A Conversation on Crypto with Michael Saylor

Transcription of the chat between Cathy Merrill and Michael Saylor on April 6, 2022.

Cathy Merrill: Thank you all for joining us. We’re going to get going here in just a minute as we wait for everyone to come into the session. So thank you. Okay. I see the numbers are still climbing, but I also know that the numbers lag from when people actually come on. So we’re going to get started because we have a lot to talk about today. Hello. I am Cathy Merrill, I am the CEO of Washingtonian Magazine. Welcome. With me today is Michael Saylor. He is the founder and CEO of MicroStrategy, which is a company right here in Washington, DC that is a terrific company that focuses on enterprise analytics and software helping a lot of other companies. He grew up in a military family. He lived on various air force bases around the country. He attended MIT where he got a dual degree in aeronautics and astronautics, that was one degree, as well as in science technology and society. He graduated with the highest honors while completing flight officer school and out of college joined the air force. At the age of 24, he founded MicroStrategy which went public in 1998. He holds more than 40 patents and is a best selling author. Welcome Michael.

Michael Saylor: Thanks for having me Cathy.

Cathy Merrill: Today we’re going to be talking to you about crypto as I’m sure. I’m going to give a little facts that you know very well, but 20% of American adults own crypto at this point. The crypto market is valued at about 1.75 trillion, which is roughly the size of Google. The biggest player in that market is Bitcoin, which on its own would be I think the 11th largest currency in the world. You own 125,000 Bitcoins or about $5.5 billion worth, so you are the largest holder in the world.

Michael Saylor: As of yesterday, we have 129,000. We announced we bought 4,000 more.

Cathy Merrill: Oh, okay. I’m a little behind.

Michael Saylor: You can’t can’t stop buying Bitcoin Cathy.

Cathy Merrill: Cannot stop buying. Well, that’s what everyone wants to talk about. As you and I discussed, there’s a lot of questions. We’re going to try to do them rapidly so we can get through as many as we can. Let me start with a basic question. Somewhere in January of 2009, someone took some code, they broke it into 21 million bits and called it Bitcoin. They’ll never be more than 21 million of these bits. They’re now each worth about $44,000. Is it a currency or is it a commodity? How do you think about it?

Michael Saylor: I think the best way to think of it is digital property. Also, you could think of it as the world’s first digital commodity. The idea behind Bitcoin is to create perfect money or another way to think of it is create perfect gold. If I could take the entire supply of gold, like 6 billion ounces or whatever it is, and if I could reduce it to 21 million gold coins and then if I could dematerialize them so that they’re weightless and magically I could move them at the speed of light and compose and decompose them. If I could split them into 100 million little elements we call Satoshi and then I could store them in cyberspace. And if I could find an incorruptible software program that would keep track of who owns the 21 million virtual coins, then you would have Bitcoin. And so the idea a Bitcoin is we put our money in cyberspace, we put computers in charge, software programs in charge, but then we distribute the software program so it runs on hundreds of thousands of different computers and every computer has a copy of the same program and the same ledger so that nobody can cheat anybody and any of the nodes that get corrupted get thrown off the network. So it’s a living creature distributed in cyber space. And the purpose is to create a shared immutable ledger of who owns what. And that’s been a-

Cathy Merrill: It’s like a giant Google drive spreadsheet, but every time someone touches it, you know who touch. Everyone can see who touched it, right?

Michael Saylor: That’s right. And so the whole idea is you can’t mine anymore gold, it’s just capped to 21 million and you don’t have to worry about some central bank or some custodian taking your gold and selling it to someone else and you don’t know, and nobody can seize it. And the ownership of the Bitcoin is through the possession of private keys. So you can in theory own any amount of it, $10,000, $10 billion. And if you convey the private keys to someone else on the network, then the ownership moves to them away from you. And so for the first time, we’ve got immortal money that can move at the speed of light and can be programmed on a computer. That’s the big idea.

Cathy Merrill: So let’s talk about the difference between Bitcoin and other cryptocurrencies. There are now over 10,000 cryptocurrencies, some of which can be flooded the way potentially the gold market could be flooded because we could find a new gold mine vein tomorrow and not know that it exists. Are the other cryptocurrencies fundamentally different than Bitcoin in that way? Are they the same?

Michael Saylor: Bitcoin is the world’s first engineered monetary system. And so the protocol is meant to do one thing really well, keep track of who owns everything forever without breaking in a secure fashion. The other cryptos, some of them pursued something similar, but a lot of them pursue other objectives. They want to be crypto platforms for building smart contracts or issuing NFTs, or they want to run decentralized exchanges. And these are all different missions and they generally end up with a lot more complicated code and different and types of code. If you think about creating life and cyberspace, my idea of life is a virus or a plankton or bacteria, but there’s someone else that comes up with an idea of life like a flying eagle. Okay. So is an Eagle life? Yeah, but is it like a swarm of hornets and is it like bacteria? No, it’s a different life.

So Bitcoin is engineered to be this base layer of the entire economy, the monetary network. And the thing that’s unique about it is that it’s been copied hundreds, thousands of times. And there have been 20,000 different cryptos that have been launched. The issue is which one is best suited to be the fundamental technical, ethical base layer of the cyber economy. And you didn’t know for 12 years. You only know after you’ve attacked it 25,000 times and copied it 25,000 times, they’ve all failed or they’re all different. It’s like, if I release bunny rabbits into Australia and they fill up this niche in the ecosystem, the small furry mammal. Okay, will it work? You don’t know, but after a hundred years, if bunny rabbits dominate that niche, then they own that niche and they have that part of the food chain. So Bitcoin today is the winner of this global struggle to see what will be the dominant digital monetary asset in the world. And what makes it unique is it’s the strongest, it has the most energy, it is the strongest network, it is the most capital, it has the most support, it’s the most robust protocol, it’s the most unbreakable one, it’s the one that’s been tested the longest, the most indestructible one, and of course the most well known one. It’s like the Coca-Cola of digital money and so you’ve got the strongest brand.

Cathy Merrill: So someone wrote in and asked if you owned other cryptocurrencies. And so it sounds like, no, but is that true or do you own them?

Michael Saylor: No, I don’t own any others. I think the Bitcoin is unique. I mean, Bitcoin is a property. It’s like buying a block of Manhattan in cyberspace. Cyber Manhattan, it’s like Manhattan. And there’s a million people that want to launch other cities. I have another idea for a city, but it’s not Manhattan. So the risk of owning anything else is orders of magnitude higher. The return is orders of magnitude lower. I would liken all the other cryptos, they’re like investing in small startups, right? Like there’s Apple computer and then my cousin has an idea for a mobile app that’s to compete with Instagram. So there’s like 100,000 mobile apps launched and 99.9% of them all fail and then one of them will be WhatsApp or Instagram and Snapchat. So you might get a Snapchat, but you’ll probably get one of the losers.

And it’s not the same as investing in Apple stock, which is like holding the broad based index of all mobile functionality. So Bitcoin is the risk off asset in the space, right? It’s the most certain thing. Everything else is a risk on asset that has more security risk. You have to analyze it, there’s more competition, there’s more complexity, there’s more regulatory risk. And if you’re a specialist like a venture capitalist and you want to basically spend your full time analyzing the space, maybe you can invest in that space. But if any ordinary person said, “Okay, well I’m 60. I want to retire. How do I allocate my assets?” It’s like you some land, maybe in the S&P index you own a little bit of stock portfolio. And then if you want to own a digital property, Bitcoin is the risk off digital property, own some of that. And I’m not going to tell you to go investing in small startups.

Cathy Merrill: Yeah. So for someone listening here who’s got a sizable 401k, maybe they’ve saved, they’ve owned their house, they maybe own some one off stocks that they’ve picked themselves outside their 401k, maybe they own a little bit of gold. Where does in your world, Bitcoin or crypto fall into that? Is it like a little bit of gold or you would convert a lot of your 401k to it or?

Michael Saylor: Bitcoin’s property.

Cathy Merrill: About $5 billion.

Michael Saylor: Yeah. So let’s just talk about why would you want to own property. If the money supply is expanding at 7% a year and you own property and it’s scarce and desirable, your property will probably go up in value 7% a year. And that’s the history of property for the past 100 years. So when you get to a point where you want to be invested, if you have money you want to save and give to your grandchildren, the least risky thing to do is put it in a scarce desirable property that some affluent intelligent person will want to buy from you in 30 years or 100 years. So Bitcoin fits that bucket and it competes with owning a building or owning a… If you wanted to have a second rental home, you would buy a second home and you would Airbnb it or you would rent it.

And the benefit of that is you’re invested in property and you can maybe put a mortgage on it so you can leverage it up. And then the detriment is you got to maintain the home and storm might hit it. And then if nobody rents it from you or they trash it. Maybe you can’t rent it at certain points in time if it’s in the wrong place. So what if I could snap my fingers and convert your rental Airbnb apartment into a Bitcoin, I call it a digital virtual apartment. And then if I told you it could last forever, you don’t have to repaint it and then you can teleport it to place in the world where anybody needs it for the Japanese Olympics or you can move it to the Cannes Film Festival and you find the highest bidder. And then when they don’t want anymore, you bring it back and you teleport it to New York or Paris or London.

So think of it as like your digital apartment that you can put a mortgage on and that you can rent out to the highest that you can also carry around in the palm of your hand and hold on an Android or an iPhone. Now, ask yourself the question, how much of your portfolio do you want to invested in that kind of property? And then maybe you want to invest in Facebook or Apple, or you want to invest in a stock because you like that or maybe you want to speculate or gamble your money. So you go gamble some money and then you have some money in a checking account because you got to pay your bills in the next 90 days. And so you divide your money that way. The checking account’s least risky. The property is a little bit of risk but not nearly as risky as investments in stocks.

And then of course the speculations, the meme coins or the meme stocks or the gambling on the horse, that’s very risky. And of course, one more point to make is the problem with holding a million dollars of cash in a bank is that it has been losing 7% of its value a year for a hundred years, but it’s losing about 14 to 21% of its value now. So you’re guaranteed to lose 90% of the money you have in the bank over a decade in an inflationary environment. So that’s a built in risk, it’s a ticking time bomb. So that drives you to say, “Well, I got to put it in property or I got to put it in investment or I got to gamble it.” And that’s what I would say to an individual.

Cathy Merrill: Thank you. For those that don’t follow that math. You’re saying the currency, especially with inflation right now is in decline. The dollar is worth less than it was worth 100 ago.

Michael Saylor: Yeah. Let’s talk about the issue of inflation. It’s very important, incredibly important. The house that I live in right now is 305 times more expensive than it was in 1930, 305. That means that the dollar has lost 99.7% of its value in 90 years. Now if you back calculate that implies that the actual inflation rate of the currency has been about six and a half to 7% a year for 100 years. If you’re calculating the rate at which things you want to buy go up in price, the real inflation rate for a hundred years is 7%. The government published inflation rate is 2%. The difference is the government’s tracking a consumer basket of goods and they make hedonic adjustments. So they’re telling you that you should be happy in an 800 square foot apartment made of drywall watching Netflix and Netflix hasn’t gone up. But 30 years ago, they would actually calculate the price of a bigger apartment or the price to buy, but they don’t do that anymore.

And they’re not calculating the cost to buy assets. So if you want to buy something like a house on the beach, well, housing went up in price 20% year over year, 19.2% according to Case–Shiller index. And yet the government says that the CPI is only up 7.9%. So the inflation rate if you already own a house or if you don’t want to buy a house and you live in your parents’ basement is 7.9%. But the inflation rate if you’re a first time home buyer is 19.2%. So if you calculate, if you consider the rate at which the money is losing value, the answer you come to is the United States dollars lost 99.7% of its value. It will lose 99.9% of its value over 100 years and every other currency loses 100% of its value over 100 years. And your only hope to preserve your wealth is to convert that currency into a property.

If you convert it into a house, you got a 305 X return on your money, right? So just buy a house. But what’s the problem with that? The problem with that is that Florida taxes housing and real estate at 2% a year. So if I convert a million dollars of cash into a million dollar house, I have to come up with $20,000 a year and I lose the house in 50 years. And that’s assuming they don’t reappraise the house up, but of course they will. So in fact, if you convert a million dollars of cash into a house in Florida, you’ll lose all the money in about 30 years. So that means I got to go and I got to risk the million dollars by betting on a company, or I got to gamble the million dollars. Why? Because there’s no perfected money that I could just convert the cash into.

Well, Bitcoin is the first example of an asset where you simply convert a million in currency into a million dollars of Bitcoin. And then because you can’t make any more Bitcoin, Bitcoin price appreciates at the rate of inflation and it also appreciates with adoption and it also appreciates with technology advance. So people that are buying Bitcoin are saying, “I don’t want to gamble in the market, I don’t want to gamble on meme coins. I’m sick and tired of being taxed to death on my real estate. The government is already confiscating and seizing all my property via tax and via a sanction. So what I want is property in cyberspace I can hold in my head, carry around in my hand that no one’s going to take away from me and they’re going to not going to de base. And then I’ll just hold that for my life.”

Cathy Merrill: What do you say to the people that are scared about the regulation that’s coming in and they don’t understand the tax implications? Most of the banks won’t touch it. Merrill Lynch is like, “Well, we are not you’re a client. We don’t deal with that.”

Michael Saylor: Yeah. So the regulation that’s coming is-

Cathy Merrill: That’s true of Morgan Stanley, Goldman, everywhere. I mean, you know that.

Michael Saylor: The regulation that’s coming is going to be really good for Bitcoin and it’s good for digital property adoption because it’s going to create bright lines that cause an avalanche of institutional money to come into this space and buy the asset. So the regulation is good. The tax treatment is set by the IRS in 2014, it’s just property and if you sell it at a capital gain, you owe capital gains, either long term or short term capital gains. So that’s not really misunderstood. What you want to do is you want to buy it and hold it for as long as you can. And if you need money, you borrow against the asset and that way you don’t pay the capital gains tax ever. But if you do sell it or transfer it, you owe capital gains tax.

With regard to the big bulge bracket banks, 24 months ago Bank of America, Goldman Sachs, JP Morgan, Citi Group, they wouldn’t touch it, but they wouldn’t even talk about it. In the last 24 months. Every one of those banks has started covering it. They have analysts publishing every week and they have embraced it. The head of JP Morgan four years ago said, “I don’t like it. You’ll get fired if you use it.” But this year said, “Okay, I don’t quite understand it, but my customers want it, so we’ll sell it to them.” The head of Goldman Sachs, David Solomon said the same thing. The previous head-

Cathy Merrill: Janet Yellen said last week that she thought it was the future. I mean, she didn’t say it was the future, she said…

Michael Saylor: She kind of said it is the future. But maybe a more important opinion was Joe Biden’s opinion because the White House issued an executive order a few weeks ago. And in that executive order it said, “Whereas 40 million Americans have crypto assets and they think it’s the future, I hear by direct all the government agencies to figure out how to responsibly regulate it and incorporate it into our government.” So in essence what you’ve got is when Biden was elected, Biden brought a bunch of progressive regulators, Janet Yellen and Gary Gensler, and they kept Jerome Powell. All three of them are on record as saying, “This is a digital asset. It may be speculative, but it’s not going away. And we understand why people would want it. It doesn’t compete with the dollar. We’re not going to ban it. We are going to embrace it. You have to pay your taxes on it. If you transfer a billion dollars secretly, you’re going to have to disclose it.”

They’ll apply all the standard anti-money laundering, anti-terrorism financing, tax code to it because that’s what an adult would do with regard to a new technology. But there’s no political interest in banning Bitcoin or holding it back at the administration level. And there’s profound enthusiastic support for it in the Senate and in Congress. And I actually think that the regulators and the administration are also very enthusiastically embracing it. Because Cathy, in the last 100 years, when did the White House ever issue an executive order legitimizing a new asset class telling everybody to figure it out?

Cathy Merrill: Yeah, that’s a big deal.

Michael Saylor: Right? I mean, that’s really a first. It’s certainly a first this century. The last time we invented a new asset class, 30, 40, 50 years ago, maybe a commodity index. The equivalent would really be like the Vanguard 500 or the S&P index like John Bogle saying you should just buy an index of stocks. It’s more profound than that in some ways, but it’s a similar idea that you just got to get comfortable with.

Cathy Merrill: Well, I think they also know that almost all ransomware payments now are done in Bitcoin. That’s what they want because it can travel without people seeing it.

Michael Saylor: Actually the truth is there’s 17,000 cryptos, but some of them are specifically for moving money without anybody knowing and those get a lot more heat from law enforcement. Bitcoin is a public ledger. So if I send you $100, everybody in the world knows that it went from my wallet to yours. I mean, it’s completely transparent. Not only can you look at every transaction in Bitcoin every 10 minutes, you can download the entire software to a $400 device and you would’ve a record of every Bitcoin transaction since the beginning of time, right? It’s completely transparent. And in the big crypto bust that took place a few weeks ago, I think the law enforcement, the FBI traced $3 billion worth of Bitcoin that had been heisted often in exchange because it is transparent. So you might get some Bitcoin transferred to you, but you can’t ever spend it because you won’t be able to liquidate it on the exchanges because they know that it’s a criminal that has the wallet. And so it’s not really good for that. You would rather use gold or cash in that situation.

Cathy Merrill: When you look at that blockchain of transactions, do you see it growing in the US or abroad and have you seen it moving around Ukraine and that part of the world, because people are trying… I know my Ukrainian friend, her family can’t get money out of the ATM there. So do you look at that code in those transactions?

Michael Saylor: Well, I mean, you don’t actually know where the… For example, if I had a billion dollars and I knew the private key is in my head, I could go anywhere in the world, right? The billion is sitting at an address. You don’t know where I am and I could send it anywhere in the world. I could actually move it anywhere in the world every second. So the point is the money’s not some place, the money is in cyberspace, right? It’s sitting in the ether. So I wouldn’t think of it like that, but maybe the more interesting question is why is adoption of Bitcoin exploding right now around the world? And the answer is because it solves a problem that people are facing. And if you look at the key things that have happened, the bank system has seized up in the developing world, like in Lebanon and in Turkey and in Afghanistan and Iraq, lots of parts of Africa, lots of parts of South America. Cypress was an example.

When the bank freezes, it basically freezes all your assets and then it converts them from whatever the dollars are to local currency and it devalues them. So the first driver is people don’t trust the banks and they don’t trust their local currencies. They’re all collapsing. The second driver is the Canadian trucker crisis traumatized hundreds of millions of people because the message there was, if you’re an American citizen and if the head of another country Canada disagrees with your politics, he could just seize your money, take it without a court order without due process. So you’re an American and a Canadian politician just took millions of dollars overnight from you just because he wanted to. So that caused a bunch of P people to think, I can’t really trust a politician. And if I have the wrong politics, they’ll just take my money, right?

Cathy Merrill: Right. People don’t trust politicians? When did that happen?

Michael Saylor: Yeah, it’s a while. So the third thing was the Ukrainian war. And then all the banks in Ukraine froze and people want to get out of the country or they want to move and they can’t get any money, right? And then all the Russian banks froze and the Russian market froze. So you’ve got 300 million people with a bank crisis, a currency crisis. When that happened, the Russian currency crashed by 30% and then the Ukrainian, Polish, Hungarian and Turkish currencies all weakened. So everyone in that part of the world lost anywhere from three to 30% of all their wealth and maybe they lost three to 30% for of what they’re going to have. So that’s a big panic. Then what happened was the Russian sanctions where the West basically seized 300 billion of gold and currency derivatives from Russia and then they started seizing all the property of all the Russian oligarchs.

And the mainstream media view is, yeah, we should do that, right? They’re spoilers of war. But the United States never declared war in Russia. So this is an example of one country not at war with another country where citizens of the one country are having all their property seized by other countries without due process immediately. And so that means that everyone that has any assets anywhere in the world that thinks they might ever be an opposition to any politician anywhere else in the world is feeling very insecure about their property rights. So who might be concerned? Well, you start with the Chinese, they have $3 trillion worth of currency derivatives. So if they invade Taiwan and they lose 3 trillion, or maybe if they just get in a diplomatic dispute over the South China Sea. So then you have the Emiratis and you have all the Middle Easterners and you have all the Africans, you have all the Asians and the Kazakhs and you have all the south Americans, everybody feels insecure about their assets.

And so if you feel insecure, who can you trust? And if you can’t trust your local currency, and if you can’t trust your local bank and if you’re building and sports team and boats and company stock is going to be seized because it’s international and everybody has international somewhere, right? If that’s the case, then you think what do I do? And the answer is, first of all, I get my money out of the bank. And so I would take my dollars out of the bank and I’d buy crypto dollars like Tether or some stable coin. And then I want custodianship of it. I want custody, I want to hold it on my own phone, because if you had your money, if you had $10 million in Lebanon before the crisis in the bank, you lost it all. And if you had the $10 million on a crypto device, you’re still rich, you still have it all. And so people are opting out of the conventional system. And then of course, well, what good is it to own a building in downtown Kiev or Moscow, right? I mean, you can’t rent the building to anybody, right?

Cathy Merrill: And most of the world has phones now, but they don’t really have access to play in the market. So this is something that somebody in Africa could buy on their phone, right?

Michael Saylor: And it gets us to this issue of human rights. If I give $10,000 to someone in Africa and they have to convert it into the local currency, then the $10,000 is going to be worth $500 in a matter of a few years. So I can’t even give you the money if the currency doesn’t work, it’s collapsing. So if you put it in a bank, the bank steals it. But the bank won’t give you a bank account. I mean, there’s 3 billion people that can’t get a bank account even if they had the money. But if they did get the bank account, someone in Africa can’t very well be buying a diversified portfolio, a big tech stocks that trade on the NASDAQ. You can’t physically buy it. So if you have some money, tell me, what do you want to own in Africa that you think is higher quality than owning your house in Maryland or Virginia?

What do you want to own? Nothing, right? So there’s nothing you can buy, right? Okay, buy a bar of gold, carry that around and someone with a machine gun shoots you and takes the gold, unless you go through an airport and they just take it. So how do I actually preserve my economic wealth if I’m one of the three or 4 billion people in these countries where you can’t trust the currency, you can’t trust the government, you can’t trust your neighbor, you can’t the bank? And the answer is I download an application to an Android phone, and I put some digital dollars like stable coin and I put some Bitcoin, some digital property on it and I don’t tell anybody to have it. And if I need to flee the country, I could take it with me. If they’re going to seize my phone, I could just memorize it and I walk out of the country remembering 12 words, and I keep my wealth.

And if I live in America and my loved one is in Nigeria and I want to send them money the conventional way, it takes weeks, there’s a 10% fee, when they go to get it from the bank, someone robs them. On the other hand, I can just put money in a lightning wallet on a Sunday afternoon and in 30 seconds, zap it to them, friction free for nothing. And I cut out the banks and I cut out the robbers and I cut out the crappy currency and the money changers, right? There’s a reason that Jesus Christ, what is it, when he goes into the temple and he runs out the money changers, right? He’s like, you guys are ripping off the people. If you live anywhere in the developing world, you’re probably losing 10% of your money on transfer just in remittance payments. That’s each time it moves. And then you lose 20, 30% of it a year to inflation, unless you’re losing 60% a year to inflation. So it’s a human rights issue. And people that like Bitcoin think this is an instrument of economic empowerment for billions of people whose life is hopeless without this technology.

Cathy Merrill: So I’m going to go flip to two quick questions, because one question that just came through was about, because you’re an evangelist for this is what do you recommend the easiest way to purchase Bitcoin is? The wallet is how people buy currency. Do you have a wallet you prefer? And how do you recommend someone who doesn’t own any buy it?

Michael Saylor: Okay. Well the answer to the first question is you would go to a regulated, licensed exchange in the jurisdiction where you preside. So if you’re in the US, there are well considered exchanges. Fidelity has a digital assets group. Coinbase is probably the best known, for corporations Knighted, and there are other exchanges. You should do your research and decide which one you trust and which service you trust. If you are interested in resources, if you go to hope.com, H-O-P-E, just remember Bitcoin is hope, then we’ve got tons of education. I would say, you should get yourself educated and become a sophisticated consumer and then do your research and find an institution you trust. What’s the next question?

Cathy Merrill: Okay. On mining, because there’s a lot about this about energy. And China, as you know, banned crypto mining, so now about 35% is done in the United States. And for those people new to this, the mining is when those transactions get added to the block, it’s a lot of computers that are following it, and those computers take up a lot of energy. Does that bother you?

Michael Saylor: No, actually that’s what makes it immortal and incorruptible. The Bitcoin mining process is the process of taking raw electricity and then encrypting it with the SHA-256 algorithm. So it’s encrypted energy. You’re digitally transforming the energy using a semiconductor chip, which we call Bitcoin miner. And traditionally the biggest manufacturer of that hardware were Chinese companies like Bitmain. But Intel just announced last week that they’re going to be producing Bitcoin miners and a new Bitcoin mining chip. So the way the network works is I buy the Bitcoin miners, I put it in a data center, I feed it electricity. It throws up a wall of encrypted energy to protect your assets from a hostile attack by a hacker or a nation state or a mal factor. If you didn’t do that, then someone could just come up with acute piece of code, hack the system and steal all of the hundreds of billions of dollars. And if they did that once, that’s the end of the world.

Cathy Merrill: Do you ever think mining will be carbon neutral?

Michael Saylor: The most important thing about mining is it’s the cleanest, most efficient energy use in the world. I mean, this is the cleanest industry in the world. Many people don’t realize that. That’s because most of the ESG FUD is spread by other crypto network entrepreneurs that are using it as gorilla marketing. So they would want you to think that there’s an issue. But if you thought about it for a while, you would realize that… Let me just give you the fact. Bitcoin mining uses 14 basis points of the world’s energy. So like one 10th of 1% of all of the energy in the world is Bitcoin mining. It’s really de minimus. Second, it’s going to decrease. It’s headed toward one 100th of 1% because the semiconductor technology has improved by orders of magnitude.

So it’s just like Moore’s law. We keep making the chips faster. So as companies like Intel, they just released a chip that’s 21 joules/terahash. And it used to be we used 1,250 joules/terahash. So it used to be a hundred times more energy intensive to mine. So the industry itself is a technology business getting exponentially more efficient. But if you look at the electricity, the electricity used is 58% sustainable already, which means that is cleaner than electricity in your Tesla or is cleaner than all the energy used in planes, trains, automobiles, buildings, food, hospitals, national defense, banking. Every other thing in the world uses dirtier energy and more energy. So if you’re really an environmentalist and I told you that 99.95% of carbon emissions come from stuff that’s not Bitcoin and Bitcoin energy efficiency is improving 36% a year.

So it’s neither the problem, nor is it the solution to any environmental concern. What it is is an industry that uses encrypted energy in order to create an open permissionless crypto asset so that it is ethically technically sound. If I eliminated the energy, then I would have a security. And it’s like in Fortnite, I would’ve a video game in Fortnite or Roblox, I can move coupons around without using encrypted energy like Bitcoin uses, but you’re trusting the board of directors of Fortnite or the board of directors of Roblox to not corrupt the currency and steal all your money. And since it’s a company, no country’s ever going to trust an American company to issue the currency that they run their world on, right? Plus because it’s a security, it’s unethical for a public figure to endorse a security.

So if you want to create a non-security, if you want to create a property, it has to be open to permissionless. The only way that we’ve ever figured out how to do that in the history of the world is proof of work mining, which is what the Bitcoin mining network is. So it’s not causing a carbon problem, it’s not even a big energy user, it’s simply is a extremely efficient use of energy because you put about $2 billion worth of electricity into a network to create an $800 billion of value. And if you compare that energy efficiency to $2 billion put into the airplane business, you realize that it’s 1,000 times more expensive to fly an airplane around and get value from that as it is to keep track of or keep a digital asset secure.

Cathy Merrill: Okay. Let me ask you about some of the things around on the outside of crypto, or I guess part of the new waves of crypto. You have 40 patents. Are you buying NFTs?

Michael Saylor: No. Look, Bitcoin is scarce, desirable. It’s basically a block in cyber Manhattan and there’s only going to be one and there’s no reason to think it won’t be valuable 1,000 years from now. And when you buy it, you’re buying one 21,000,000th of all the economic energy in the network, maybe all the economic energy that’s ever going to be in the world, right? It’s a very profound, deep, dominant network. NFTs represent crypto art. And they compete with physical art and sculpture and every other form of art and it’s still a fairly early embryonic business, but they’re not particularly. You can create a million, a billion, a hundred billion different NFTs. I can write an algorithm to create them. So primarily their art that has value because of the marketing of the art and other technicalities that have to do with the leverage that’s used by those crypto networks to monetize them.

But I don’t see the… If I was going to buy art, I would buy all the Picassos, right? And even then, say you bought all the Picasso or all Leonardo DaVinci or something like that, your bet is that the human race in 1,000 years will still value 19th century impressionist paintings, right? And if that’s your bet, there’s a risk. But I think it’s more likely the human race will value pure energy or pure money 1,000 years from now than it will value 19th century impressionist. They will have a place, but there’s 1,000 years worth of other art to be created that’s going to dilute that art and the culture. And so you’re taking a risk, you’re expressing a sentiment.

Cathy Merrill: Let me ask you another question. This came from the audience. In the simplest way, because I think it could get detailed, but what applications do you see for blockchain that are outside of crypto? Blockchain’s pretty exciting. How do you see it transforming other industries or other parts of society?

Michael Saylor: I don’t really think there’s any other low risk, compelling, obvious application of blockchain right now. I think it’s heavily marketed and hyped by people in the industry. The real compelling application of blockchain is a decentralized global crypto property that can replace gold as a non sovereign bear instrument store of value. And that’s what Bitcoin is. As that spreads, that could be worth hundreds of trillions of dollars. So that is a big idea. All the other ideas are questionable because any application you want to build, you could build with a website or a mobile phone as a company, and then you could just run it against Bitcoin. So if you really want to move money at the speed of light and sell it and give flash loans and mortgage it, you can simply build a website like Coinbase, plug Bitcoin into it and then give it to the world.

The reason they don’t do that Cathy, is because it’s illegal. The reason that you don’t get a flash loan from Apple computer or Google is because it’s illegal. Because you have to get regulatory approval from the SCC. So companies don’t do these things because they’re not compliant with existing regulation. If the regulations allowed you to give flash loans and do DeFi, then Citadel or JP Morgan or a Coinbase or Apple, they could spin up a website and they could trade with 8 billion people in Singapore and China and everywhere else and they could do it with simple non decentralized code. The things that people are deal doubling with in the crypto world, they’re pursuing smart contracts and art and NFT and I grant you it’s exciting, but it’s all in the regulatory gray zone.

Because for example, DeFi. DeFi is running a stock exchange without KYC. So why is it that people in the US, why is it that a company doesn’t run a stock exchange on a website without KYC? And the answer is because it’s illegal, right? It’s non-compliant and you get shut down by the regulators. So I would say, when you look at the safe harbors, it’s legal to own property in the US. It may not be legal to own property in North Korea or Cuba, right? So if you’re in a communist regime, Bitcoin might be banned. But if you’re in the Western Europe or the US and you want to own a Bitcoin in lieu of a house, you’re in a very safe zone and that’s a business which is something worth promoting. But on the other hand, if your idea is you want to run a bank, but you don’t want to comply with regulations and if you want to do lots of other things, you want to run insurance companies, but not comply with regulations, then yeah you need a decentralized thing, but is it really decentralized?

And most of them aren’t really decentralized. And so that means that the regulators start to clamp down, they launch enforcement actions. So that’s why I would say, no, they’re not all equal. It’s not like there’s 10 ideas and they’re all equally good, you should diversify. There’s one good idea that’s worth hundreds of trillions of dollars that’ll solve half the problems of the human race. And then there’s a hundred other ideas that have 1,000 X as much risk, 1,000 X as competition. And all the other things, they only exist at the pleasure of the regulators right now, right? There’s probably out of 17,000 cryptos Cathy, there might be six you could debate or property, that means a commodity. There’s one that we all agree on as a commodity that’s Bitcoin, there’s six you could debate. The rest are all securities. And if they’re all securities, they’re all unregistered securities. And if they’re all unregistered securities, that means that you really have to be a venture capitalist and you have to parse the competition, the security risk, the regulatory risk, every other liability. And you’re just wading into a very murky area of speculation. So just keep that in mind when you’re considering what do you want to promote and what do you, what do you want to dabble with.

Cathy Merrill: You’re promoting Bitcoin. And so my question for you is Bitcoin famously created January, 2009 by Satoshi Nakamoto who no one knows who that is. So one of my questions is, is that you because it seems like you are Mr. Bitcoin? And two, has this person ever reached out to you as the biggest owner of this thing they created? Have they ever back channeled you in some way?

Michael Saylor: Okay. So you’re too kind. It’s not me. And Satoshi’s gone and never coming back and has disappeared. And it really allows me to make a point about the providence of the network. The reason that people are passionate about Bitcoin is because of the immaculate conception of Bitcoin, it’s ethically sound and it’s fair. What you had was one pseudonymous programmer that finally launched a successful crypto network that had no value for 15 months. And that’s like starting a fire, after 50 tries they’d failed and the 51st time they launched it and it caught a little bit of energy and it started to burn. Satoshi operated and there are about a million coins that are called Satoshi coins that were mined in the early years or the early year. Those have never moved. Satoshi disappeared after about 18 months, never to be heard from again and said, “Okay, I pass the Baton,” knowing that if this had a founder or if this had a controlling entity or if there was a company or a group of people behind it, then it would start to look more like a security and there would be a question of, is it fair?

Is it fair that some early person got their coins for free? And so Bitcoin never had a pre mine, right? The Satoshi coins never moved. It never had an ICO. There was never an IPO. No insiders ever invested in it. And it’s very important to decentralize. So there was never a big company backer, a Facebook, an Apple, a Google, a Microsoft that we might not trust. There was never a nation state behind it. It was completely people. And about 15 months into it, we got to a point called pizza day. And on pizza day, Bitcoin was used to pay for two pizzas, 10,000 Bitcoin. And so Bitcoin for the first time had a value of like 2 cents. So the thing it burned with no value, nobody thought it would ever be economic.

Cathy Merrill: Analogy because now those two coins that that person bought for two slices of pizza would be worth $400 million, right?

Michael Saylor: Yeah. $500 million or $450 million today. But the point was the people that got involved, they were hobbyist and idealist. And what they were trying to do was create this ideal organic life form in cyberspace that was fair and equitable. We say, wouldn’t it be great if we could settle our differences in a fair and equitable fashion? So that’s why say there was such pushback when Facebook was going to launch Libra. It’s like, do we want a powerful company to create their own currency and then push it down their network? It doesn’t seem fair, right? But with the Satoshi, Satoshi gave a gift to the world, a fair gift. And the fact that Satoshi disappeared and the coins never moved and the stuff never had value, it means that everybody that ever joined the movement joined it on equivalent equitable basis, right?

No one had an advantage. Everybody had to take either exponentially more risk or they had to pay exponentially more money and there was nobody that controlled it. And what that meant was no one could corrupt it. And what’s really critical about Bitcoin is the fact that that monetary policy, 21 million coins, and that expectation, that block size, one megabyte block size that’s the same today as it was on pizza day when it was worth a penny. And it’s very important because if you’re going to ask me, am I willing to risk a billion dollars for 100 years? Well, if you’re going to bet a billion dollars for the next 100 years, you don’t want a piece of software that somebody just shipped last month or that they’re going to fix next year or that they’re changing or tinkering with, right? You really want to know that this thing is not going to change, it’s past the test of time, it’s got a community that’s idealistic and they’re going to fight to protect it from corruption. And there can’t be any one personality because if there’s one person that becomes a liability as opposed to a feature.

Cathy Merrill: You are one person and you are betting billions. So let me ask you some personal questions, okay?

Michael Saylor: Sure.

Cathy Merrill: One, do you tweet yourself or do you have a team that tweets?

Michael Saylor: Oh, I tweet myself.

Cathy Merrill: Okay.

Michael Saylor: It’s all me Cathy, all me. All the warts and all. This morning I tweeted Bitcoin is my daily tweet.

Cathy Merrill: Okay. Do you have a goal in mind for how much Bitcoin you want to accumulate? Is there a number in your head?

Michael Saylor: Another way I look at it is when we generate cash flows where we come across cash, if I hold it’s going to lose 10 to 20% of its value a year so I convert it into a stronger asset, which is Bitcoin. So we will just keep sweeping our cash flows into Bitcoin forever.

Cathy Merrill: Okay. Tomorrow is Matt’s opening day. If you had a walkout song, what would it be?

Michael Saylor: Eminem, Lose Yourself.

Cathy Merrill: Okay. Do you have a favorite TV show right now that you’re watching?

Michael Saylor: No, I don’t have a favorite one.

Cathy Merrill: Tell me one book that had a huge impact on you.

Michael Saylor: The Bitcoin Standard, caused me to buy billions of dollars of Bitcoin.

Cathy Merrill: Okay. I know you’re a pilot. I know Elon Musk has a spaceship. I know you know him. Are we going to see you in space?

Michael Saylor: Maybe one day. We’ll see.

Cathy Merrill: Okay. What was the last thing you bought with cryptocurrency?

Michael Saylor: I don’t think you should buy things with cryptocurrency. I think you should buy cryptocurrency with things. So the best idea is if you had cryptocurrency, in this case Bitcoin, if you have Bitcoin and you want to buy something, you’re better off to take a loan against it and create an account of dollars or pesos and then you should sell the currency for the thing or trade the currency for the thing you want to buy. And you ought to accumulate the property and hold it forever.

Cathy Merrill: What is home screen wallpaper on your phone? And is it orange?

Michael Saylor: It’s not orange, it’s blue and it’s a picture of Dubrovnik in Croatia, the Mediterranean Sea.

Cathy Merrill: It was a beautiful city. Okay. Best concert you ever went to. Most people don’t know this, you’re very, very musical. You play yourself. You’re a musically inclined person. Best concert you ever saw?

Michael Saylor: I think I really enjoy seeing Staying at Wolf Trap play up close and personal.

Cathy Merrill: And finally, if the government asked you to serve, if they said, “Look, we need someone to regulate all this crypto and someone who knows it in depth,” would that be something that we could see from you?

Michael Saylor: Above my pay grade. I’m just a humble private citizen. I think I’ll let career regulators and career politicians handle the regulation and the politics. I think I’m just going to educate and advocate.

Cathy Merrill: But hopefully you’ll lend them your brain. Thank you for sharing it with us. There are so many more questions that I didn’t get to and that people sent in, but it is a huge subject for an hour and thank you for giving it to us. I know you’re off to speak at the Bitcoin conference, which is attracting a ton of people, so good luck on your speech on that and thank you.

Michael Saylor: Thanks, Cathy. I mean, I would say to the audience, if anybody wants more information, remember hope.com. There’s a whole index of websites, free courses, books, resources, videos there, and pointers to other leaders in the space. Feel free to follow me on Twitter. I post interpretations of regulatory developments, market developments, technical developments in the entire crypto economy every day if you’re interested. There’s the Saylor academy saylor.org, has a free Bitcoin for everybody course. It’s 12 hours. It’s free. Anybody can take it. And I think the best way to communicate this this is think it’s like 1900 and someone invented electricity and they came into your town and said, “We’ve got this new thing called electricity and we think it’s going to be in hospitals and cars and planes and trains and boats and government and schools, and we’re going to teach classes on it.”

And you’re trying to figure out what does it mean to you, and the answer is, yeah, maybe it’s scary and maybe it’s exciting, but it deserves your attention. So treat it with respect and spend some time to educate yourself on it because it’s all those things. And I think the society had 30, 40 years to figure out electricity. I think it’ll be a decade with people figuring out what Bitcoin is because Bitcoin in its purest form is digital energy and electricity is electrical energy. So if you have digital energy and you didn’t expect to ever see it in your lifetime, it’s a paradigm shift. And it means different things to different people. And it’s extraordinarily exciting. It’s also scary, it’s also complicated, right? And I would say everybody can benefit from it, but it’s such a novel thing that you probably have to spend some time to wrap your head around it in order to get the fullest value from it.

Cathy Merrill: Okay. Hope.com, Saylor academy, that’s the place to tune in. Thank you.

Michael Saylor: Thank you. All the best everybody.

Cathy Merrill: Bye.

Jacob Raim
Director, Digital Products