“Google is an information network. Facebook is a social network. Bitcoin is a monetary network.”
Michael Saylor is a technologist, entrepreneur, business executive, philanthropist, and best-selling author. He currently serves as Chairman of the Board of Directors and Chief Executive Office of MicroStrategy, Inc.
As we approached 2010, companies like Apple, Facebook and Amazon were poised to transform the world. The analog world we once lived in would soon fit in the palm of a hand. Apple was replacing Canon; Facebook and Instagram were replacing Kodak; Amazon was replacing retail stores. In the process these companies became exponentially more valuable than the ones they eliminated. “Software networks are dematerializing everything in the world.”
Bitcoin represents a similar transformation in the financial space. Similar to the likes of Amazon, Apple and Facebook, Bitcoin has proven itself the winner in the crypto asset space and will continue its inevitable climb. Institutions and major players in the financial space are already coming around to Bitcoin which will accelerate its adoption and growth.
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SPEAKER
Michael Saylor
Chairman of the Board & Chief Executive Officer
MicroStrategy
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
John Darsie: (00:06)
Hello, everyone. Welcome back to SALT Talks. My name is John Darsie, the Managing Director of SALT, which is a global thought leadership forum and networking platform at the intersection of finance, technology, and public policy. What we're trying to do during these SALT Talks is provide interviews with leading investors, creators, and thinkers. It's trying to replicate the experience we provide to our global conference series, the SALT Conference, which provides a platform for ideas that we think are shaping the future and a window into the mind of subject matter experts. We're very excited today to welcome Michael Saylor to SALT Talks.
John Darsie: (00:43)
Michael is a technologist, an entrepreneur, a business executive, and a philanthropist, as well as being a best-selling author. He currently serves as the Chairman of the Board of Directors and as the Chief Executive Officer for MicroStrategy. Since co-founding the company at the age of 24, Michael has built MicroStrategy into a global leader in business intelligence, mobile software, and cloud-based services. In 2012, he authored the book The Mobile Wave: How Mobile Intelligence Will Change Everything, which earned a spot on The New York Times Best Seller list.
John Darsie: (01:14)
Michael attended MIT receiving an SB in Aeronautics and Astronautics and an SB in Science, Technology and Society. Just a reminder, if you have any questions for Michael during today's SALT Talk, you can enter them in the Q&A box at the bottom of your video screen. Hosting today's talk is Anthony Scaramucci, the Founder and Managing Partner of SkyBridge Capital, which is a global alternative investment firm. Anthony is also the Chairman of SALT. With that, I'll turn it over to Anthony for the interview.
Anthony Scaramucci: (01:43)
Well, John, thank you. Mike, I got to tell you, I was so pleased when you accepted our invitation. Thank you. Welcome to SALT, and welcome to SALT Talks. Hopefully, we'll get you to one of our live events one day when we can get back away from the pandemic. But before we get started, you got this beautiful ship in the background. You're crushing John Darsie, who prides himself in his room ratings. So, I'm very happy that you're here with this beautiful room rating. But tell us about your background. Tell us about your family's background. I know you come from a military family. Give us some sense for your upbringing and what got you on the arc of your professional journey.
Michael Saylor: (02:22)
My father was a career noncommissioned officer in the Air Force. We spent 30 years. He rose from the beginning to be Chief Master Sergeant. We lived on military bases, air force bases everywhere in the world. Then he spent 10 years as a government servant working on the F-16 program. So, I come substantially from an Air Force background. I grew up in Dayton, Ohio, and in high school, where they invented the airplane. I became very enamored with science fiction. I read every science fiction author, Robert Heinlein, Arthur C. Clarke, Isaac Asimov.
Michael Saylor: (03:04)
By the time I graduated, every self-respecting individual, every dude of my generation either wanted to be a rock star, astronaut, fighter pilot, maybe professor, or CEO. So, I went to MIT on an Air Force scholarship. I studied aeronautical engineering and spaceship design. I learned to fly in the Air Force, Lackland Air Force Base. My senior year, I ran into two flukes, the United States won the Cold War, Reagan drew down the military. I was diagnosed mistakenly with benign heart murmur.
Michael Saylor: (03:48)
The result of that is I didn't go into the Air Force to fly jets and become the astronaut, which was one of my career paths. I ended up going out into the business world. I thought I'd get a PhD. I took a job. The job blew up. I got another job. When I was about to go back to college, the people I was working for gave me the chance to start MicroStrategy. They financed the entire business. So, I started a company at 24. I thought when it fails, I'll get a PhD. It never failed. I'm still stuck here. So, that's how I got to be in the software business. It wasn't of my own doing. I really wanted to be an astronaut.
Anthony Scaramucci: (04:28)
Do you think you'll ever take a trip into space, Mike?
Michael Saylor: (04:33)
We'll see. I'm holding out hope. Go SpaceX!
Anthony Scaramucci: (04:39)
I see his base. Yeah, we're investors in SpaceX, because we love that company. We're obviously cheerleaders for what's going to happen this weekend with their launch and cheerleaders for Elon's company. Talk us through The Mobile Wave and how mobile intelligence has changed the world, a fascinating book. What's interesting about your book, even though it was written eight years ago, it is still very current. So, I would recommend everybody on this SALT Talk to read the book, very compelling stuff. But tell us a little bit about how it's changed the world, mobile intelligence.
Michael Saylor: (05:17)
In 2007, Apple came for with the iPhone, but it was a toy. There was no cut and paste. There is no App Store. By 2009, the iPhone 3 was not a toy anymore. It was a business tool. I became enamored with the idea of software leaping off of a computer onto a handset. I thought when software goes from solid state to vapor state and now it's around us and with us and we sleep with it 24/7/365, maybe it means something different.
Michael Saylor: (05:48)
So, when I wrote The Mobile Wave, the observation was software networks are dematerializing everything in the world. They're dematerializing money and identity and everything you hold in your hand, the photograph and the camera and the recorder and the video. If software dematerializes everything, then I can take a map from Rand McNally and make it a magic map. Google Maps is a magic map that tells you where to drive, how to drive, whether you should go there, the directions to take. It's in the palm of your hand. It even talks to you. Rand McNally was a simple 20th century map. Rand McNally is worth 50 million bucks. Google Maps is worth $50 billion.
Michael Saylor: (06:36)
Apple dematerialized Kodak, maybe Instagram did. You went from taking photos on a Canon camera and storing them in a shoe box or a photo album to Facebook and Instagram and the iPhone. It wasn't worth the same. It wasn't worth 10 times as much. It was worth 1,000 times as much. So, the conclusion of the mobile way was the world's going to change the network. Google's an information network. Facebook's a social network. Apple's a mobile network. Amazon's a retail network. They're going to eat the world. They're going to destroy 15,000 other companies that are competing with them, because Apple is able to ship a better camera to a billion people overnight for a nickel.
Michael Saylor: (07:21)
Nobody in the history of the world could ever upgrade or ship a product for no variable cost to the entire planet for a nickel. Yet, that's what Google does. That's what Facebook does. That's what Apple does. The part of Amazon that works well is that dematerialization of the retail storefront to a billion people for a nickel. Well, the conclusion is buy Apple, Amazon, Facebook, and Google. I wrote the book. Anthony, nobody read the book. I mean, some people read the book. I got 50 people-
Anthony Scaramucci: (07:51)
What do you mean? Darsie and I read it, because we're get ready for you, man. I knew I was going to be out punched in terms of IQ and brain powers. I had to read the damn thing.
Michael Saylor: (08:01)
Eight years later. When I wrote the book, probably 50,000 or 100,000 people read the book. I made 50,000 in royalties from the book. I didn't invest my company into Apple, Amazon, Facebook and Google. I took $50 million of my own money. I bought it. I bought it when everybody said, "You're forced to own Apple. You should diversify into all the other computer companies. What is this Facebook thing? You're foolish to own that. What is this Google thing? It's overvalued. It's overpriced." Well, I converted the $50 million into $500 million. Anybody could have done it. If you had bought any of those companies in the past decade, you couldn't lose money.
Michael Saylor: (08:41)
So, it made me conclude a couple of things. One thing, if you want to make money in the tech era, you find the dominant digital network, the one that's worth $100 billion that's crushed everybody. You can't buy MySpace. You might hit BlackBerry or MySpace or Yahoo or something like that. If you buy too soon, you might miss it. But after it's $100 billion dollars and the market has decided Apple's the winner, Google's the winner, Facebook's the winner, Amazon's the winner.
Michael Saylor: (09:15)
I know it's pretty obvious Amazon was the winner in 2013 when it was trading at 300 bucks, Anthony. Everybody on Wall Street said, "What is this stupid company? They don't make any money. We don't buy into it." They would sell you Amazon for 300 bucks, but you could have bought it. You could buy all those things. You would have got a 10X, 20X gain on it. You just wait until the 99% of the world that disagrees with you, that cynical and skeptical and ignorant and they don't understand it and they're afraid of it.
Michael Saylor: (09:45)
As it gradually dawns on them that Google's an information network, Facebook's a social network, Apple's a mobile network, Amazon's a retail network, Microsoft's an enterprise software network, when you finally figure it out, you're like, "Oh, these guys can serve up a billion people for a nickel. Their variable cost is zero. They've got overwhelming crushing advantages."
Michael Saylor: (10:12)
So, summary of The Mobile Wave, I had that experience. It made me very successful as a personal investor. My company didn't invest in it. 2020 came and I swore to myself, if I ever saw this again, I wasn't going to write a book. I was going to buy as much of that thing as I could personally, as much of that thing as I could corporately, and then I was just going to tweet about it. So, that's basically the tie in or what leads us up to the virtual wave and my interest in Bitcoin.
Anthony Scaramucci: (10:48)
So, let's talk about that, because you started out as a Bitcoin skeptic. I've listened to a lot of your interviews. There was a tweet in 2012, where you likened it to a form of online gambling. And then you had the slow conversion into becoming what I would say one of the more exceptional Bitcoin evangelist. I mean, I would describe you be like that based on a lot of the stuff that you've said. But now you're putting your money alongside of your ideas and your mouth, you've announced a $425 million investment in Bitcoin from the MicroStrategy cash reserve. So, could you take us through your personal odyssey from skeptic, "This is online gambling," to "Okay, wait a minute. This is a lot like Microsoft, Facebook, and Amazon"?
Michael Saylor: (11:36)
Sure, I mean, in the early days of Bitcoin, Bitcoin's like an open source project. There's no company behind it. It's an emergent phenomenon in cyberspace. As it emerged, the early days, it was very uncertain and scary and complicated. So, how will the IRS tax it? Will the government ban it? Will it be illegal to hold it? The early exchanges were failing. Mt. Gox failed. The early use cases were Silk Road. The early question of, "Is it a security or not?" Right? You went through all of these tests for Bitcoin. It could have been destroyed, because it was banned. It could have been destroyed, because it was hijacked by bad exchanges. It could have been destroyed, because it was forked. Everybody said, "Well, either someone else is going to copy it or the government will ban it."
Michael Saylor: (12:41)
Over the last eight years, what happened is it was copied 6,500 times, Anthony. It's the winner of the crypto war. So, how do you get comfortable with it? Well, after it's been attacked 6,500 times by clones, and they've all failed. When it emerged to be 95% of all of the proof of work networks... 95% of all the monetary energy in the crypto asset space is on the Bitcoin network. ... then you know it's Facebook, it's not MySpace. So, we had to watch it get to a point of maturity, where it's season. We had to watch all of these bad exchanges failed and all the bad actors failed. We had to watch the development of a regulatory apparatus.
Michael Saylor: (13:28)
So, now you have KYC regulation on the exchanges in the US. You have clarity with regard to how it's taxed. You have clarity with regard to what it is and isn't. I think people are starting to understand it's not a currency. It's not a payment network. It's a bank in cyberspace that allows billions of people to store their money. It gives them a simple, straightforward, affordable, secure savings account for people that can't set up their own hedge fund and don't know and can't get into a hedge fund. They just want to put their money in a bank.
Michael Saylor: (14:11)
The politicians and the country has destroyed the savings account over the past 30 years. When I was a kid, you put your money in a savings account, get 5% interest, and everybody believed that the money was going to be more valuable in the future. You wouldn't lose your money. That option's been deprived. So, Bitcoin has emerged from casino gambling scary to the savings account or savings and loan at the end of the universe. That's the journey of the 10 years, and that's why I could get excited about it in the year 2020.
Anthony Scaramucci: (14:49)
You tweeted a lot about that this morning, which I shared with my team. I guess the question I have is and you said it, but I want to hear it again. You had MySpace. You had Yahoo. They got hopped over by Facebook and Google. There's not a coin out there that could hop Bitcoin. Is it or no?
Michael Saylor: (15:13)
They tried 6,500 times, Anthony, over a decade. Everybody and their brother thought, "Man, could I copy this?" The problem is Bitcoin's the only one with the immaculate conception. It's truly decentralized. It's the money. It's the crypto asset of the people, right? There's not an example of a digital network that hit 100 billion dollars in market cap that was vanquished subsequently. Lots of billion dollar things failed, lots of $2 billion things fail. But once you get to $100 billion dollars, I think the market has spoken.
Anthony Scaramucci: (15:55)
Right. I think it's well said. There was a book 20 years ago, James Dale Davidson and a guy named... I think it was William Rees-Mogg. His son is now in the parliament in the UK. I'd have to get the exact title of his last name, but the book was called The Sovereign Individual. I read the book 20 years ago. Peter Thiel decided that that was a big book for him. So, he's repurposed it and helped to get published again in a paperback form.
Anthony Scaramucci: (16:28)
So, I went [inaudible 00:16:29]. I hadn't read it in 20 years. Let me go back and read it. I bought it. Thiel writes in the foreword, something that I want to ask you about. He says that "AI, you think of the CCP AI. It helps people score you socially. It helps people identify your facial tics. AI is about centralization and command and control. But Bitcoin and the asset associated with digital currency is a libertarian ideal. It is about personal and individual freedom. That's how he started the book, The Sovereign Individual. I'm wondering about your reaction to that. Do you agree with him?
Michael Saylor: (17:09)
I do agree with him. I think that the thing that makes people that own and invest in Bitcoin passionate about it is because it really does enforce the concept of freedom and truth and liberty and sovereignty for the individual. Let's just take one interesting example. You're an investor, you have a bunch of money, you want to leave it for your granddaughter 30 years from now. Your choices are gold or Bitcoin. Oh, this is the real problem, $10 trillion in gold, hundreds of billions of dollars in Bitcoin. Well, if you actually choose gold, you have to put your gold in a bank and trust the counterparty to take care of that gold. No, are you going to bury it under your mattress?
Anthony Scaramucci: (18:00)
It's stored somewhere. That's that shoe box. That's that Kodak's shoe box that you were referring to earlier.
Michael Saylor: (18:07)
Yeah, pretty much, you're putting it in a bank vault. Now, you've surrendered all your monetary energy. Money is monetary energy. You've surrendered your life energy to a bank, a counterparty trustee. In the last hundred years, they all fail. Every bank fails. You're trusting a company or you're trusting a country. 95% of the cities in the world, the banks failed over 100 years. But the countries and the regimes fail too, so you're trusting in a country or a company and a counterparty. On the other hand, if you actually buy Bitcoin, you have the option, not the obligation, but you have the option to take custody of those keys. That's advantages for you in two reasons.
Michael Saylor: (18:59)
One, you can switch custodians quickly. In half an hour, you can move your money from one bank to another bank, one country to another country. That keeps everybody honest. It's useful in a capitalist world if you have options and no one's holding you over a barrel. The second is, I can hold a gun to your head, pull the trigger, kill you, and take your gold. But if I hold the gun to your head and pull the trigger, I can't get your Bitcoin. I could just kill you.
Michael Saylor: (19:29)
There's a very important subtlety there, which is at the end of the day, you control your life force. It shifts the balance of power back to the individual versus the bank, the custodian, the country, anybody that would coerce you and steal your life force from you. In that way, it's a libertarian idea, but it's also a capitalistic idea. It's also just a matter of decency to the individual and sovereignty to the individual.
Anthony Scaramucci: (20:05)
I'm sure you thought about this, I'm just interested to get your iteration process in making that large of an investment. You had to be thinking, "Okay, what could go wrong? What's the risk management?" Tell us what you think could have gone wrong, and then tell us how you intellectually and cognitively overcame what you thought the issues could be for something like Bitcoin,
Michael Saylor: (20:26)
Anthony, I think this gets at the big issue. The number one problem every investor in the world is facing right now... There's $250 trillion or more worth of this problem. ... is I have monetary energy. Where's my store of value? How am I going to conserve my monetary energy in the current macroeconomic climate? As long as the central banks are expanding the broad money supply and to expanded by 5.5% a year for 10 years. This year, it expanded by 24%. If the monetary supply expands by 10 to 15% a year for the next three to four years, the banks are sucking the oxygen out of the room. They're sucking 10 to 15% of the purchasing power from all of your investments.
Michael Saylor: (21:18)
I mean, if I'm holding cash and I have 500 million in cash and I'm looking at losing 15% of the purchasing power every year for five years, the risk was I'm going to lose 75% if I do nothing, okay? It made it easy for me to take another decision, because I expected that doing nothing with money, with cash is losing half to 75% of your purchasing power. It's not a problem if the money supply is not expanding, right? The expansion of the monetary supply is like I'm sucking 5% of the option out of your room every year or every month. How long will it be before you leave?
Michael Saylor: (21:55)
Now, what do I do with that? Well, I got to find a store of value. A bond is only a store of value if the coupon is higher than the rate of monetary expansion, unless I have expectation that the interest rate will fall. So, a 5% bond can work as long as you keep cranking down the interest rates. But when interest rates get to zero, unless you go negative, bonds don't hold value. Everybody in the bond market has figured this out. Either interest rates go negative or you got to exit.
Michael Saylor: (22:26)
Now, how about stocks? Stock can hold value if the cash flow per share grows faster than the rate of monetary expansion. Google Amazon, Facebook, they work in the last decade, because they're growing 20% and the money supply is expanding 5%. But if the money supply expands by 15%, how many equities are going to expand cash flow per share by 20%? By the way, how do you do that if you're not? You have to leverage up, right? So, if I'm growing 5% a year cash flows, I have to borrow money. I go short the dollar. I borrow billions. I buy my stock back. My cash flow per share goes above the hurdle rates, and I can hold value.
Michael Saylor: (23:09)
What happens when you're fully leveraged up, Anthony? Everybody's at the end of the line. I've leveraged up as far as I can go. Interest rates are as low as they can go. How many companies are going to grow their cash flow greater than the rate of monetary expansion? Well, you crank in your estimate for money supply. Bonds are a problem. Stocks are a problem. Cash is a problem. Now you got to go to precious metals. Am I going to buy gold? The miners are going to create 2, 3% more gold every year. The gold supply as centralized. There's counterparty risks. The central bankers hypothecated and create gold derivatives. There's no scarcity with gold. Under the best case in 100 years, you're going to lose 85% of your money when they just print 2% more gold a year.
Michael Saylor: (23:58)
Under the worst case, you're going to lose it all from a counterparty risk. In the mid case, you're going to lose 90%, 95%, because people keep generating gold derivatives. This is why gold is breaking down against the Fed balance sheet. You can see it breaking down on the charts this year. It's not working. If gold goes through $100,000 an ounce, gold miners are going to frack gold like there's no tomorrow. It's a commodity. Commodities make awful money, because human beings can create more. So, you work your way through bonds, stocks, and gold. What's left? Crypto, find a digital asset you can't print more of.
Michael Saylor: (24:37)
Well, they're 6,500 choices. There's one that's the winner. It turns out that the winner is the one that no company controls, no country controls. It's capped at 21 million. Because it's 21 million, what do you have here, Anthony? You have a software network engineered to collect, store, and channel monetary energy without power loss. It's like Facebook for money or eBay for money, but here's the difference.
Michael Saylor: (25:07)
It takes you 30 years to buy everything you're ever going to buy on eBay. The reason eBay works is because it has all the liquidity of stuff you might buy, but it takes you 30 years to buy it. Bitcoin is a savings network. It's a monitoring network. If you're a billionaire, you put a billion dollars on the network, you put it on the network in a week. I bought $600 million worth of this stuff in a quarter, Anthony.
Michael Saylor: (25:35)
I put 20 years of earnings into the network upfront, because as soon as you figure it out, you realize that it's going to be the highest real return versus all the alternatives. Do I want to have my money sitting in a Fiat instrument, which is a bond or a stock that's going to be debased by expansion of the money supply; or do I want to put it into an absolutely scarce digital asset, which is going to float with the expansion, the monetary supply?
Anthony Scaramucci: (26:06)
Are you worried about the volatility, because it has experienced some volatility over the years?
Michael Saylor: (26:11)
LeBron James started playing basketball like age eight or nine. The first 10 years, he was brilliant. Everybody knew he is brilliant, but he was a little bit volatile. He was a little bit erratic. From age 18, to 28, he crushed everything and everybody in his past. Great superstar athletes have a volatile first decade. It was volatile. There were crooked exchanges that were hacked.
Anthony Scaramucci: (26:32)
They couldn't have evolved until three decades. I mean, there are some superstars that evolved. I just want to give that as a disclaimer on the side.
Michael Saylor: (26:40)
There are some, but my point really is looking backwards at the first decade of a superstar's life and then extrapolating forward to the next decade isn't necessarily the most rational thing. For example, Apple computer was a totally different stock from 1998 to 2007. And then from 2010 to 2020, it was a bit different. If you look at what's happening now, institutions are discovering Bitcoin and there are adults in the room. When they're buying, they're not buying 100,000 at a time and they're not being manipulated on these early exchanges. You're talking about people putting $100 million.
Michael Saylor: (27:27)
For example, for me to buy $600 million, it took me 14 days trading every three seconds, Anthony. I was sitting there ready to buy everything you would sell me for 14 days straight every second for two weeks, me, one guy, one actor. Now, what happens when there's 100 actors like me in the Bitcoin market?
Anthony Scaramucci: (27:51)
Yeah, I think you're making a very compelling case. I appreciate you taking all my questions, because there's a lot of people on this SALT conversation that are coming up the learning curve. They appreciate all the work that you've done. In fact, frankly, they're able to leverage all of the genius that you've put into this. I'm going to turn it over to John Darsie who has a series of questions from our audience. We got a tremendous amount of audience participation, Michael. So, I'm going to let him ask a few questions here.
Michael Saylor: (28:24)
All right, bring it on.
John Darsie: (28:26)
All right. So, you have a very interesting concept, Michael, about Bitcoin being a store of energy in a thermodynamic type of sense. Could you walk us through that metaphor, what you mean by that?
Michael Saylor: (28:39)
Okay, look, it's totally strange to have a financial instrument, which is scarce and capped, because you can print more tech stocks, you can print more bonds, you can mine more gold, you can issue more fiat currency. On the other hand, in the engineering world, when you're designing pneumatic systems or hydraulic systems, nobody ever built a pneumatic system with a leak, a hydraulic system with a leak. Your swimming pool doesn't even work with a leak, right? Everybody knows if there's a leak in the fuselage of the airplane, it's not going to fly, it's going to explode. So, you don't have a leak in a nuclear reactor. Do you ever try to go across the ocean and a ship with a leak?
Michael Saylor: (29:21)
Okay, the idea of a closed system is basic to every freshman in engineering. I'm an MIT engineer. We talk about something called adiabatic lapse. An adiabatic system is no leak. A closed system is when you have mass in the system that can either leave or can be added, and all you can do is inject energy. So, Bitcoin is the classic textbook closed system. There's 21 million coins, virtual bars of gold in the system. You can't remove any, you can't add any. There's no inflation.
Michael Saylor: (29:58)
On the other hand, what you can do is you can heat it up. If you're buying Bitcoin above the 4-year or the 200-week moving average, you're heating up the system. If you're buying it below the 200-week moving average, you're cooling down the system. The entire thing's like a massive monetary battery, a capacitor. It's storing energy. What we've done is created a system where I can take $100 million of monetary energy, I can put it into the Bitcoin network. It'll sit there for as long as you can imagine, and there's no power loss. That's the genius of it.
Michael Saylor: (30:37)
If I told you I was going to inject another million Bitcoin or two or three million Bitcoin, I'm bleeding off, I'm diluting the energy. So, when I describe it as a closed system, what I'm saying is for the first time in the history of man, we created a monetary energy network that will store the energy over time with no power loss. We've never had a money. We've never had a thing that could do that. Gold didn't do that. Copper, silver doesn't do that. Fiat doesn't do that. Stocks and bonds don't do that. So, it's really an engineering breakthrough.
John Darsie: (31:17)
So, you have this degree in aeronautics that we mentioned earlier, but you also have a degree in the history of science. You've talked about how you've studied different technological leaps throughout history. Do you think Bitcoin is a technological leap and the blockchain technology that underlies Bitcoin is a technological leap akin to the start of the internet, akin to the start of the automobile? What does that mean for the banking system as a whole? You've talked about how this isn't a store of value or a currency. It's a bank that lives in cyberspace. Do you think Bitcoin, blockchain technology is ultimately going to swallow the entire banking system?
Michael Saylor: (31:58)
What I think is that Bitcoin is an elemental force similar to steel or electricity or oil. John D. Rockefeller found a way to channel chemical energy via oil, created standard oil, changed the world, drove down the cost of energy by three orders of magnitude, and everything changed. Take away steel, right? Andrew Carnegie came up with steel. There's no New York City without steel. Build the building more than four floors, there is nothing without steel. It created the entire modern civil engineering era.
Michael Saylor: (32:33)
Andrew Mellon brought forth aluminum. That's why he became rich, aluminum. Try to build an airplane without aluminum. There is no aviation industry without aluminum. Electricity, think about the world without electricity. The Romans had aqueducts. The city of 500,000 people shrinks to 25,000 people if you turn the aqueduct off. It's channeling hydraulic energy.
Michael Saylor: (33:00)
Bitcoin is pure monetary energy. For the first time in the history of the world, we figured out how to create a software network that will store and channel monetary energy with no power loss. That's a million times better than a gold network. I bet it's better than electrical network. If I want to hold $500 million of electricity and I put in the battery, I lose 2% a month. There's a 24% inflation rate on electric battery. You can only move electricity 500 miles and you lose 6% in the first transaction. Try to move $500 million of electricity from New York to Tokyo. Here's how you do it. You take the $500 million converted to Bitcoin, send a Bitcoin to Tokyo for three bucks, convert it back into electricity.
Michael Saylor: (33:53)
By the way, the magic is not just that I did the transfer for $3, instead of $300,000 with gold. It would take you a month and 300 grand to do it in gold. The magic is I can put the $500 million 30 years into the future and not lose a nickel of the energy, right? That's the beauty of this entire network. It's a network to channel monetary energy, which is the apex energy. Monetary energy is the sum of kinetic energy, potential energy, chemical energy, electrical energy, nuclear energy. All energies flow to monetary energy. We have a software network or a technology network for monetary energy.
Michael Saylor: (34:40)
One last point, Google's an information network. It's worth a trillion dollars, because it channels information and video. Facebook's a social network. It's worth nearly a trillion dollars, because it channels social energy. People couldn't conceive of it. Bitcoin is a monetary network. It collects and channels monetary energy. It's a little bit more valuable than collecting all your photographs from a shoe box. It's a little bit more valuable than posting photos to your friends and family on the holidays. We're talking about tens of thousands of billion dollar entities. They've all got a problem. Their monetary energy is being debased by 10 to 20% a year by the expansion of the monetary supply. They're all stampeding toward a solution. Is that going to be derivatives or equities or bonds? What is the solution?
Michael Saylor: (35:42)
Bitcoin is the first perfected crypto asset that serves as a long term store of monetary energy. That's what's going on here. It's an invention. John D. Rockefeller became the richest man in the world, because he collected, stored, and channeled chemical energy. It's a simple idea. 99% of the world doesn't understand it. They're new to it. It's inconceivable, because Facebook was an inconceivable idea a decade ago. So, that's where we are with this, something exciting, new, powerful. It's the elemental structure of a totally new set of financial systems. Yes.
John Darsie: (36:35)
So, building upon that, just before we came live, the Federal Reserve Chairman Jay Powell responded to a question about a central bank digital currency, which has gotten a lot of buzz lately. We asked Raoul Pal about this last Friday. He had an interesting answer. We talked to Marty Chavez, the former Chief Information Officer at Goldman Sachs, who's thought a lot about what you could do if you did create a central bank digital currency. You could relate it to something like modern monetary theory or stimulus packages.
John Darsie: (37:04)
If you gave everyone a central bank digital wallet, you could instantly transfer government money into their bank account and target individual people based on who you need to send money to and how you want that money to circulate through the economy. Do you think central bank digital currencies have a future? What is the future of Bitcoin living alongside potential central bank digital currencies?
Michael Saylor: (37:28)
I wrote about money as software in The Mobile Wave in 2012. You could see it coming. Today, you see Apple Pay, PayPal, Square Cash, Alipay. Big tech companies are moving money around. It's clear that governments are going to at some point grapple with it. I listened to the same interview. What I heard Christine Lagarde say was, "We'll make a decision in January, February. If we do something, it's two to four years." So, we're talking four years out for the EU. I heard Jay Powell say, "We got to study it, make sure we get it right." That felt to me like more than four years.
Michael Saylor: (38:09)
So, my view is everybody knows that digital technology matters. They know they can't ignore it. The government's aren't going to move as fast as the big tech companies. China's going to move fastest. Big tech will move second fast. The governments will be 5 to 10 years out. I wouldn't be holding my breath in the next 36 months.
Michael Saylor: (38:31)
Now, how it relates to Bitcoin. Bitcoin is not a currency. It's not a payment network, right? Currency is the province of the government, always has been, always will be. The IRS set the tax code for currency. You can't use Bitcoin as a currency, because the tax code is hostile to it. It would generate 100,000 accounting entries and tax obligations for no reason whatsoever. So, there's no point in Bitcoin being thought of that. Bitcoin is not a payment network. Apple Pay and Square Cash and PayPal and Alipay are payment networks. They work well. They work a billion times better than Bitcoin or any crypto will ever work.
Michael Saylor: (39:13)
So, crypto's inappropriate as a currency, even though people call it cryptocurrency. It's a wrong choice of words. We should move it out of the lexicon. We should refer to as crypto asset. Crypto is an awesome technology for creating a scarce asset as a store of value. The $250 trillion problem is store my value, I just want to put my money in a piggy bank in cyberspace and have nobody take it. It's a very simple idea. Then if I want to spend money, I'm going to convert 5% of it to Apple Pay or Square Cash or PayPal or Alipay. I'm going to move it around and fiat currency on those rails in a responsible, legal, efficient, fun fashion.
Michael Saylor: (40:04)
Let the governments be the governments. Let the big tech companies do what they do best. Bitcoin is going to solve this last very simple issue, which is I just need pharmaceutical grade, synthetic, safe haven asset, synthetic gold with none of the hangover of gold, none of the bad problems, none of the problems with mining and hypothecation and centralization and corruption, but all of the good parts of it. I put my money in there. A decade from now, I've still got it and it hasn't been inflated away.
John Darsie: (40:41)
You didn't even touch on flying to asteroids and mining gold on asteroids, which they think potentially is going to be possible in the next decade. There's an asteroid out there they think is worth $10 quintillion, trillion, bajillion worth of gold.
Michael Saylor: (40:56)
Yeah, you just bring us back to the fundamental issue. In the finance world, it's very rare to be able to buy anything you can't print more of. But in the engineering world, it's very rare to find a machine that works unless you plugged all the leaks, unless it respects conservation of energy, the first law of thermodynamics, and it's a closed system. By the way, Bitcoin is the singularity, where engineering, science and technology smashes into finance. For the first time, we can finally apply Isaac Newton's laws and the laws of thermodynamics to protecting our money. Who wouldn't like to have a monetary system that works?
John Darsie: (41:43)
So, a less charitable characterization of your recent Bitcoin evangelism would be that you've now put $425 million worth of MicroStrategy reserves into bitcoin. You've personally bought Bitcoin. You're now talking your book. You realize that if Michael Saylor and Paul Tudor Jones and Alan Howard and all these other really wealthy, influential, smart people are talking up this asset, ultimately, it becomes a self-fulfilling prophecy and it goes higher.
John Darsie: (42:13)
Your cost basis, I believe, is somewhere around 10,000, 11,000 in Bitcoin. Do you think you'll continue as a company and as an individual to continue to buy Bitcoin at higher prices as you generate more cash from your business? Do you expect other Fortune 1,000 companies to follow your lead?
Michael Saylor: (42:31)
Well, I would answer the question by pointing out that I think it's important that people of character and conviction articulate the benefits of Bitcoin to the masses. There are billions of people on this planet that are living in a regime where the currency is collapsing, one billion that we just saw last month. For them, this is a lifeboat against the currency collapse. If you're living in Argentina or Venezuela or Turkey or Lebanon or most of Africa, if you don't have this, then what choice do you have? I mean, they don't have the option to put their money with a hedge fund in Connecticut, right? They don't have an option to hire some professional money manager and convert it to dollars.
Michael Saylor: (43:18)
So, as Jack Dorsey said, this is an instrument of economic empowerment. There are billions of people on the planet who have been deprived of a savings account where they won't lose all their stuff. So, we're going through a transition where people aren't sure what this is. I think it's a moral imperative to stand up and say to people, "It's a good thing. It's a thing that's going to make the world better for billions of people that don't have a choice."
Michael Saylor: (43:47)
If you're going to criticize Bitcoin, what are you going to do to solve the problems of everybody on the planet that doesn't have liquid wealth and hedge funds in the United States with options? Because it's morally incumbent upon you to give them something to cling to in the event of a currency flood. So, the reason we're talking about it is because it's the right thing to do for the world.
Michael Saylor: (44:11)
As for what I think going forward, I think that if your choice is invest your money in bonds that are going to yield 2% while the monetary supply expands by 15%, you're looking at -13% real yield if you're calculating asset inflation, right? So that doesn't make any sense. If I'm going to put my money into equities, I'm going to gamble, I've got to rebalance my equity portfolio every quarter based upon performance and competition and a million moving parts. That doesn't make sense. If I leave my money in cash fiat currency and I know that all the banks are going to print 10 or 20% more every year, that doesn't make sense.
Michael Saylor: (44:59)
So, the only idea of adopting the Bitcoin standard is very simple. I'm going to sweep my excess cash flows into a savings bank in cyberspace that's run by incorruptible software that has no agenda other than to just store my value for 100 years. There's no CEO of Bitcoin. No one can print more Bitcoin. No one can use Bitcoin to do an acquisition or a dilutive acquisition. No one can be based to Bitcoin. It's a very simple idea.
Michael Saylor: (45:32)
Take your monetary energy, encrypt it into a cyberspace bank that's going to hold it in a vacuum, where the power won't bleed off, and then wait. Because in a world where everybody's dissipating energy, John, the rational strategy is preserve your energy. Everybody else is dissipating energy either by trading around or by holding bonds that can't keep up with the real rate of monetary expansion or by taking risks. What am I going to do, buy $500 million worth of liquid arts indexes? Scarce art index?
John Darsie: (46:18)
Baseball cards.
Michael Saylor: (46:20)
Put yourself in the place of someone that drives a truck for a living. What advice are you going to give them, right? My 82-year-old father, he can't be a hedge fund guy. He can't be picking stocks to buy and sell in a balanced portfolio with exposure to developing countries and with currency hedges on. It's going to short the 30-year bond and it'll play the yield. It's too complicated. There's billions and billions of people, they just have money, and they want to not lose their money. So, that's our strategy.
Michael Saylor: (46:58)
We're just going to try to preserve our money. We're going to do it by betting on the only obvious thing we can find in the world that is not correlate. Everything else is for the most part a fiat instrument. If the monetary supply expands, it's going to be diluted. So, you either got to buy the only Picasso, you got to buy scarce art or things that cannot be produced; or you buy bitcoin, because Bitcoin is that scarce crypto asset that's got hundreds of millions of dollars behind it.
John Darsie: (47:35)
Well, I'm going to play devil's advocate again on behalf of a couple of members of our audience who might not be as bought into Bitcoin. You described Bitcoin as the cryptocurrency or the asset class of the people, but what about people in third world countries who don't have access to the internet or the computing power or people who say that it takes a tremendous amount of energy to mine Bitcoin and run the Bitcoin network? What do you say to those people as detractors of Bitcoin?
Michael Saylor: (48:03)
Okay, well, first of all, I think just more people have access to a mobile phone than have access to running water on this planet. You can actually buy and sell and utilize Bitcoin from a mobile phone that costs 50 bucks. It's the most egalitarian thing in the world. People in Africa can't go and invest in hedge funds on Wall Street, but what they can do is they can get their hands on Bitcoin. Bitcoin trades 24/7/365 in every currency at every language on Earth. There's never been an asset in the history of the world that's harder working. Apple stock works 35 hours a week. Bitcoin works 168 hours a week. So, it truly is a global asset, an egalitarian asset running on mobile networks that reach everybody.
Michael Saylor: (48:56)
With regard to the energy issue, it consumes 1/10th of the energy that gold miners consume. It consumes like 1/1,000th of the energy that the financial establishment consumes. The only energy that gets used in Bitcoin mining is the marginal energy at the edge of the network that otherwise would have been thrown away. People that are flaring natural gas, people that have shot in fossil fuels, people that have hydraulic or hydroelectric power that otherwise would go to waste.
Michael Saylor: (49:29)
So, I think that the energy argument is silly fraud, because at the end of the day, Bitcoin is something like a million times more efficient from an energy point of view than moving your money around in gold or by trying to store it in Fort Knox. If you look at all the inefficiencies of all of the other traditional financial approaches, none of them are so efficient as to what Bitcoin does.
John Darsie: (50:02)
So, let's close. I want to talk about something completely different, which is Saylor Academy. You basically put all of your philanthropic efforts towards the cause of education. You believe that there's unequal access to education in the country, in the world. You've put a lot of money towards building a free educational platform, Saylor Academy. Could you talk about why you think access to education is so important and why you've put so much effort towards building Saylor Academy?
Michael Saylor: (50:30)
Well, look, when I went to MIT, my entire family's life savings for 200 years were depleted in the first four weeks of class. That was before education started getting really expensive. It's actually gone up from there. But my recollection is getting a good education cost more money than a middle class family could come up with.
Michael Saylor: (50:52)
On the other hand, I sat in physics classes and I learned stuff that Isaac Newton wrote about Principia Mathematica in the 18th century. So, it occurs to me that in a world where most of the math and calculus and science is out there and has been around for quite a while, it's in the public domain. Why is it you have to impoverish yourself to learn? Why isn't it free? I mean, why can't we upload it via open source and give it away to the world? Because there's about 10 million people with PhDs in the world, but if you really want to solve the problems of the world, you need to get Master's Degrees and PhDs and you need to teach people how to cure cancer and how to create rocket propulsion. That's not going to happen without education getting to be orders of magnitude cheaper.
Michael Saylor: (51:41)
So, given the fact that algebra and geometry got invented 2,000 years ago, why is it that we spend so much money manually teaching people algebra and calculus? Because we could have one automated professor, upload them to Google or upload them to YouTube and let it run and educate a billion people for a nickel. Wouldn't it be great if we had a billion people on the planet that had a PhD? I mean, it'll cost about $1 million a person. So, we need to come up with a million times a billion in order to do it. It's not going to happen the conventional way.
Michael Saylor: (52:21)
So, my passion around Saylor Academy is you can give away science, technology, engineering, mathematics, education for free to the entire world if you want to, if you have a will to do it. So, we decided we're going to do that. I think we signed up 80,000 students last quarter. Boy, it's not easy to give away stuff for free. So, if you can tell everybody that wants a free college education just to go to saylor.org and they'll see it there, then please do.
Michael Saylor: (52:57)
There's not a lot of things that I'm sure of in life, but I feel like making education free for everybody forever is a good thing. John, I don't have any heirs. I don't have any children. When I die, all my money goes into a foundation. The foundation's mission is simple. It's like giveaway education to everybody forever, right? What? How about the education necessary to go to Mars or fly faster than light or cure cancer or make the world a better place?
Anthony Scaramucci: (53:29)
Darsie, Darsie, don't even try. You have no chance of being adopted by Saylor, okay? So, don't even try.
John Darsie: (53:33)
Yeah, that's where I was going with this.
Anthony Scaramucci: (53:35)
I know you were thinking that. Let him give the money away to these people that need it, okay? Don't be greedy.
John Darsie: (53:40)
You sound a lot like Sal Khan. We had Sal Khan, Khan Academy on an early SALT Talk. He's been to several of our conferences. He talks about the same thing where he could go out and he could make a lot of money from this platform that he's built, but it's much more important to him to provide greater access to the educational tools that he's helped build. You and him have a very noble cause. You're helping a lot of people. So, we're very grateful for that.
Michael Saylor: (54:07)
Thanks.
John Darsie: (54:07)
Do you have any words from Michael before we let him go? We went into SALT Talks over time here, because there was too much-
Anthony Scaramucci: (54:12)
No, listen, it's a fascinating conversation, Michael. I hope that we get a chance to see you in person soon. I appreciate you coming on. There's a lot of exciting things ahead for you and MicroStrategy, but also for the world as we continue to exponentially innovate and make things faster, more efficient, smaller. The dematerialization of the world, I think, is so fascinating. I got my entire library on my iPhone, Michael. Who would have thought that when we were growing up?
Michael Saylor: (54:40)
Yeah, it's a wonderful world we live in if we can harness technology to be a force of good. I think Bitcoin is harnessing technology to be a force of good. For the first time in the history of the world, we've got a monetary network that doesn't bleed power, right? That's incredibly empowering to the billions and billions of years that are looking for technology to make their life better. That's the wonder of the year 2020.
Anthony Scaramucci: (55:06)
Well, I'm looking forward to be a part of that future with you. I think we said this, but we've got a note established at SkyBridge to keep up that effort to keep the light shining. So, thank you again for everything. Hope we get a chance to see you soon, Michael. God bless.
Michael Saylor: (55:24)
Thanks for having me, Anthony. Thanks for having me, John.