currency is going to be the province of every government, and so if you wish to wrest control of the currency from the government it is literally a revolutionary idea — you’re not going to do well with the mainstream and it’s going to be a difficult road to hoe. So if you said what I’ve got is digital energy, what will it do? It will improve your efficiency by a factor of a million and bring safety and civility to cyberspace and protect your children from being molested by pedophiles and stop terrorism online and stop criminal behavior and stop con men and protect the investing public. There’s nobody that’s gonna object to the idea of doing those things. I mean, the Chinese government would agree with that — every government would agree with that. At some point, you would even have the Koreans and the Cubans. They won’t agree on digital property but they could probably agree on digital energy. Like, name someone that wants to outlaw fire and electricity in their country? Or steel? There are communist societies that would outlaw property — everybody outlaws private currency, right? But nobody outlaws energy. And so I think that it’s not just the most powerful intellectual idea, it’s the most powerful political idea and the most powerful marketing idea if you want to spread this technology to the four corners of the Earth as rapidly as possible. And also it’s a lot clearer narrative I think than the Web 3.0 thing, right? It’s like, what I want to do is I want to go from the Internet, which was a layer of digital information, to the next generation, which is a layer of digital energy overlaying digital information. And who’s the winner? Google, Facebook, Amazon, Apple, they can all be winners. Twitter can be a winner. YouTube can be a winner. Every government can be a winner. Who’s the loser? This is probably the single most important point, and my number one question: if you properly explain Bitcoin as digital energy, who’s the loser? There’s nobody! There’s no reason anybody needs to be a loser. Only people offering inferior horse and buggy technologies that just don’t work so well. And I think that that’s the key for us: we should communicate to people the technology promise here, because technology is apolitical. And it’s a universally desirable thing everywhere in the world and always will be, and everything else you want to say you could probably say through the lens of technology. Other questions?

Saifedean Ammous: David has a question for you.

David: Thanks guys. So Michael — and just to that point as well — I think that the correlation also between Bitcoin and time, there’s a very big correlation in that people basically take their time, exchange it to work at a day job, and as they create inflation, you work twice as hard for the same dollars. So they’re actually robbing time which is, I would argue, the most valuable asset even probably more than energy because you never get the time back. I think it’s super interesting. My question was with regards to purchasing Crypto-assets, primarily Bitcoin, as opposed to the option of also mining for Bitcoin and basically purchasing the hardware to acquire that Bitcoin. And a follow-up to that is: the correlation between the miners and the pricing of those miners. So are they setting the price of Bitcoin? Setting with the hashrate, the complexity — are they partially in control of Bitcoin price based off the mining?

Michael Saylor: I don’t really buy the notion that there’s any correlation between hashrate and price of Bitcoin. I think that hashrate determines the security of Bitcoin and it determines how competitive Bitcoin mining is, but I don’t really see it as as having any serious impact on the price. When Bitcoin’s hashrate was cut in half, I didn’t see Bitcoin as less valuable. And if it doubled — I think anything within an order of magnitude feels pretty secure to me, so I don’t really get caught up in that. With regard to mining versus buying it, let’s just say this: there’s a million ways to get Bitcoin. If you’re a dentist you can fix teeth take the cash flow and buy Bitcoin. If you’re a doctor you can set bones take the cash flow buy Bitcoin. If you’re a country you can print your currency buy Bitcoin. If you’re a company you can sell your product and buy Bitcoin. If you’re a miner you can mine for Bitcoin. If you are a semiconductor company you could create SHA-256 ASIC chips compete with Bitmain sell them to miners take the cash flow and buy Bitcoin. I tend to think that mining is one of the most competitive industries in the world. It’s almost by design, right? It’s totally open globally competitive no monopolies no government’s gonna pass a law giving you a monopoly on Bitcoin production in the world. Your odds of getting a monopoly for your restaurant or for your hospital or for your power company are much higher. So you’re competing in a brutal fashion against everybody else. I tend to think that everybody ought to figure out how you can best generate cash flows or how you can max out the amount of Bitcoin you could buy. For example, Saifedean, if he writes books I would say: write good books sell the books convert the cash buy Bitcoin. If Saife said, Should I write another book? Or should I teach? Or should I start a Bitcoin mining company? I would say: generally I believe in capitalism. I think Bitcoin’s all about capitalism. And really, the ethos of capitalism is you need to be the best in the world in your niche at what you do. If you’re going to be a restaurant you better be the best restaurant of that type in your neighborhood and if you are then maybe you’ll make money, but maybe you won’t make money. There’s all sorts of existential risks. Maybe your restaurant will get forcibly shut down, right? So you have risks in every business. There are risks in mining. If you can raise lots of capital — mining is a capital intensive industry — if you can raise a lot of capital cheap then that would be a good reason to go into Bitcoin mining. If you have a lot of rigs that’s a good reason to be in mining. If you had energy — if it was free — maybe, but the truth is: energy is really the tail wagging the dog here. The world’s full of too much energy and energy is only like 1%, 2%, 3% of the proposition. If you become a miner and you buy power from somebody else and they cut you off they could destroy you. So it’s a risk factor. But if you told me I have energy at 2 cents a kilowatt hour forever, should I be a Bitcoin miner? Not necessarily. If you can’t raise capital, you’re still gonna get wiped out. There’s politics there’s capital there’s execution et cetera. So I like Bitcoin mining I think it’s good business. I also think it’s a business that calls for a very aggressive business strategy. Like, you want to get big fast, like raise billions of dollars of capital and buy up all the other miners and buy up all the equipment and then raise billions of dollars of more capital. I know there’s the Bitcoin ideal which is: we want distributed mining and I’m okay with that, but I just see that when you see someone with three football fields full of mining rigs and they’re engineering this stuff, you start to think this is getting to be a very scale-intensive capital-intensive business, so I don’t think that I would go into that business unless you really knew what you were doing. I would just evaluate every business opportunity.

David: What about companies like Compass Mining or Blockstream where they’re basically data centers and then you can bring your hardware there or they supply the hardware?

Michael Saylor: Well you’re splitting the returns with them. Here’s the issue: Bitcoin is like the best thing in our lifetime. You could own the property and be the general partner of the property with full property rights. Or you can buy a share, you can be a limited partner, in someone else’s business. So do you want to be partners with someone else in a speculative business that has risk that may or may not pay off? For example, do you want to be a franchisee to McDonald’s or do you want to be McDonald’s? I did consulting work for McDonald’s and if you do the analysis after you did the conclusion, you concluded that running restaurants is really not a good industry to be in. It’s not a good business: you don’t make that much money at the end of the day. And in fact, all the profit at McDonald’s was based upon the real estate leases and the fact that they were assigned long-term leases with their franchisors that they couldn’t get out of —they had a monopoly on the lease. So McDonald’s had 20,000–30,000 limited partners and the limited partners want to be their own business, right? So you’re a family — you want to be in business? You want to be a Bitcoin miner but you don’t want to run your own data center? So you go ahead and you sign up with someone else — you’re like a McDonald’s franchise. Is that a good idea? I don’t know — maybe. Would I do it instead of buying Bitcoin? No. I would buy the Bitcoin because if you own Bitcoin you’ve got your own franchise: you own x percent of the dominant monopoly monetary network and you’re the property owner. So you have to consider: what am I surrendering in order to do the other thing? And so if you have $1 billion and you have to invest in securities then you go and buy Bitcoin miners because you don’t have a choice: your choice is to invest in non-Bitcoin companies or invest in Bitcoin companies. So a Bitcoin miner is better than not a Bitcoin miner. But that’s because you have a billion dollars of strategic capital and you can’t move anywhere else. But if you had a billion dollars and you could buy Bitcoin with it — buy the Bitcoin. Now, if you’re wanting to start a company and take it public, you probably can’t start a company to buy Bitcoin and take it public, but you can start a Bitcoin miner and take that public, you see? So you gotta ask the question: what are you trying to accomplish? My view is: the most valuable property in the universe is Bitcoin. The second most valuable property in the universe, presumably, is a Bitcoin mining rig that’s producing Bitcoin right now. And then after that you’ve got these concentric circles. After that you can own companies that are Bitcoin companies. But they’re competitive with each other: some can win some can lose. And then you can own non-Bitcoin companies. And then some are better than others. So I guess my answer to your question depends on what your question is, really. Caveat emptor is what I would say generally to everything.

David: Like, if you had a million dollars and you could either buy it today or you could put a million dollars towards mining hardware today, three years from now when your hardware becomes somewhat obsolete from a computation —

Michael Saylor: If I had a million dollars I’ve already answered that for you: I’d buy the Bitcoin. If I had a million dollars of cash there’s nothing I would do with it other than buy Bitcoin. Bitcoin is the theoretical apex asset of the human race. The theoretical return on Bitcoin is higher than anything else. Everything else is dilutive. You could take your million and you could invest in a Bitcoin miner and you could wake up and the hashrate could increase by a factor of 10 and the guy that actually did the deal with you could steal your rigs. Then where does that leave you? I mean the point is: you’ve got counterparty risk, you’ve got hashrate risk, you can invest it in Kazakhstan and find out the government of Kazakhstan put like a triple windfall capital gains tax on your Bitcoin mining so you’ve got political risk, you’ve got execution risk, you’ve got technical risk, you’ve got all sorts of risks. And against that, maybe there’s a return. But is the risk-adjusted return higher than buying Bitcoin? I don’t think so. If Bitcoin goes to zero your Bitcoin mining investment goes to zero. If Bitcoin mining goes to the moon then some Bitcoin miners will be successful and some will not be successful and some might be more successful than the Bitcoin and some might not, but who knows? That’s just a complicated issue.

Saifedean Ammous: Yeah I guess, in my opinion, I think when people ask about mining as if it’s just one thing where there is a clear answer whether it’s better than or worse than Bitcoin then I don’t think they’ve really looked at all the complexities involved and all the potential [challenges]. I mean it comes down to the cost of your power primarily, but also all these other factors that Michael has mentioned.

Michael Saylor: You’ve got energy risk, political risk, hardware risk, execution risk, counterparty risk, tax risk — all those things. And you don’t have any of those things if you buy the Bitcoin. With Bitcoin you just have to avoid losing it.

Saifedean Ammous: Exactly. And with a lot of miners what they say is basically it’s only viable at the two extremes: either you get one small miner you put at home if you have very cheap electricity or free electricity in your apartment, or you become one of these very public big miners. It’s the miners in the middle that really struggle the most: an operation with a couple of dozen rigs or whatever. Acouple of dozen machines or something like that. That’s where it gets really hard. Knut, do you have a question?

Knut: Yeah first of all thanks for the compliments, Michael. Great to finally talk to you. I have a completely off-topic question. I’ve been thinking about it since I heard the story about you moving money out of Argentina I believe by buying a yacht?

Michael Saylor: I didn’t buy the yacht I tried to buy the yacht my lawyers wouldn’t let me.

Knut: All right, so you never bought the yacht.

Saifedean Ammous: Why don’t you just get new lawyers?

Michael Saylor: Not so easy.

Knut: My question would have been if you were on the yacht or not sailing it to the West Indies, but since you never bought the yacht that’s — so I thought that was a real story but it was just an example then. I’ve heard you mention it in a couple of podcasts.

Michael Saylor: What I said was I suggested that they told me I couldn’t. One time I ended up losing the money and the other time I ended up having to buy some sovereign debt from the government or some kind of technique that was regulated approved but Iended up taking a haircut 10%, 20%, 30% on the money to get it out and then you never really get it all out. It is what it is.

Knut: Another off-topic question then: what’s the name of the ship behind you? Do you know?

Michael Saylor: There’s no name. It’s just a 19th century model — it’s handmade. I think it’s supposed to be sort of modeled on the Amsterdam or one of the Dutch East India’s ships from the 17th century that they used.

Knut: Yeah. Why I ask is not just because of asking something else ship related, because I used to work on a vessel that looked almost exactly like that one. A historical ship called the Gothenburg. It was also an East India man. The company who who ran the whole thing was called the East India Company. They started it up again.

Michael Saylor: Yeah it’s an East India ship I think. Like, part warship part cargo ship that they they ran.

Knut: Yeah. They sail better than you think, those things. Well thank you anyway.

Michael Saylor: Yeah if I could just clarify on that last conversation: I think that the best way to think about Bitcoin mining versus buying Bitcoin is everybody in the world has two decisions to make. One is their business strategy and the other is their investment strategy. And the investment strategy is how do I allocate my portfolio of assets and what do I do with my free cash flows? And buying Bitcoin is an investment strategy. Business strategy is how do I generate cash flows? And you can have a business which is selling anything: ice cream cones, writing books, broadcast television, mining Bitcoin, you can mine gold and then you can sell the gold to convert it to Bitcoin. So the point is there’s a million businesses and if you’re asking what would I do my answer is you ought to be engaged in the business that you’re good at where you have assets and you have skill where you can compete. And then you ought to set your investment strategy based upon your risk tolerance and I would say high quality digital property is best and if you can’t stomach that, buy analog property or big tech stocks or real estate or something. And if you do it that way then I think once you ask yourself the question: am I competitive? Am I better? Am I best of the best in the world? If you are then that makes sense to do it. Where you really get to this acid test is if you have to put your own capital into the business. You have to ask the question: is this business going to give a better yield than Bitcoin? The answer is probably no. If you don’t have to put your own capital in the business, if you can go to someone else and raise millions of dollars to start up a Bitcoin mining venture then by all means you should do it. It’s someone else’s capital, right? And so you’re drawing capital into the ecosystem. So the right way to think of it is: launch a Bitcoin bank like Silvergate, raise $480 million. Launch a Bitcoin miner, raise hundreds of millions. Launch a Bitcoin anything, raise money, bring it in the ecosystem and compete, but when you have excess cash flow, sweep them into Bitcoin. That would be my view on that. And if you think of it that way, then I think everything’s a lot simpler.

David: I think also to that point, the ability to depreciate the assets which are the mining rigs.

Michael Saylor: Yeah there are a lot of business advantages to having an operating business. You’re right, like if you buy the mining rigs and you can take immediate depreciation, yeah, assuming you have cash flows or you have profits that you can use that against, tax credit against. So there’s a lot of other times when it makes sense. Like if you have natural gas it’s stranded and you have to shut in the wells, then you should launch a Bitcoin mining business so you don’t have to shut in the natural gas. If you have a cash-generating real estate company you pair it with a Bitcoin mining company then you could really use some of the tax benefits. It’s just a business discussion and one thing that I try to do is I try to keep all of my commentary on just Bitcoin — laser-like. The laser eyes thing is just Bitcoin. I don’t give you advice about what stocks to buy. I don’t give you my opinions about Facebook or Apple. I don’t even tell you to invest in MSTR, right? If you look at every one of my tweets I’ve never said buy MSTR stock — that’s a security. Risk comes with it. There’s 24 pages of disclosures, right? I mean there’s 57 pages of a parade of horribles of everything could possibly go wrong. So I don’t really tend to want to give people business advice about what’s the best business because it’s a very complicated thing, it’s very individual. I think you got to find your own way. What I would say is: study Bitcoin think about it really hard and then think about how does it fit into your circumstances? You have capital, you’re in a country, you have business expertise, you have a reputation, you can raise certain amounts of money, figure out what’s the most constructive thing you can d o— and then do that thing.

Saifedean Ammous: Fantastic. Well this has been absolutely amazing and very very informative and helpful. I’ve learned a lot and this is beyond the usual massive poetry and nuggets of wisdom, I think there was a lot of very practical business advice here which I think is very useful for a lot of us who have not built billion-dollar companies like you, Michael. I very much appreciate your time and I thank you so much for joining us and I hope we do this again when you’ve bought a lot more Bitcoin, as always.

Michael Saylor: Thanks. I appreciate the invitation. I will look forward to the next time, Saife. And thank you for everybody that went through the seminar with us. I enjoyed talking to all of you.

Saifedean Ammous: Cheers, take care.