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So the fact that we've worked our way from individuals to high net worth individuals to private companies, up to, you know, the, the tech innovators, and now we're working on the mega, mega public corpse and the banks, right? That's a sign of the asset improving. And and you know, education matters, setting an example matters, right? But there's just a lot of moving parts here. And we're talking about the birth of an asset class and a paradigm shift. And, and in both cases, right, it's like a, it's like an organic viral process. You know, it's like, which is, you know, they say one of the first things they taught me at MIT about this was, you know, they said, you know, if you have a, if you have a pond and there's algae in the pond and the algae is doubling every day and in 30 days it covers the entire pond. On what day of the month will you notice you even have any allergy? You know, and it's like, well, 90% of the days you don't even know you have any. And like on the 26th day you notice something. And then in three more days the pawns completely covered, right. So with exponential processes, there's a whole lot of nothing apparently going on as the process builds and builds and all the sudden there's a little blip and then all the sudden you have, you know, you have more action, right? Like with Apple stock, right? It took forever, 40 years to make it to a trillion, and it took like 18 months to make it to 2 trillion. You know, it's like, but you see that as a phenomenon. And that's the phenomenon here, organically, virally spreading everywhere in the world, I think. Welcome back to On Ramp Media. Today we're excited to re release one of the most impactful conversations we've ever hosted. An episode originally recorded in October 2024 with none other than Michael Saylor. In this wide-ranging discussion, seller lays out why Bitcoin isn't just digital gold, it's digital capital. A $100 trillion idea reshaping how we think about value, ownership and energy itself. He explains why Bitcoin is the ultimate hurdle rate in capital allocation by self custody through the call option of withdrawal acts as a natural check and balance that keeps the system honest. And why Bitcoin adoption behaves like a viral exponential phenomenon. If you're new to the show or missed this the first time around, now is the perfect moment to revisit a foundational conversation in the arc of Bitcoin adoption. And if you're ready to move from theory to action, On Ramp is here to help. We're building the infrastructure for the next era of Bitcoin ownership, multi institution custody for fault tolerant security, private client services across inheritance, insurance, Iras and Bitcoin backed loans, and independent research and insights to help you stay ahead of the curve. Visit on rampbitcoin.com to learn more, schedule a consultation with our team and subscribe to our research newsletter now. Here's Michael Saylor. Bitcoin is the digital is digital capital. So it's the transformation of financial and physical capital to digital capital. And that's not complicated. That's a very simple idea if you just say it like that. But the implication is it's also driving the digital transformation of the capital markets. So the capital markets are fragmented, right, that the bond market trades in Japan at different times than the bonds trading in Germany and then the bonds trading in Brazil than the bonds trading in the US. And the equity market, right. Our, our existing capital markets are built around equity and debt, you know, and there's some derivatives, right, equity debt derivatives and they trade 9:30 to 4:00 Monday through Friday. And they don't trade on the weekends or they don't trade on holidays. And they're all fragmented and they're and you know, they're limited in access. So, so you know, the implication of somebody being able to trade in a capital market in Australia on Saturday and having an impact, someone in the United States, you know, 12 hours off on the time zone or something that's interesting. So a real time 24/7 global capital market is interesting. Up until up until now it has been again, it was point oh, 1% of the money in the world. You know, when it was 6000 or 7000 a coin and now it's point 1% of the money in the world. And so it's, it is a global digital capital market, but it's still de minimis in an amount of capital. And so I think that as you see bigger players come in into the marketplace and it gets to be 1% of the capital of the world. Now you're going to have the, the tension of the 20th century, the 20th century capital markets, they're fragile. They're, they're limited to a certain set of people. There are very limited settlement options that they're slow, they're not smart. You can't trade Apple stock 100,000 times on a Saturday afternoon, right? You, so you can't, you know, you can't vibrate it at a high frequency. You don't have global, you can't self custody, you can't program it right. So the capital that's in the traditional markets, it's not programmable, it's slow, it's fragile. And the capital in the, in the 21st century, it's going to be smarter, faster, stronger. And so that the interesting opportunity is what happens when the investment bankers and the commercial bankers and the money managers realize that digital capital is smarter, faster, stronger, universal, right? Because it has a lot of implications, right? Like there's 50,000 publicly traded companies and how many of them are capitalized on Bitcoin? How many of them are capitalized on bonds? So 99.99% of the corporate capital is financial capital which is fragile, fragile, fragmented, right and and defective, right, right. Digital capital is appreciating at 45% a year and over the last four years and financial capital is depreciating at 4% a year. And Fiat this is in USD terms, right. But you know, I think that has profound impact on investment banking, right? Like why wouldn't you go and recapitalize every company? So that's interesting. I think what's also interesting is is, you know, it's like the same set that the financial world brags about taking settlement from T + 5 days. You know, like the 1970 to 75 was like T + 5 days, T + 5 to 10 days, then T + 3 days and it was T + 2 days as of a year ago. And now we're going to T + 1 day. But we're, but we're not T + 1 day on Friday. You know it, it might be from Friday at 4:00 till Monday at 10 AM or something to settle something. So money still moves very slowly and it has to pass this fragile network of correspondent banks and anybody can block the move and, and you can't program it right. So like, so I, you know, I, I use this phrase, you know, I mean, when you think about digital capital, digital capital is invisible, right? It's intangible, it's immortal, right? It's, it's indestructible. But while you're working through your bowls, like comparing it to a building, it's all those things. It's musical. And the musical is something to think about, right? Think about a Symphony. Think about vibrating the strings of a guitar, you know, think about, you know, energy, frequency and vibration. And think about Mozart's or Beethoven's Seventh Symphony or Beethoven's Ninth Symphony. Think about what happens when you start to vibrate on various frequencies. And literally you hear it and it's beautiful. And then think about how fast you can vibrate a building and think about how fast you can vibrate a billion dollar block of Apple stock and see, they don't play, right? They vibrate like a rock, right? You can't, right? The answer is you can't play that capital, right? You can't. But with digital capital, you can. You know, on the base network you can move it once an hour. That's actually comparatively high frequency compared to moving gold once a year, right? What 80 87160 hours a year? So 8760 times faster than the fastest gold Seems like high frequency. But really when you put it on a layer 2 network, the real point is if I can settle on the underlying network, then when you put Coinbase against by Nance as a counterparty or you put Block against, you know, set up layer 2 and layer 3 counterparties, they can move the stuff, you know, at 10 kHz on the weekend. And now you combine that with a, you know, high. High speed trading has been a fixture in certain equity markets, but we've never had high speed global trading. It's like asking me in 1650, are there risks in building Manhattan into a great city in North America? There's steps that have to be, you know, if I find you the greatest port in North America, you know, an island of granite sitting between the East River, the Hudson River with the great natural harbor right in the right location. And everybody's decided it's their favorite city. And the year is 1650. Are there risks with growing the city? I suppose, but I don't think of it that way, right? Just I just think there's there's challenges to be overcome and opportunities. And so I think I think bitcoins going through all that, right? There's stuff to be built right working. If the accounting changes for every company in the world in February of our January of 2025, then I guess that means the accounting profession has to learn a bunch of new things. There's new stuff to be done right, new procedures and accounting systems to be, you know, reviewed. And likewise, it's one thing to say banks should custody Bitcoin. It's another thing to create, you know, are 10,000 banks going to create their own Bitcoin custody service? Well, is that a risk or is that an opportunity? I guess I'm back to 1900 and I'm in New York and we just emitted electricity. And I'm just pointing out that I think like one day all buildings be wired with electricity. And you're asking me, are there risks and the wiring of New York City with electricity? And, you know, I guess there's going to be some electric fires, right? And there's also going to be a lot of fire insurance to get sold. And there's also going to be electricians and there's going to be electricians union. And there's going to be a lot of projects and there's probably going to be a bond and somebody's going to complain about it. We're going to dig a lot of trenches, right? Because where are those power lines running? And someone's probably going to put a, you know, a drill, you know, jackhammer through one of the power lines and stuff's going to happen. But and then we're going to fight over whether we burn coal or we run the power line in Niagara Falls and there's going to be stuff. But I just think there's just a lot of work to be done. We're building out the future. Bitcoin is the risk free return for a Bitcoin maximalist. So just start there, right? Bitcoin is the risk free return and the question is do you want to take risk or not? But if we start with my base case, my base case is the risk free return is 29% ARR for 21 years. Which means that when you pitch me an idea, if you come to me and say, hey, I got a new Bitcoin custody thing or I got a new hardware wallet, or I got, you know, a new Bitcoin whatever banking thing, or I got a new whatever. I'm like, well, so can you guarantee me 29% plus the risk premium, which is probably 8%, six, 810%. You know, it's like the risk premium on a mega corporation like Disney or whatever is 4 or 5%. And the risk premium on a small startup has got to be 20%. OK. And so if you pitched me an ID and said OK, I guarantee you 40% ARR for the next 21 years. And I'm like, oh, and is it going to be capital free? Like I, you know, I don't have to bother with it and I don't have to put any more money in later. Like, well, if you promised me all that stuff I would like. OK, well, let me think about it. But probably if you gave me 10 of those ideas, I probably still don't want them because it's just a distraction because my alternate, my view is 29% ARR risk free. And then I guess I would say when you look at it like that and you compare it to the next 50,000 publicly traded company ideas and the next 500 million private ideas, it's like they're all kind of distractions with the exception of this, which is the only thing that's better than Bitcoin is more Bitcoin. OK, so what's, what is my personal idea? My, my personal view is like my personal holding strategy is I own Bitcoin. You know, I either hold the asset 17,732 Bitcoin, you know, which I tweeted, you know, four years ago, which I'm still holding, or I would hold like the ETF if I needed to try, you know, to buy if I had extra cash flow yesterday and I just wanted to have it. And I thought, well, I don't know if I can hold it for a decade. I might need to spend it in two years to pay some expenses, but I'm going to hold it for now. So I, if I'm trading in high frequency in and out or whatever, you know, it's like, you know, I would buy an ETF of Bitcoin and and I'm, I would take the counterparty risk to black rocks or Fidelity or something. But you know what? I put my Bitcoin with Celsius, you know, or Block Fi or FTX or Genesis, they all pitched me. By the way, I already said no to every one of them. No, no, no, no, no. But why? Because the counterparty risked to an unregulated entrepreneurial custodian is like 25% a year. Like, like there's a, they're going to fail every three years, right? So I'm just rationally thinking and I just don't need the headache. So if you offered me 40%, I mean, I mean, think about this, right? If if you thought you've got 25% counterparty risk and your risk free rate is 29% / 21 years, you're already up to the point where they have to offer you 55% interest to put your money in their custodian, right. So did any of them offer me 55% interest? No. And by the way, if they did, then my next question is, well, how are you going to generate 55% interest? Well, we're going to like put it in a defy levered protocol on what I'm like. OK, well no. Now I've got like towers of counterparty risk. You know, that's like 7 layers of risk and eventually there's a degenerate trader, you know, offshore in a dark pool that's levered up 20 to one. That's paying that. So, so none of those things are very compelling. So I would say those don't make any sense. But you know, on the other hand, like if JP Morgan offered me 5% interest on my Bitcoin and they pledged their balance sheet too big to fail if they said JP Morgan won't back it. Not not, I'm going to if they said we'll take your Bitcoin, we'll loan it to someone who wants to short it. And if they short it, then you're out, out. I wouldn't take them as a broker, but if I was facing them as the counterparty, I'm like, I think that I think that the US government will have to fail before JP Morgan fails. And so, you know, if it's one of those top four too big to fail banks and they offer me SOFR and SOFR was 550 basis points, then would I take that yield? Probably maybe. Or I mean, I, I mean, don't, don't hold me to any amount forever, right? But some portion of my assets, I already trust those banks, right? You know, but you don't trust those banks. Keep in mind that the US government trusts those banks, right? The, the entire civilization runs on those banks. Apple, Google, Facebook, all run on everything else you own is, is clearing through those banks, right? So you're probably going to starve to death and the supermarket shelves are going to empty out if those banks stop working. So yeah, there's a certain degree of trust there that I might take. And I think there are certain things you consider taking, but I don't recommend any of them. I don't even recommend my own stock. My my point, you want to buy a stock, why don't you read every single SEC filing, every 10K, every 10 Q? The irony of course is on Twitter people all opine on all this stuff and they have a lot of strong opinions. Most of the time if I post a paragraph of text, I can count on them to not read the fourth sentence in the paragraph right? Like I generally assume that people will read the first sentence. I discount the 4th sentence. You know, if there's 2 pages in the 8K, very few people read to the 6th paragraph of the second page of the 8K. And if you're a professional investor, you're expected to read all 100 pages of the 10Q or the 10K filing. You know, we hired very expensive lawyers and very expensive accountants to write all this stuff down South. You could think about it. And if you're prepared to think about it, right? And if you understand you're taking risk, there's risk. It's interesting. You know, there's like there's an ETF called MST. Why? Have you heard of it? OK, well, MSTY basically sells something like it feels like unhedged MicroStrategy volatility, right? So, so if you buy it, you know, you're taking downside risk and they purport to be selling the upside via, you know, call, you know, synthetic long position selling calls or something. And you know, right now on my screen, I look at it, it says they've got $476 million of capital and it yields 226% interest. OK, so that's yield. Now the question really is, is it, you know, what, what is the risk associated with it? Download the prospectus, study the strategy, look at, you know, back tested. Does it does it actually constitute taking downside risk and getting paid 226% for the for giving up the upside? Is that exactly what it is? Or is there an embedded leakage where you know you're actually losing 20% of your principal per year? I don't know, right? You want to do an interesting podcast, right? I mean, do that analysis back, test it, study it, take apart all the take, take apart all of the risk factors. Have the people running the ETF on your podcast, quiz them on this and try to figure out, have they figured out a way to generate 226% yield on MSTR? Yes. No, right. Very interesting if you're bored. And you want something and you want, and by the way, if you, if you're running an investment fund and maybe there's someone that wants to generate yield on Bitcoin, like, you know, some people just want to hold the asset and pursue the capital gain unrealized forever. I get it. If you had a fund, if you're an institution, if you're Harvard Endowment or a church and you don't pay tax on operating income, I look at 226% and I think, well, oh, that's a pretty big tax bill. But then I think, well, my, what if I didn't have a tax bill? What if I lived in UAE or Singapore's, right? Or what if I had a trust, which was tax advantage? Maybe you would feel differently about that. If I, what if I've raised a billion dollars to invest, you know, I get paid 2 and 20 and I'm supposed to find all these ideas? Well, I think I think there's a lot of interesting ideas. I think that if Bitcoin is a 55 Vol ARR or 50 Vol ARR with A50 Vol, you know, or 50 volatility and 50% ARR, there's a lot of people that they would rather have 20 arr 20 Volt. Like they don't really. It's like high voltage power coming into your house. It's nice to have it, but then you don't want it in your hair dryer, lest you drop it into the bathtub and electrocute yourself, right Or on your electric razor. So you've got this big transformer box that steps down high voltage to low voltage digestible power. So some people, some people, what they want to do is they want to lever up like micro strategy levers up Bitcoin to get to higher Vol, higher performance. And that's the that's high volatility equity. And that's why some people like our stock. But and some people are degenerate crypto traders and they want 10X leverage. So if you want to have real leverage, you buy the calls, you don't even buy the equity, right? I think if you're a normal person, you know, and you just want the risk free thing, the risk free thing is buy Bitcoin whole Bitcoin forever and turn off the television, right? And, and I think there's a lot of investors for which that's wise. If you're a professional or if you have a very particular, you know, entity, right? I mean, it's or a particular portfolio. If you're a professional investor, a money manager, you've got you've got a particular coin of your client saying I want fixed income. I want to generate this much. I need to generate, you know, yield, etc. Well, I mean, one thing I do think is I don't think you should go, you should chase after yield with FTX or offshore unregulated opaque exchanges. Not wise. If you're going to chase after yield, you should do it with regulated entities with full disclosures, knowing what, what kind of risks you're taking and with and with clarity as to who's accountable for the risk. But I don't, I don't recommend anything because I, I really do believe there's 50,000 publicly traded companies. It's, it's, the question is, are, are any of them underpriced versus the risk expected return? And that, that comes and goes. That's very complicated. And then you've got, you know, there's 50,000 nice pieces of art and there's 50,000 cool buildings. And those are all things you can invest in. I just think you ought to be an expert and fixated on it. And I take the position that probably they're all going to underperform Bitcoin. And you know, 29% ARR is pretty good. I mean a very simple idea is if you can figure out a way to borrow money long term at 1/3 of that, if you can borrow money at at 8% and you could then loan it to the Bitcoin network at 29% and you've got a duration on that, on that debt instrument of eight years to 12 years. Now you're 3 epics, right? You're probably going to be fine. That's brilliant. I mean, how do you do that way? You could have done that with a 15 year mortgage at 2.8% interest 24 months ago, right on your real estate, right. So if you can do a 15 to 30 year mortgage at low interest rates and just and then buy Bitcoin, you're arbitraging 368 percent money versus 29%. And that's that's intelligent. If you can create a company that raises equity or debt to buy Bitcoin, that's intelligent. If you can borrow money at 4%, that's even more intelligent. If you can borrow money at 1% and buy Bitcoin with it, no recourse more than four year duration. I think you ought to do that, right? That would be intelligent. So, so levered Bitcoin levered long as long as it's not mark to market degenerate. I mean like when you're when you're trading 10X leverage, what that means is Bitcoin trades down a few $1000. You get forced liquidated while you're sleeping and you lose everything. That's stupid. Don't do that, right? But, but a simple idea is if you have capital and you can hold it more than four years, I think you buy the Bitcoin and just forget about it. If someone will give you a loan and they're not going to ask for the money back in less than four years, you can consider it. You see, if they're giving you a loan for one year, right? You might get wiped out on that, right? If they're giving you a loan where you have to actually post additional collateral every day, if Bitcoin trades down right, that's actually anxiety inducing. But when the loan duration goes to more than four years and there's no mark to market, well, that's probably interesting. And of course, if you can get out to 8 years, it's got I would kind of say four years duration on equities, a no brainer 8 year duration on debt starts to feel safe. And I guess my issue with all these other ideas is you can either give me a very complicated entrepreneurial idea and I stare at it, but it's just so complicated and it's it's you probably don't even know the way you're going to fail. I might rather you just give me a financing idea like, hey, we can take over this cash cow company for one times revenue and then we can convert its balance sheet into Bitcoin and then we can lever it up by borrowing $2 billion at 8% interest. I mean, I, I like that idea better, right? Just a very simple idea. I'm going to borrow a billion dollars at less than the cost of capital. The risk free cost of capital is fill in your number. Mine's 29%. But if you're pessimistic, maybe yours is 12%. OK. If you're if your base case forecast is 12% and borrow the money at 4% and it works right. If you're enjoyed the episode, really would appreciate a like a comment, a subscribe if you haven't done so already. If you're on a podcast player, if you could rate US five stars really goes a long way. Ultimately, the reason why this helps is it helps our content to be discovered by more people who maybe want to hear it or should hear it. And so if you could just take a few seconds to leave a like a comment subscribe, that helps a ton. There is a lot of effort from the team, myself included, to book guests, prepare for episodes, edit them all the post production work as well and distribute them. So if you could just leave as a quick token of your appreciation if you're enjoying the content, that really helps. And then the other place I'd point you to as well is on rampbitcoin.com/research if you want to get our weekly roundup product announcements, you know, other things that we're working on behind the scenes. Looks, you can subscribe there. Typically we send out two issues per week. We're not spamming your inbox. So check us out there if you're not subscribed already and enjoy the rest of the episode. You know, I think the three big, the three big planks of corporate adoption of Bitcoin are #1 fair accounting and we started with indefinite intangible accounting and we get fair value accounting in January of 2025. That's mandatory. So there's been about a, you know, a four year period of normalizing the accounting. I think the accounting was is hostile and prejudicial to a well run company just because if you if you can only lose money and you can never make money on an investment, a reasonable CEO or CFO would say would say, I don't know if I want to make that investment. And so even though the reality is you would make money on an accounting basis, it would look like you're losing money. So I think that was the first challenge. The second challenge is fair treatment as as an institutional asset, you know, via the Securities and Exchange Commission or the major financial regulators. And we started to get that January of 2024 with the approval of the spot Bitcoin ETFs. And before that point, a lot of skeptics were of the opinion that maybe it would be banned or they're not sure it's an actual real asset. You have all the skeptics saying it's Tulip bulbs or it's a Ponzi scheme or something. But of course, the SEC would never approve an ETF for a Ponzi scheme, right? So, so probably for people that don't really think hard one way or the other about this, the reflexive investors, they're looking for that endorsement from the most important financial regulator in the world or regulators in the world. So that was Plank 2, and I think Plank 3 is is fair treatment from the banking system. So right now it's impossible for most major banks to custody Bitcoin, buy Bitcoin or sell Bitcoin for you. There are a few banks in Switzerland. I mean, there's standard charter bank in Europe. There are some of the banks in Brazil that can handle the asset. But the major corporations, right, the Microsoft, the Google, the Amazon, the Apples of the world, they wire billions of dollars a month to a too big to fail bank, right? A bank with a trillion dollar balance sheet. And right now they wire the billions of dollars a month to buy sovereign debt. They're just saying, OK, they take this billion dollars today and buy T-bills with it and it's like a 10 second transaction. It's routine. They've been doing with the business, with the same bank for 30 years, 40 years. City. City is National City Bank. National City Bank was the Bank of John D Rockefeller, run by his brother. Okay, that tells you how long, how far back JP Morgan, right? Try to remember who founded JP Morgan, right, and how far back it goes. JP Morgan wasn't the first, right? He took it over. So what you have are these 100 year old banks and 100 year old relationships and at the point that a CFO can send a billion dollars of cash to their bank, buy a billion dollars of Bitcoin, do it and hold it there no risk, right? Or what they perceive is no risk, right? These are too big to fail banks. So the shareholders of Apple and the shareholders of Microsoft, they're not obsessing over the risk that Apple and Microsoft take to do business with Bank of America or JP Morgan or Citi, right, or Wells Fargo. So that's a very important thing. When you've got all three, when you've got fair accounting, when you've got fair, you know, securities treatment or trading treatment, and when you've got fair banking treatment, then you'll see mega corporations that will think, OK, well, this is a, a reasonable thing to do and it's practical to do. Until you've overcome those 3, then you've got problems to solve. The thing about Bitcoin is that I think is important to point out is a lot of the security comes from the optionality to move the Bitcoin from one custodian to another. You can like if you, if you had a $10 billion real estate portfolio in New York City, you don't have the optionality to move the real estate from New York City to Tokyo, right. And if and in certain extent, if you have a, a large holding of an ETF, you don't necessarily have the optionality to move your holding to a different ETF provider without taking a tax hit, right, without a taxable event, right. This is This is why cash creates and redemptions are much less efficient than in kind create and redemption. If you had an in kind create and redemption, you could actually take a redemption without a taxable event and Bitcoin move it to another ETF provider and then swapped out for shares without a redemption. So, so being able to relocate your asset between various counterparties and various custodians and various places without a taxable event is is very important. So if you own underlying Bitcoin and you have it with a custodian and you lose confidence in them or you don't like the business relationship, you can move it to a second custodian without a taxable event. You could do that in an hour, right? Practically speaking, a big company would take more than an hour to do it because just like there's a ton of people on the custody side, there's a ton of people on the institutional side, you know, And so there would be a set of processes you would go through, but that that keeps everybody honest and keeps the market competitive because, you know, the mayor of the city knows that you can't move the building. And so they can double the property tax rate and you're not moving the building and you, your only recourse is to try to vote them out of office. But if you're a custodian, a Bitcoin Singapore and you double or triple the maintenance fee or the, you know, the custody fee, then maybe the Bitcoin finds its way to fill in the blank another place, Paris, London, US, different country. Or even if you had two custodians in New York City, the Bitcoin can move between 1:00 and the other. You know, we talked about the 19th century gold issue goal was like a settlement t + 1 year and Bitcoin is in the worst case t + 1 hour. So if you, if you, you know people, oftentimes they fixate they're like, they think the lesson of Satoshi is don't trust any counterparty. I don't think that's the lesson of Satoshi. I think the lesson of Satoshi is if you can store your money for 1000 years without a counterparty, you've, you've created perfect money, right? I think our perfect digital capital, I think that's the first lesson. And I think the second lesson is if you can move the Bitcoin without a trusted intermediary, now you've got an open global network. And what it really means is that 300 million companies can settle with each other. And that means that at 50,000, banks can settle with each other. And so this becomes a settlement network, right? When we teach people that corporations are not to be trusted, banks are not to be trusted, and governments are not to be trusted, we become crypto anarchist. But Apple's a corporation, and the hospital's a corporation. And insurance companies are corporations, you know, and Uber's a corporation and the United States government, for better or worse, does useful things, right? Just like your city government, sewerage, sewer, power, water, etcetera. The power company is a corporation. So if you embrace the idea there are some companies that provide you with food, electricity, transportation, you know, airline service, freight, etcetera, then you're like, OK, companies are probably OK. And if you embrace the idea that, yeah, yeah, you could be like, OK, well, I got a self custody. Well, like, how's the 12 year old kid supposed to self custody? How does an 85 year old with Alzheimer's self custody? Right. This idea that corporate that you should never trust a corporate custodian is also a kind of orthodox, zealous ideological notion. The truth of the matter is there's a lot of circumstances under which you want a company to fixate on custody. Just like we use Apple to custody our photos and custody, you know, our documents and, and the whatever. And you can rail against it, but I don't, I haven't seen any crypto anarchist that's proposed a solution to the dependence on Apple and Google and Microsoft that we currently have today. So I, I think that the deeper idea is not that Bitcoin allows you to avoid depending on a custodian. The deeper idea is Bitcoin gives you a competitive market, a global competitive market for custody, and you have the option to move $10 billion in one hour anywhere in the world to any of hundreds of millions of potential custodians. And so that creates an, A competitive market, a a free global capital market and an arbitrage between every type of custody and every country and every form of possible custodian. And, and what is it the the last resort, right? As a last resort, you can take self custody and, and you don't have the ability to take self custody of $10 billion of Apple stock as a last resort. And you don't have the ability to take self custody of $10 billion worth of real estate as a last resort. And you don't have the ability to take self custody of $10 billion of gold as a last resort. And so the last resort is useful, but really a more practical thing you find in life and, and every corporation finds this out. It's like when you need to buy electricity or when you need to buy oil, you know, yelling at General Electric or yelling at the at Exxon that if they don't give you a better deal, you'll just drill for the oil yourself. That that's not credible, right? The salesperson looks at you and they laugh. You're like, yeah, sure, you're going to start your own petroleum company, drill for your own oil. I bet you will, right? I'm much better negotiating strategy to say to the gas station, if you don't sell me gasoline at a reasonable price, I will go across the street to your competitor that will, or I will do business with Chevron instead of Exxon. And, and so generally if you want to get treated fairly, you know, any Business School would say to you, OK, you create a competitive auction and you find the two or three specialists. You know, when you're the restaurant and you want to leverage Coca-Cola for a better deal on Coke and Diet Coke, you don't threaten to create your own, you know, beverage company or do it yourself and create Mikey Cola. What you do is you bring in the pet. You have the Pepsi sales guy. You have the Pepsi hat sitting on the table. You say, you know, I just met with the dude from Pepsi and he offered me a better deal. And the Coke sales guy goes back to the district manager and says, you know, Pepsi's in there talking to them. So I think we better give them a better deal. And, and of course, there's only Coke and Pepsi. That's only two. As a practical matter, you have to have two. When there's one, you're in deep trouble. But Satoshi gave us 10,000, right, 10,000, there's 50,000 banks, right? If you, if you get like 100 custodians competing with each other, you're going to have a pretty good market and, and a pretty fair market. And, and, and I think that's what's going on here. So the big institutional holders like MicroStrategy or the big ETF's, yeah, they're going to use regulated custodians. They're going to put pressure on them by the way, that, you know, there's the crypto anarchist and there's the libertarian view. Not your keys, not your coin. And it's a good, it's an important mantra. But barking at Coinbase and telling them or barking, you know, at Mount G Ox or, you know, yelling at some exchange to be better on Twitter doesn't work, right? You know what? I'll tell you what works when BlackRock has $20 billion of assets and then the guy that runs the BlackRock ETF goes to talk with Coinbase, you know, or, or when Fidelity, you know, Fidelity looks and they're like, well, I think we'll just go and do it ourselves. When a mega Corp with trillions of dollars of assets decides that they want better service or they don't trust the exchange, Now you have a market dynamic. And that works because there's huge amounts of assets at risk and there's armies of lawyers and armies of accountants. Like it's like, you know, you have to go through a, you know, a Sarbanes-Oxley, you know, risk control, audit in order for me to do business with you. And that means we've got a list of 10,000 things. So I think that the institutional players, the SEC 40 trust companies and the SEC 33 Act operating companies, those are applying pressure to the crypto exchanges to become much better, but they're also the ones that are lobbying for the repeal of SAB 121, right? And the repeal of SAB 121 will result in all of the major banks in the United States and then the rest of the world starting to consider becoming crypto custodians and and Bitcoin custodians and the like. And so, so that's again, that's going to happen because BlackRock and Fidelity, you know, and other mega corps talk to their senator, talk to their Congress person, talk to the regulators and point out that they want more options and the banking lobby gets involved, et cetera. And so Bitcoin is going through this seasoning process where really it's encouraging new companies to buy it and it's encouraging new custodians to custody it. And we should welcome both, right? The more corporations that own it, the better we are. And the more corporations that custody it, the better we are. There's 1000 interesting business strategies for people that want to launch a business or generate something of value on Bitcoin. And so this is, this is 1, this is the first derivative of Bitcoin per share, right? It's the rate of increase in Bitcoin per fully diluted share, right? That's, that's the idea behind the KPI. So if I have, if I have $100 and I buy a spot Bitcoin ETF and I pay 25 basis points fee, that means over the course of four years I'll pay a dollar roughly in custody fees. I've, I've pretty much got $99.00 of Bitcoin, right. So, so there's a slight dilution of my Bitcoin per share after fees in that situation. It's a very simple value proposition and I'm paying the 20 or 25 basis points for someone else to handle the custody and the compliance, you know, and, and the like. And it's not a bad deal. It's a pretty good deal. You know, it's, you know, some people paid 100 basis points for a custodian before. 20 basis points of 25 is not bad. What MicroStrategy is doing though is we're securitizing Bitcoin. So if we can sell $200 worth of stock back by $100 worth of Bitcoin and then we buy back $200 a Bitcoin, we've actually captured 100, a $100 Bitcoin premium, if you will. And So what we're doing is we're generating A yield as we're, if we're selling a security backed by by less than 100% Bitcoin and then we buy back to Bitcoin, we're arbitraging the difference and capturing that as a benefit to our shareholders. So you can do that variety of ways. You might do it by selling equity at a premium and net asset value. Another way you could do it is you can sell a convertible bond. If you sell a convertible bond at 40% premium to the equity price and if the equity was already at a premium to the underlying asset, you get a double boost. So you might very well sell a a convertible piece of debt at a 200% premium to the underlying asset. If you do that, you know, if you do a $300 million bond offering at a 200% premium, you're like capturing $200 million of benefit in the arbitrage, right? And then, and then you're holding the debt and the issue is, do you think that the thing you bought with the debt that the Bitcoin is going up or going down over six years or so? So let's assume you, you basically issue convertible debt and then you and then you hold the Bitcoin for six years and you do it. What you're doing is you're offering shares six years out and you're swapping a set of shares at a premium to the underlying asset for the asset. If the asset trades up, you're going to capture another, another Bitcoin premium or a benefit on the back end, right? The $300 million of Bitcoin you buy double S and double S again. So you make $900 million in, in sort of an investment gain on the back end and you make $200 million in arbitrage gain on the front end. So BTC yield is, is, is a, a KPI we're using to help our investors figure out how we think about each of these transactions. You know, if you thought about it, you can realize that if our stock was trading at exactly net asset value and we sold $100 million of stock and bought $100 million of Bitcoin, we'd have no BTC yield, right? It's a net neutral and you can see that instantly, right? And if we sell the stock, you know, back 200 million of stock backed by 100 million of Bitcoin, then we capture that. And now how much yield is it? Well, it's the $100 million divided into the, the, the total asset position. Or another way to do it is you, you know, you look at the Bitcoin and then you look at the fully diluted Share Account. Of course, there's it's lots of complications because you have to look at all of the various elements of the capital structure over time. And then there are also risk factors like what happens between now and then if the stock trades down and what you and a convertible bond that you thought would convert into a certain number of shares converts a different set of shares. So, so that's why it's not really a normal gap metric. It really is just a KPI, but the general idea, if you simply want to take a plain vanilla investment position, then you buy a spot Bitcoin ETF and you just hold it. And that's a very safe, simple, straightforward thing to do. You're taking counterparty risk to the ETF provider. And then there are vendors, right? You've got risk to BlackRock and you've got risk to Black Rocks custodians, and you read the filings and you've got risk to Bitcoin, right? Those are your 3 risks with an operating company, a Bitcoin miner. A Bitcoin miner can generate BTC yield and operating company can generate PTC yield. If you generate 100 million in cash flow and buy Bitcoin, you'll generate A yield, right? If you issue equity at a premium and buy Bitcoin, you'll generate A yield. If you, if you issue a convertible bond at a premium, generate A yield, I mean, there's some things you could do. Like if you buy an ice cream truck company for equity and you get no more Bitcoin, but you issue a bunch of shares of equity that will be diluted, you'll have a negative yield, right? If we were to go and buy a billion dollar ice cream truck, ice cream truck company, we would have a negative BTC yield, right? And if you're a BTC investor, you would say, you know, what are you guys thinking, right. So, so it's the, by the way, a lot of times people do dilutive acquisitions all the time and no one can figure out if they're dilutive or not. The beauty of BTC yield is if you're on a Bitcoin standard and you and you calculate that metric, the way that we've defined it, any investor, any Bitcoin maximalist investor can see immediately whether the companies they're invested in are doing rational things that increase the amount of Bitcoin per share or they're doing foolish things that decrease Bitcoin per share. So I, I think it's a very useful thing for companies on the Bitcoin standard or if you're an investor that wants to accumulate more Bitcoin because you as an operating company you can do things to create BTC yield. An SEC 40 company or a trust probably can't. If you want to understand the difference between MicroStrategy and Marathon and say BlackRock I bit and FBTC, MicroStrategy and Marathon can create BTC yield, right? We can also create negative BTC yield, right? That way we can, we can buy a portfolio of apartments in San Francisco with billions of dollars of equity and we can brag about what a great deal it is, but it didn't generate any yield. It generated a minus something, right. So we have the option to do intelligent things or non intelligent things and and that's the counterparty risk. You're taking risks to the management team and the management strategy. So operating companies can do that. And this is an interesting metric to evaluate them. Trust companies they can't. And that's kind of like why you want to put if you want to put an, if you want to buy gold and you want to leave in your portfolio for 40 years. You don't want to wake up and find out that the CEO of the GLD decided to do a mortgage back, you know, a junk bond to buy ice cream truck companies and speculate on whatever you because it's just too many, you know, complications for you. So there's a place for both strategies, but I think people have struggled with the idea of how do I know what's a creative and dilutive. And BTC yield is a, is a simple metric that that we're doing because our shareholders want more Bitcoin per share. And they've said it loudly and frequently. But I also think it's a contribution to the entire community. And I think that any company that wants to pursue a Bitcoin standard would be wise to stare at that KPI and think about adopting it because it's just a useful, a useful communications tool. Yeah, I think people work too hard at this. I mean, it's very simple idea. You've got a trillion dollar asset going to $100 trillion asset, it's 100X. And so what's the best way to make money? It's basically capitalize a private company with Bitcoin, capitalize a public company with Bitcoin. You know, convert debt to Bitcoin, borrow money and buy Bitcoin. If you're if you're AVC, you can try to find the next 10 Alibaba's. That's hard. Or you can just go and invest in 10 private companies that do anything that are cash cows. How hard is it to find a company growing zero to 5% that makes money? It's easy. How hard is it to find a private company that's going to grow more than 20% a year for the next decade without consuming capital? Hard, right? Go find one of the cash cows that's private. Invest in them. Convert their treasury to Bitcoin, over capitalize them. Take them public. The equity becomes a Bitcoin derivative. The volatility is off the charts, right? If half the enterprise Oregon more is Bitcoin, you get to a 55 Vol, then you've you've set fire to the company and make a fortune, right? What risk did you take? You took Bitcoin risk. You see everybody. But here's the thing, right? I mean, this is a big ego thing. Everybody's got a big ego. And the biggest idea and the biggest, most important thing in the 21st century was already invented and discovered by Satoshi. Satoshi created digital capital. Digital capital is worth hundreds of trillions of dollars, $400 trillion by my last estimate. Somebody's already invented a better idea than you're, if you're going to, you think you're smart enough to come up with a better idea than $450 trillion idea. Like, what's the second best idea, right, Right. The price. There is no second best idea, right? There's a, you know, there's an idea, it's called Bitcoin. It's digital capital. OK, so you've got the best idea and you're a business person. And if you humble yourself before Satoshi and you recognize the brilliance of digital capital and you recognize the fact that this is inevitably going to go from a trillion to 10 trillion to 20 trillion to 40 trillion to 80 trillion to 160 trillion, it's the nothing stops this train, right? Nothing stops this train. Once you recognize that you're a VC investor, what do you do? You invest in private companies, put them on the Bitcoin standard, take them public and they strengthen the Bitcoin system and then they draft off the Bitcoin network, right? You're a private equity investor. You find big private companies, you invest in them, you recapitalize them with Bitcoin, you take them public. You're an invent your investment banker. What do you do? You don't. You don't negotiate 1000 complicated mergers between 1000 different counterparties or or how many different pairs? 1000 companies and and 1000 options each. So it's 1000 * 1000 combinations and you can solve all of the combinations because you're brilliant or you just merge 1000 companies with Bitcoin. Bitcoin is a universal merger partner. OK, I got 1000 zombie companies at the bottom of the Russell 2000. How do you fix them? Recapitalize them on Bitcoin? Bitcoin is the universal merger partner. OK, but but, but I need to come up with a new idea. No, you don't. Satoshi already came up with the idea, right? Everybody wants to come with a new idea. Well, I got a company. I got to grow my company. Or is your company going to grow faster than 29% a year with no cost, risk free for the next 21 years? You have a better idea than that, right? Again, you have pride cometh before a fall. A bunch of alpha males running around and they all, they all look at like, yeah, Satoshi was smart, but I got a better thing. Yeah, Bitcoin was good, but I got a better thing. It's like, but but you know, how am I going to get rich and famous if I just embrace Bitcoin? By the way, there are ways to get rich and famous by embracing Bitcoin, right? The problem is when you stray from the path of righteousness, you embrace Bitcoin, you become a great Bitcoin custodian, Then you trade shit coins, you embrace Bitcoin, you create a Bitcoin fund, then you start to trade alt coins, right? You embrace Bitcoin, you securitize it, and then you drift off to do the next thing, right? The world's full of people that they found it and then they thought, well, I've conquered this. Now I got to do something else, you know. But by the way, I was that guy, right? When I, yeah, when I came public, I had a good thing. MicroStrategy, the greatest business intelligence software. We grew for a decade, we conquered the world. I was like, OK, well, I've declared victory now. I got to invent, tune 10 more things, So I launched 10 more things. I launchalarm.com, I launch angel.com, I launch wisdom.com, I launch alert.com, I launch blah, blah. It's like none of those work as well. It's like, guess what? Just because you can do one thing doesn't mean you could do the next 10. He's like, you know, Napoleon. He Yeah, he ended up taking over France. Good for him. He was in Italian. He took over France. But then he's like, I think I'll take Italy too. Oops, he took it. He lost it. I think I'll go conquer Egypt. Oops, he took it. He lost it. I think I'll go into Syria. That didn't work so well. I think I'll go take over Spain. Oops, that didn't work. Now I'll go conquer Germany. Oops, got it. Lost. I think I'll take Russia. Get the mosque. Oops. You know he drops 3 armies along the way. One in Russia, one in Egypt, one in Spain. Manages to get whatever millions of people to follow him. They die, right? It's like, congratulations on that. Seriously, it's like the it's it's like the the, you know, the Alexander the Great Napoleon complex, everybody thinks that because they came up with one idea that they were put on earth, you know, as God's gift to deliver their brilliance. And the point. And there's a point of humility when you realize that maybe your brilliance was to discover somebody else had a good idea and to embrace the idea. So, yeah, I think there are a lot of good business I businesses to be created on Bitcoin. But the but the operative words are on Bitcoin, on Bitcoin and focus. And and that's why laser eyes matter so much. It's just laser like focus, right? And just because you can do a thing doesn't mean you should do a thing. And, and some people have to do a thing or maybe there's a responsible way to do the thing because you're solving a problem like like in Shanghai, they want Bitcoin, but they need a state regulated, you know, custodian that the Chinese government will support. So the guy that sets up a Bitcoin ETF in Shanghai will open up a gateway for 1 billion Chinese people to buy Bitcoin. And that'll be good for China and good for the world and good for Bitcoin. And that's an idea, right? There's there's probably another idea is probably a regulated Chinese company that could be the micro strategy of China. Because what is micro strategy doing? We're giving people bonds, we're giving them high Vol equity, we're giving them options. Do people want, But I mean, some people, how do you buy Bitcoin at the all time high and take very little downside risk or no mark to market risk? You buy a bond, you don't want the equity. So once you embrace the idea that the world's full of a lot of people, they're in different regulatory regimes, they're in different cultures, they're different, You know, that the 80 year old has a different risk profile than the 20 year old. You know, institutions and churches and endowments have different tax treatments and different regulatory requirements than a hedge fund, than a ball trader, than institutional investor, right. So Satoshi gave us a big idea, like perfect money, profound big, huge paradigm shift idea. But it's not not different than electricity. It's like or fire, right? Oh, we can extract energy from material, right? Right. We can actually move energy cleanly, you know, powerfully over hundreds of miles into your bathroom. OK, that's the big idea. But how many different businesses got launched based on fire? How many businesses got launched based on electricity? A lot right like a lot. How many businesses got launched or will be launched based on digital capital, digital energy a lot, I have no doubt, but it's just like just remember, you know pick the right protocol, you know and don't get distracted and and try to avoid blowing yourself up, you know and in the process and and then you'll do OK right. The empowerment of Bitcoin is. Wouldn't it be great if we took our money, we invested in an asset and we could turn off the TV and for forget about it for a decade? I thought that's why at the end of the day, you have to keep coming back to Bitcoin and come back, come back to this idea of an asset without that counterparty risk, right? Without, without them there, you could, you could talk for 20 hours about the risks, right? And, and for the most part, most people would benefit just to understanding Bitcoin and, and, and Bitcoin, I think is the solution to the great majority of the people's problems. These other things are it's like there's a professional guy who has an equity investment fund who might have $10 billion of capital and their charter says they have to invest in publicly traded operating companies that trade on the NASDAQ or the New York Stock Exchange. And so that guy can't buy Bitcoin, even though I would say that's the, you know, the risk adjusted best thing at the end of the day, it's like that that guy can't buy that. And and that guy took money from a pension fund that represents 8 million retired firefighters or something and they can't buy Bitcoin. So what you have is you have a, you have one pension fund that represents, that represents the interest of unborn children. You know, people that don't even live right now, right? It's a, it's truly a public institution with a long duration. They're looking out 100 years. They have allocated their capital to a variety of money managers. They, they might have 2% with a commodity trader, that guy can buy Bitcoin. Maybe they've got another X percent with an equity trader. That guy can't. The pension fund can't do anything. So when you look at the way that capital is structured in the 21st century, if you're a public company, you can create public securities that meet the requirements of all these pools of capital. That's just useful. That's a solution for them, right? Just like a Chinese pension fund cannot and probably cannot buy a United States based software company, right? Just we have lots of pools of capital and they represent real people living dead or about to be born. And Bitcoin represents the digital transformation, the capital markets. And if you're going to rebuild hundreds of trillions of dollars of capital and you're going to give them a path from physical capital and financial Fiat capital to digital capital, well, I mean, there's a lot of commercial banking to be done. There's a lot of investment banking to be done. There's a lot of money management to be done. There's a lot of journalism and analysis to be done. Someone has to create the securities and we need the auditors and the accountants to account for it. We need the lawyers to figure out how to disclose and assess all the risks. There's a bunch of regulations that have to be formed to clarify right there. There's a lot of work for a lot of people in the ecosystem and you know, you can make your career being a leader in any one of those areas. You know, there's a dude that figured out how to create electric shavers, you know, and the contribution is it works and it doesn't electrocute you. And it was probably a, you know, probably there's an entire company that dedicated their, you know, 30 years to perfecting that thing. And, and we're going to have the equivalent of those sort of things right in the digital assets ecosystem. And that's the inspirational part. There's something to do in your day job. That's that's how you earn money. But you know, never forget, right, that you got to see the world as PL. and balance sheet on your PL. You should do something whatever you're best in the world at whatever you're best. If you're a dentist and you're the best dentist in your city or you'll have a good job. My advice is make sure you stay on top of the dentistry thing, right? And be a good dentist on your balance sheet. That's where you want to take the lowest risk. I would generally recommend someone figure out how to buy Bitcoin and just figure out are you going to custody it or who do you trust to custody it for you. And that's about the extent of the risk you want to take and leave all of the other risk taking to securities professionals who do it for a living. And you know, and they, and they can, they either obsess over it or they obsess over it. And then the diet they diversify. Like, like my, my view is, I think diversification is a dirty word with regard with regard to Bitcoin. Like once I've decided it, I don't want to diversify. But if I'm trading securities, you know, if you said, well, here's 100, you know, 100 companies backed by Bitcoin or 100 AI. One of my 2 best ideas, digital capital, digital intelligence. If you came to me and you said, well, here's, here's a dozen digital intelligence ideas, well, I don't know if I'm going to put all of my money into one of them, right? And here's 10 companies on the Bitcoin standard. Which one do you trust? Well, you got to think really hard. You better study all those, right? You know, and, and my job is to obsess over micro strategy. That's my day job. That's what I do. I'm not obsessing over the next 27 companies, right? I don't have an information into their transparency one way or the other. So I think I think people should be very thoughtful about that. I think the Bitcoin community is special because the people of the community think longer and harder and deeper about fundamental issues like inflation, demonetization, innovation, monetization, asset macro economics. You don't see any gold people thinking super hard about the future of gold with a, with the open source community gold model. And you don't see the art people doing that. You don't see the real estate people, You don't see the people pitching the SP index. At the end of the day, their position is just, well, just do it just because or, and in fact, the most common position is, well, we know it's probably all risky, You know, don't, don't invest any money you can't afford to lose, diversify and, you know, or just, or give me your money. And trust me, there's a lot of that. And I think that I think that Bitcoin 24, that model is, is US moving toward a position where, you know, the Bitcoin community, we're actually looking out 21 years and we're thinking about this. And, and you can take that and you can crank in different assumptions about the US debt and the growth rate of, you know, any government. You can create models for any country, any company, any family, any endowment, the United States, all the other assets. And, and so there's, there's a lot of very good discussions to be had there and, and there's a lot of reasonable debate, But I think that I think that welcoming the debate is the beginning of a conversation that elevates everyone's thinking to new levels of sophistication. And, and ultimately there's just a lot of businesses, a lot, I mean, most corporations. What's your treasury strategy? Oh, well, we just buy treasuries and look for something better. What? We just have money parked there until we find a good merger. What what I mean, the point they'll have a strategy. They're their strategy is just not to lose too fast. And, and you know, Bitcoin is, is about a strategy of winning and most public companies, most private big companies and most startups, they all could immediately benefit if people started talking a lot more about, you know, you know, Bitcoin treasury strategies. I think this is exciting time. 2024 is like year 1 of institutional adoption. I mean, I feel like the gun went off with January approval of ETFs. Next January, the second gun goes off with fast B account A fair value accounting. And then the, the, the third trigger is going to be full bank custody. And I don't know when that happens, but I think it happens definitely in the next 4 years. Maybe it'll happen faster depending upon outcomes in November 5th. I would laser like focusing on Bitcoin and then think hard about, you know, what are your professional assets that you can bring to bear? What kind of financial assets can you bring to bear? You know, what kind of political assets can you bring to bear? What kind of communications or marketing assets can you bring to bear? And everybody can do something to both benefit themselves and benefit Bitcoin and benefit all the other Bitcoiners if they think long and hard about about what's about to happen.
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