The Future Of Bitcoin, Investing & Cryptocurrency In 2025 - Prepare Now | Michael Saylor

Everybody, welcome to another episode of Conversations with Tom. I am here with somebody whose a logic has had a profound impact on how I think about Bitcoin in particular and investing in general. The one and only Michael Saylor. Michael, welcome to the show. Thanks for having me. Dude, so you are the founder and CEO of MicroStrategy. You went to MIT. At one point you almost became a fighter pilot and a misdiagnosis has granted us all a very interesting public CEO to watch. And I want to actually start with that story. There's something about the way that you face massive disruption that I find really interesting. So, I want to start with the beginning of MicroStrategy. There was sort of you versus another guy going head-to-head with your ideas. I think started companies at relatively the same time and he kept telling you that you were doing things wrong. And you would make an adjustment and it would have a a material impact on your business and you just kept going with that, facing what you referred to as these existential threats. And the way that you handle existential threats I find incredibly informative. So, if you don't mind starting there, that would be really interesting. Sure. Um You know, so I started a company when I was 24. And we didn't have a lot of resources. I guess I took out like a $5,000 furniture loan. And then I implored my my first employer, DuPont, to give me a $250,000 contract. And then I asked for like 100,000 in cash up front and and my negotiating technique was they said we don't normally do it and I said, "Well, I don't have any money and so I can't build the software you want unless you give me the money up front." And that that negotiating strategy only works once in your life, but for me it worked and so they wanted what I had to offer and so they gave me the money. So we started with not that much capital and when you don't have that much capital, you know, you can't you can't do anything. So we were using we were building computer simulations based upon an existing piece of software that I had and it was limited, but we did what we could and we grew the company to like 750,000 a year and then we grew it to 950,000 the next year. And we and we saw an opportunity to plug into a graphical interface. And the idea was give computer simulations to executives to predict the future and the problem was it was kind of delphic. They couldn't figure out what the assumptions were. So we thought, well, maybe we could actually create a piece of software that lets them plug in the assumptions. And of course we couldn't afford to write it in C++, so we didn't even have the programming skills to build the software. It was like 19 91 or so. So we found a product called Wings, which was like an Excel spreadsheet, but it had its own scripting language and graphical interface. It was one of the first graphical interface development tools. And we took that product and we plugged it into our simulation engine. And um and you know, that that friend I told you about, friend/competitor, was a former professor from MIT. And so he had the PhD and he had all the knowledge and and I was just the kid, you know, trying to grow a company. So in his wisdom what he said was you know, like everybody knows that you You to use Excel if you use a spreadsheet, you can't use Wings. Excel is the winner. And my response was, "Yeah, it might be the market share leader, but the it doesn't have the functionality. The technology just doesn't work for me. So, I can either use Excel and fail or I take the take the safe choice and fail, or I can try something new and succeed." And he goes, "Well, you know, long term that's not going to work." I said, "Well, you know, we all know that eventually Excel will crush them like all my business school case studies say that." So, I I said, "Yeah, but short term we're going to fail. So, we got to do something." So, we built the product with Wings and it was a screaming success and the company doubled and we became a $2 million company and we became a $4 million company. And then we became a six an $8 million company and then a $16 million company. And right around the time we were a $16 million company, he was still a $1 million consultancy cuz he hadn't taken the risk. And he was not at risk. He had no existential threats. Whereas we had a $16 million company with threats, which was was Excel was going to squeeze Wings out of the business. And so, the answer was we rebuilt our product on a Microsoft base. So, we started using Visual Basic and Microsoft technology. And at that point we were 16 times bigger than that consultancy, he said, "You know, every every good software engineering company that I know uses C++. They don't use Visual Basic. You know, and and so, you're not going to get taken seriously." And I said, "Well, you know, I have people that can figure out how to do it in Visual Basic and they can't figure out how to do it in C++. So, we did it the other way and then we doubled to 32 million and we doubled to 64 million. And he stayed 1 million. And we we had at 64 million, we had this existential risk, which is we needed to code part of our software in C++. But we of course were 64 times bigger than we had been, and we were 4x bigger than we were when we started. So, we hired a lot of people, and we started coding in C++. And he still had a a secure consulting company that was a million dollars with no risk. And you know, and it went on like that. The next thing was we adopted you know, the internet, and we started building our software to run on HTML. And people said, well, you know, like no big company uses HTML. It's a risky thing, and it might not be secure, or it doesn't do that. And we thought, well, you know, well, we can't give the software to 20,000 people unless we try this. And so, maybe we'll try to figure out the problem. So, the result was initially we built it, and not that many people used it, and then we built it, and people used more of it, and then we built the third version, and everybody used it, and then the people that hadn't built the internet version got squeezed out of business. And then then you know, then it went on, and but at this point, right, the company's like 200 times bigger than the million dollar consultancy, which is still not at risk. But it's the difference between being a technology company and being a services company. Services companies don't take risks, and they don't they don't pursue architectures. Technology companies need to take risk, and and of course the eventually the mobile wave hit, and we rebuilt our software to run on iOS. And then people said, well, you're crazy, Android's the winner. So, we built our software to run on Android. And eventually we had software running on PC operating systems, web operating systems, Android and iOS operating systems. And then of course, eventually the web browsers changed to Chrome and in and in plugins. we built something to supported plugins. And if you sign up for technology, I think you got to have this model in your head that you're a snake that's shedding its skin every three, four years. Or I mean a really good model in nature for growth under pressure is a chambered nautilus. And a chambered nautilus is this creature that grows under under deep sea pressure and it and it builds a shell. And of course, the shape of the chambered nautilus is the spiral because the creature is rebuilding the next shell to be twice as big as the last shell and turning in on itself and is using its previous work as the structure to support the next piece of work. And so it if you look at the at the design of a chambered nautilus, what you see is is nature's solution for growth under pressure. And um and I think that's how technology companies work. You just always growing. You can't abandon what you've done. But nor neither can you uh can you uh not move forward and not take risk and not not branch off in a new area. So you So there's this very interesting dynamic dance between between uh respect for the past and integrity uh and architecture versus uh the opportunity and the challenge of the future. And you're living in that zone in the middle. The the friction between those two. This is uh the very thing that makes you so compelling to me and the way that you think through problems. And and compelling in a way where I have taken your advice and invested a substantial portion of my entire net worth um into Bitcoin not by force of personality, but by the way that you can walk people through the logic of how to think through a problem. And the one sort of capstone that I'll put on the story that you just told to really build your credibility, and then we're going to go cuz my audience probably doesn't know a lot about crypto in general. They may not know a lot about you yet. Um and the capstone I want to put on is you are if not the longest-serving CEO of a publicly traded company in your industry, one of certainly the top. And you know, in an era where CEOs and public companies, you know, are are constantly like in fear of losing their job, you've navigated through insane storms, including the dot-com crash, including the 2008 crisis, including COVID. So, it's I think you said at one point you actually went through a 98% loss in shareholder value and still managed to keep your job. So, just understanding how profoundly difficult that is. Now, I will credit it to something, and then you can tell me if I'm crazy. What I credit it to is not only your ability to sort of analogize something like the the chambered nautilus, but that you think from first principles. And that's what I found so compelling in your analysis of Bitcoin is just reducing it down to first principles. So, wouldn't it be great um for you to define what first principles are so that people understand that, and then for the rest of the interview we can sort of build on how that plays out in crypto. Yeah, I think probably the most valuable thing that I I learned from MIT was to think from first principles and to be intellectually fearless. MIT is just is an entire university full of very bright people, but intellectually fearless people. My uh my freshman classmates, you know, one of them started a computer company, you know, and launched a a Pac-Man competitor and got a cease and desist letter from Commodore computer in the game company. Another one designed hardware that went on the space shuttle, you know, another one used to like rip down and fix his own cars for fun on the weekends and they were they were just capable people that weren't afraid to do something. And what does that mean to be intellectually fearless? Like you're not afraid of looking stupid, you're not afraid of breaking something. What what is that? My my first material science class, the professor comes out and we're literally all freshmen. It's the first the first hour of our of our time in in the class and maybe it's like a freshman year class like freshman year first semester. So, it's early. So, the professor walks out in the first lecture and he holds up a tile and says, you know, I'm a consultant to NASA and this tile burned off the space shuttle on re-entry last week. So, they have a problem. They don't know why. They flew me down to talk about it. So, he they gave him the tile. We had a deep discussion. They're still not sure. He says, so here's the tile. What do you guys think? And you know, everybody looks at each other and these are like 18-year-olds, right? We're Okay, I was valedictorian of my class or I'm an Eagle Scout or whatever, but they're all thinking, was this in the readings? You know, I did I not read this? And and there's this first, you know, horrifying thought, right? That I should know the answer, but I don't. And then the light bulb goes off and and you know, one one guy in the front row raises his hand and he and he suggests that maybe he ought to try to you know, reverse the lattice composite or you know, or ask a question about the nature of the material and where it was in the space shuttle. And then he posits a theory. And then the rest of us go "Wow, that professor actually expects us to think for ourself." And then and then we realize he just asked us the question that he doesn't know the answer to, that NASA doesn't know the answer to, that no one in the world knows the answer to. It's not in the back of the book. And then that the second thought is not only is it a truly a truly unique question, he actually has confidence that maybe we can reason our way through it to figure out a methodology to solve the problem. So, I would say that a lot of your education consists of rote learning. You read something, you read the answers in the back of the book, you try to remember what the answers are, and then you regurgitate them back. But there's a point in your life when you have to reason from first principles. So, what are first principles? A grasp of math, a grasp of the scientific method, you know, um a grasp of of, you know, elements like at some point you have to build a building, you have to choose an element. Will you use choose steel or will you choose bronze or will you choose gold or will you choose silver or or or ceramic or whatever. If you don't understand the math of civil engineering and you don't know anything about material science, then you certainly can't put one thing together with a structure and make it stand or not stand. So, engineering in general is uh is about learning enough math, enough science, and then enough uh engineering technique in order to construct a mechanism that's going to work, right, under whatever the circumstances is you need it to work. And I think that's that's what it means to reason from first principles. You have to be willing to take a clean sheet of paper, like a literally a clean sheet of paper. Like I For example, I tell you, "Design something that flies, you get wood." Okay. "Design something that flies, you get a metal." Pick the metal. Well, we don't design planes with steel. Why? It's the perfect metal for everything except flying. It's just too heavy to fly. You will never, ever successfully design a plane with steel. Without aluminum, you will never design a metal plane. It's It's just not happening. So, so if I tell you a design a plane that flies in high winds, that's a different design. Design a, you know, design something that works in cold. Right? If If you If you're unable to to divine the impact of the change in the material, design something that flies on the moon. By the way, it's it's different flying on the moon than flying on the Earth, right? What if I change the gravitational constant? What if I change the the speed, you know, with of sound, right? What if I I change the density of the air? How about run a marathon? How about run a marathon at the top of Mount Everest? How about How about stay alive for a day at the top of Mount Everest? If I were going to string those together to give people an overarching sentiment of what unites those, and tell me if you think this is crazy, what I explain to people is you have to understand the physics of the situation. Like the the whole thing about flight. You have to understand lift to understand this is about using, and trust me when I say I don't know the actual physics of flying, but the sort of ballpark idea is you've got thrust, you've got the wind hitting underneath the wings, so weight is going to become an issue, the amount of thrust that you have is going to become an issue. And when your thrust exceeds the, you know, effort that you need to get that lift, then you fly. And if you fail to do that, then you crash. And when you understand this is about recognizing the the way that it works. So, tensile strength of the, you know, object you choose to build your building is going to determine the amount of weight that it can hold, things like that. And once you understand that foundational layer, now you don't have to necessarily follow a book, you can just think, well, I know that this will work because this is a function of, you know, strength, weight, durability. And once you get the parameters that you're operating under, now you can build something that's new. Because you just like you understand literally the physics of that situation. I think engineering is a discipline of uh of uh constructing mechanisms to channel energy. And um so you have to understand a bit of math. You got to understand uh the basics of physics. You fly and and you and you generate lift, but you got to you got to know enough to know that the amount of lift you generate is different if the density of the air is different. And if there is no air, try generating lift. Right? Like uh human beings human beings rise through channeling energy. So so fire was pretty elemental. Okay. How about uh does that burn or does that not burn, right? I give you two things. Can you burn a rock? Can you burn some wood? All wood doesn't burn the same. Can you burn grass? You know, design an oven. How about uh you know, we wouldn't have made it without uh air bows and arrows, missiles, right? Probably the most elemental thing is you need to hunt from a distance. Okay, so design a bow. Design an arrowhead. I give you four rocks. Choose the one that makes the best arrowhead. All right, kind of common sense, right? Not not the light, happy, shiny, soft rock. Maybe the sharp flint rock that will will do the job. Now design an arrow. You want a long arrow, short arrow? You have some ideas, but then there's also experiments, right? How long should the arrow be? Okay, we'll make it this long. Fire the arrow. Now make it this long. Fire the arrow again. Now make it this long. Fire the arrow. Now should I create a bunch of randomly different sized arrows? Uh prob- probably one of the arrows works better than the others, right? So after I fire 100 arrows and I pick the 87th arrow, then I'm going to manufacture 10,000 arrows of the the 87th arrows length and and width and makeup and you know, and then put the right arrow head on it and then manufacture it and pretty soon you don't have to go and wrestle with the gorilla or a bear in order to get dinner. So it goes on, right? I mean what's a sail? Channeling wind and wind energy. You ever create a sailboat? One sail, two sails, three sails? What kind of sail? Different shape of sail? How do you make the sail? How high should the sail be? Right? So that there's an entire set of engineering which is just common sense. Can you imagine that there's a shape of a boat that goes through water better than a different shape of a boat? Okay, there's there's laminar flow, you know, often times you know, there's there's the ratio. If I make the boat 1 ft wide and 100 ft long, it goes faster. That's a cruise ship, right? If I make the boat 10 ft wide and 40 ft long or 50 ft long, well it goes slower, but on the other hand it carries a lot more stuff. Right? And and there's something called hull speed. What you'll find is that there's a maximum speed at which you can push a uh push a hull through the water. It's um it's not a function of the energy use, it's a function of the shape of the hull. Right? Common sense. Create a a square shaped boat, right? Harder than a needle shaped boat. Which has the fastest hull speed? It's when the aspect ratio is 1 to 100, you go fast. When the aspect ratio is 1 to 5, you go slower. When the aspect ratio is 1 to 2, you go slower. What's the best aspect ratio? Depends on what you're trying to build, right? What should you once you figure it out, make more like that. Does the material matter? Yeah, ever see a boat with rocks? Doesn't float as well. You know, yeah, everything matters. How do you solve the problem? Right? Through being methodical. Is it important? Well, it might be a matter of life and death. So, I I Look, I think the big thing that happened with regard to Bitcoin this year is that Bitcoin is the first is the first point in human history where engineering impinged on economics. Up until this point, people didn't really embrace the idea of energy theory and engineering theory and math and sciences as being integral to the way that a monetary asset function. You know, it used to be money was, you know, seashells and tokens and then and then we have this general you know, we have gold and we have coins and then we have general agreements and and uh and the like and Bitcoin was the first time when we created um a digital monetary asset a a pure a a pure digital token on a pure digital network that uh that actually uh respects the laws of conservation of energy. You know, I say it's it's sound money, but that's the same as thermodynamic sound money, which is conservation of energy, which means mathematically proper. We'll get to that in a minute cuz those are like really deep concepts that even after being in this for a while struggle with some of those definitions. But so now I want to help people understand. So, we're talking about boats and arrows and there's a certain type of arrow that works better and it takes a lot of experimentation. There's a boat and a certain type of boat, some of which you could probably think your way through like even just as a layperson looking at a square boat. It seems like okay, something doesn't feel right intuitively. Um and then I think it was a Portugal army that at one point like took over the world cuz they had longer trees, which meant that their boats were faster. And so you get to a point and what I want people to understand about the way you approach the world is you get to a point where you can know nothing about it and say, "Hey, somebody tell me which boat to buy." And you're as ignorant before as you were after, but at least you have if you have a good consultant and you have the right boat. But when you yourself can reason from first principles, now you can act at a moment of tremendous uncertainty. Now the reason I care about this, probably important to um articulate that to you. When uh COVID kicked off, I had a moment of panic for cuz I I first of all I started not poor, but I was broke. So I start broke, I utterly transform my life. Um I work in the inner cities a lot because I'm in manufacturing or I was. And so I see these incredible people that are destitute because in my opinion, they don't not all of them lack intelligence because intelligence is evenly distributed. So in any neighborhood you're going to sort of find the same distribution of IQ, but what you won't find is the right frame of reference. They don't think in the right way and because they're not thinking in the right way, they get stuck. So I become obsessed with how do I convey mindset to people so they can think through novel problems and solve it in a way that allows them to get out. COVID hits and I'm like, "Whoa, the monetary system is blowing up. I'm super scared for other people that the basically they have no sense of how to invest or if inflation is going to go crazy, like how to protect against that." And so I start bringing on financial experts. And none of them could talk at the street level about like what does the guy do that's making $52,000 a year? What does that guy do? And none of them had an answer. And then I come across you and you've got this idea that we're having a once in a thousand year opportunity with Bitcoin and I'm like, I've got to get people to understand how you have come to that how you have come to that conclusion through first principles. And then like we can get to sort of the what they should do. So walk through how you go from that sort of early tweet that you just sent off as a whatever saying, you know, Bitcoin is never going to be anything to like, whoa, this is real and as a person and as the CEO of a company I'm going all in. How does that change happen? Well, the the catalytic event is uh the pandemic and the events that took place in March of 2020. And what you saw was Main Street shut down. It literally shut down and came to a grinding halt. And Wall Street had an initial panic and a rapid recovery, a V-shape recovery. And so we put those two together, you had an L-shape recovery, Main Street just shut down. And then you had a V-shape recovery and we call that a K. But what we But if you decompose it and I and I was very sensitive to it because on one hand in my personal life I'm an investor. And in my public life I run a Main Street company. I run a software company that has people that that manufacture software that does things. So um what I saw was if you had um if you had a large portfolio of stocks or assets and you went into this pandemic uh after the Fed uh ended up expanding the money supply with the interest rates going to zero and the expansion of the M2 monetary base, the money base. You found that you were actually 25, 30% wealthier doing nothing. Uh you could have done nothing the entire year. As long as the only mistake you could have made is do something, right? If you If you had a billion dollars and you did nothing for the entire year, you had 1.3 billion dollars at the end of the year. On the other hand, if you had a Main Street company and you're generating let's say a hundred million dollars a year in cash flow and you're valued at a billion because of the cash flow, you would have to be generating a hundred and thirty million af- after a year to be valued the same because the value uh the assets that the money buy is is being devalued by 30%. If the currency is devalued at some rate and you know, the money supply expanded to 24% last year, so you could use that as your metric or you could use the S&P 500's return as another metric. But clearly, uh the currency devalued, which means that if you're a Main Street company, you had to work 20% harder to get nothing. And if you're a Wall Street company, you had to work you had to do nothing to get 20% better. And so what I saw was a shift in balance of power, you know, and a shift in in wealth. And it was a pretty disturbing to me, too. You know, it's like you don't want to be uh the dentist working for a fixed amount of money that's getting 20% less valuable every year. So, the average person I think struggles with that cuz they're like, "Well, I'm getting my stimulus check. What do you mean? Like, how's this going down? Cost of bread is the cost of bread. I'm all good." I I think there are some fundamental uh misnomers or or or um understandings of the world that people miss. And what And the most pernicious one is the idea that inflation equals CPI. Which is consumer price index. Average The idea that there is a number that for inflation. Inflation is only 2% or inflation is 1% or inflation might be 3%. Okay, that's just a mistaken idea. Um to to What is inflation? Inflation is the rate at which the things you want to buy are going up in price. And what are the things you want to buy? Well, you might want to buy pizza, you want might want to buy Netflix, but you might want to buy a house. You might want to rent a house, but if you want to rent a house, it might not go up in price as much as you want to buy a house. What if you want to buy a house in the middle of Manhattan? It might go up in price differently than a house in the middle of Kansas. What if I want to buy food? What if I want to buy energy? What if I want to buy a Picasso? What if I want to buy something really scarce? What if I want season tickets to, you know, the baseball game? What if I want health care? What if I want early retirement? They're all things you can buy. You can buy assets, you can buy um luxury serv- You want to buy a Rolex? You want to buy a Maserati or a Porsche? Luxury goods or do you want to buy commodity goods? And there are some things you don't have to pay for, right? They're ad financed, right? Streaming YouTube. What's that? What's the inflation rate on streaming YouTube? Ad financed. Right? So, the inflation is is the cost of stuff. If the money um supply is expanding, that means the currency is devaluing. Um I In a closed system, if we want to make that simple, I live in a town and there's a thousand houses and I and I double the amount of currency in the town and everybody wants a house, what's the price of houses do, right? Pres- If the only thing I can buy is a house and if I double the amount of currency, then the price of the house must go up. Probably go up by two, but but maybe not exactly by two, but it goes up. If I increase the amount of money, if I get if I raise everybody's salary by a factor of 10, and I keep the number of houses constant, one might presume that the price of houses will go up. How will inflation actually take place? Well, there's a different coefficient uh for price uh for the price gradient or the change in price for everything you might want to buy, and it's different at every point in time. So, for example, if I put you in lockdown and I make it illegal to go to the movies, and I make it illegal to go to a restaurant, then the price of restaurants and movie theaters aren't going to go up. If I if I make it illegal to or or inappropriate to go on a cruise and fly in an airplane, then the price of cruise tickets and movie theater tickets and restaurants, they just don't go up because you can't buy them if you want to. There's no velocity on that money. Okay, what can you buy? You can buy stocks. You can buy crypto. Right? So, what you know, what does go up? Well, if I give you $1,000 and you can go and you can buy stocks, then the price of stocks go up. Now, what happens um what happens next? Well, so everybody gets locked into their um apartment and they decide they really want a house with grass. So, what happened next? Well, 12 weeks after the lockdowns, the price of like suburban housing went up, and people started trying to buy houses. They said, "This is unprecedented. We've never had so much demand for houses in the suburbs of New York." Well, that's not a surprise. You know what? If you If your choices If I close the parks in the cities, and you know, and and I close your office, then why wouldn't you move out into the country and live in a house with green grass, right? You're not the utility You're not missing out on a restaurant. You're not missing out on a park. You're not missing out on your job. So, rational human behavior causes people to take their money and go buy things they want. So, and where do they buy them? Well, um you know, Hampton's real estate went up in in price 50%. Palm Beach, they go to the places where they want to go. Uh did the price of land in the middle of North Dakota go up by 50%? Not so much. It's not you know, it's not a scarce desirable asset by people stampeding. So, um So, what is inflation? Inflation is a vector. It's not a scalar. A vector means you can calculate for a thousand different products, a thousand different numbers, and they change every month. So, I could give you a thousand different numbers uh 12 different times a year, and it would be different in every city. Everybody can figure out that in Minot, North Dakota, it's different than Manhattan. And it's even different in Manhattan than in Brooklyn, and it's different in Brooklyn than in Upstate New York. So, inflation is varying by time, by space, and it's varying by every item. And if you want to calculate the inflation index, you have to construct a market basket of goods and services and assets that you would want to acquire. And then I can give you the rate at which that market basket of goods and services and assets is changing every month or every week. Um and uh of course, that would be different for every person. So, what happened after the lockdowns? Well, we got hyperinflation in some things. Bonds hyperinflated. Cost of bonds doubled in 3 weeks. Whoa. That's hyperinflation. Uh equities inflated, you know, they were up 40%, you know, year over year. Uh you know, cryptos inflated. Bitcoin was up 3 400%. So, the cost of scarce art, the the cost of luxury real estate, all of that stuff inflated, you know, or hyper-inflated. What didn't inflate? Things that people can't buy. And and I can define a market I could define a market basket of things that don't go up in price by definition, too. Right? If I define a market basket of highly manufactured goods that have very low variable cost, right? Like what's the price of your streaming YouTube video? Or what's the price of some manufactured box of macaroni that's 5% food and 95% marketing? Right? I mean, the more if I spent $2 billion on a on a factory to stamp out widgets that have a variable cost of 10%, right? Then inflate then I've already sunk the cost in the factory. Those things don't inflate at the same rate as you know, if there's only one Mona Lisa in the world, and if I increase the amount of money in the world by a factor of a hundred, don't you think that the value of the Mona Lisa would go up, assuming that lots of wealthy people wanted it? And that that gets you to the really the the interesting theory of economics, right? If I want to really understand the anything in the engineering world, I need to use vector vector calculus, right? Or vector math. I would never use arithmetic. You you cannot solve the problem of fluid dynamics with arithmetic. You can't design a boat, you can't design a plane, you can't design a nuclear reactor, and you can't design a bridge with arithmetic. Well, a scalar, like, oh, inflation is 2%. That's arithmetic. Right? You know, adding it up, right? Isaac Newton gave us the calculus of variations, you know, and calculus in general, and pretty much every sophisticated thing that flies or floats, you know, it's all based upon calculus. And and you just can't solve the problem without that math. So, that's the problem with inflation. Okay, so let's inflation is our problem, but we have the confounding variable of the average person is being told by sort of the mainstream media, by the government, "Hey, inflation's not a problem." They look at their basket of Netflix and bread and whatever and it all seems fine. They're getting their stimulus check, there's no worry, but the reality of inflation is completely different and we're now seeing a break in the narrative from the government saying, "Well, actually inflation is, you know, whatever, twice what we thought it was and that may be just the tip of an iceberg that's coming." So, inflation is a problem in in two ways. One, if you pour money into the system, inflation is going to go up on a certain set of items. And then number two, if you're confused about what inflation is because it is not simple arithmetic, you're now paralyzed, especially when that's confounded by marketing, essentially. So, cool. So, we've got inflation is sort of problem number one. You're you often use the analogy of, you know, if you have a boat that has a leak in it, you've got a real problem. And if you know that inflation at some level exists, you've already got a problem. So, when did you begin to think, "Okay, I've got this in fact, what I'm really the the part that I find so intriguing about your story is when you turned to Wall Street and were like, "I have a profitable company. It is wildly profitable." And yet Wall Street does not like it. "Dear Wall Street, why do you not like my company?" And the answer to this is so revealing. Yeah, the company was valued at like one times revenue plus cash. And I said, "Well, I have I have 500 million cash. Why don't we get more credit?" And the answer is cash is trash. Like it's Ray Dalio's quote, "Cash is trash." Well, why is cash trash? Well, if the money supply is expanding at 7% a year, then that then the risk-free hurdle rate is 7%. If you don't generate more than 7% yield on your cash, then it's devaluing. So, from 2010 to 2020, the money supply expanded at 7%. So, all the cash you're holding is losing 7% of its value um assuming you have 0% rate or 0 yield on the cash. So, you can imagine the traditional world, you invest your cash at 3% treasury yields, and you get a minus seven, and it's like a minus 4%, and divide four into 72, and you know, and somewhere 15 20 years out, you're going to lose half of the shareholder value in the treasury if you do that. People might hold their nose. But, after March of 2000, the money supply is expanding at 24%, the interest rate is zero. So, now you have to put a forecast in place. At what rate will the the money supply expand? If it expands at 20% a year, and you're going to generate zero in treasury yield, then you're looking at cutting your treasury purchasing power in half in 3 and 1/2 years. Whoa. Okay, now that's not trivial. So, you have to find a way, if you're going to if you're going to have assets, to get over the hurdle rate. Another way to say it is, I have to invest it in a strategy which is going to appreciate faster than the money uh is devalued. If the money is devalued at at 7% a year, then the S&P 500 index better yield 9 or 10%. If it yields 10%, and the money devalues at 7%, you're plus three, you can save money in an S&P 500 index fund. You can't save money with bonds unless unless you're buying bonds and the interest rates keep getting reduced. If you if you bought a bond at 4% yield and the interest rate got taken down to three and a half, the bond trades up. And when the interest rate goes down to three, it trades up again. And when it goes down to two and a half, it trades up again. When the bond rates get or the LIBOR, you know, the short-term bond rate and interest rate goes to zero, you can't take it down anymore. So, bonds won't hold value either. So, now you're in a conundrum. I have a lot of assets, but I'm not beating the hurdle rate, and the hurdle just tripled. This is the problem that a company that's cash rich has, and it's a and it's a problem that anybody that works for a salary has. Which is I generate a cash, and the the currency is being devalued every year. The real question is what's the rate at which it's devalued. And and that let's do the thought experiment. What if What if we didn't print any more money? What if the inflation rate the monetary inflation rate, not the CPI, but what if the money expansion rate was zero? In that case, the currency is also an asset and it's a store of value and and a medium of exchange at the same time. That's a complete Austrian economics like deflationary economy where we have call it hard money or sound money. The closest thing to that would be the gold standard. If the government said you can exchange your money for gold at any time and we'll keep gold equal to the amount of money and we won't print any more money. Well, that puts you on a hard money standard. In that case, you could just store your money in a bank, and it would be more valuable in the future, not less valuable. Um when the government goes off the gold standard, and we went off the gold standard explicitly in 1971, now the currency is losing some percentage of its purchasing power every year because it's being inflated away. And what's the number? Well, it was about 7% a year. And now it's like 20% a year. And 15 to 20% a year, and you know, and you you got to figure out is it 15, 20, or 25? But if it's 15 to 20, the currency is weakening 1 to 2% a month. When it gets to be 40 to 50, it's collapsing. That's Argentina. Or worse. So, you've either got a country where the currency is weakening or a country where the the currency is collapsing. When that happens, now you have a decomposition. The money is broken into two components. You have a currency component which you use as a legal medium of exchange, like the dollar, the euro, or the yen, or the renminbi. Um and then you have an asset component which you use as a store of value over the over the long term. Money uh or US dollars have ceased to be a store of value for at least the past decade since the great financial crisis. So, what people did was they stampeded into ETFs and index funds. Right? And and to a certain extent bonds. Right? How do you store your value over the long term? Well, if I if I take money and I buy a mixture of stocks and bonds, that will store my value because if um if the economy's healthy, the bonds the stocks go up by 10% a year, the S&P does. And if the market uh if the economy's not healthy, the Fed will lower the interest rates by 50 basis points, so the bond will trade up. And so that works for how long? It works Watch the interest rates for the last decade. It works until you crank the interest rates down to zero. Mhm. The It used to be overnight money was 550 basis points, Tom. Before the great financial crisis. And then they cranked it down from 550 to 500 to 450 to 400 to 350 to 300 to 250 to 200 to 150 to 100 to 50 to zero. And now we have, uh, you know, the bankers say, "I'm not even thinking about thinking about raising interest rates." So, that breaks bonds as a store of value, unless you go negative interest rates. And, uh, stocks stocks work except for the fact that you know, what stocks worked in the past decade? Apple, Amazon, Facebook, Google, uh, a big tech company that grows 20% a year top line. When Apple stopped growing 20% a year top line, they fixed it by taking on mass amounts of debt, buying their stock back, and leveraging up their EPS. So, so companies that grow faster than the rate of monetary inflation, faster than the 7%, they can hold value. A company growing 20% like Google, Facebook, or Amazon, they all hold value. In fact, they accrete value. Why? Because 20 is more than seven, right? So, it's it's plus 13% a year, right? Um, what hap- what happens to all those all the other companies? What which companies in the S&P 500 amounted to all the indexes to all the gains? It was big tech, right? Big fang stocks were the winners. Everybody else treads water because if you're growing at 7% and the money supply is is collapsing at 7%, you're net zero. And how else do you get around it? Well, you can go borrow a lot of money, leverage up, buy back half your stock, and get your cash flow per share up. But what what happens when you're fully leveraged, which is like where they are right now? You can't do it anymore. So, what's the problem right now? The problem today is the currency is is being devalued at 20% a year, not 7% a year. Right? That's I turned up the heat in the frying pan. And the second problem is some stocks could hope to grow 20% a year, like the minority, 5% of them could grow 20% a year for the past decade. What percentage of stocks can grow 30% a year? Cuz now you got to grow 30 or 35% a year cuz the hurdle rate just jumped. Now you're pushed out on the risk on the risk curve here. You got to take massive risk as a company to grow that fast. You got to do acquisitions. You got to You got You got to burn the candle on both ends. You got to take on massive new leverage. This is squeezing Value stocks don't work, right? I mean, it squeezes you out of the value stock trade because the if the company is reliable and it's growing its cash flows 5% a year and the money supply is expanding at 20% a year, cash is trash. Back to my story, right? Why is cash trash? Because I had a value stock with a lot of cash and the money supply is expanding. Looking at it from the point of view of an investor, they can invest in the S&P 500 index or the Nasdaq and that those were all up like 40% year over year or something. You know? Or they could hold cash and get 0%. Nobody wants to hold cash. And so they might as well just take it and put it into something else. Now long-term, you can get a bump on equities when you have a boost when interest rates get spiked down. You saw it when we flood the market with liquidity. Initially, that makes stocks go up. But let's take the example of Zimbabwe and Argentina. If I keep doing it for 10 years, what happens to those stocks? They don't go up. Right? The problem over time is stocks are valued based upon the discounted value of the cash flows or at least in part. And so if I give you a company generating a hundred million in cash every year for the next decade, but I tell you there'll be ten times as much money in the economy in a decade, that hundred million dollars of cash will only be worth ten one-tenth as much in a decade. So you the discount rate is jumping, which means the value of the cash flows into the future is collapsing. The road to serfdom is working exponentially harder for a currency growing exponentially weaker. And so how do you solve the problem? And the solution to the problem is you convert your assets from a weak currency that's inflating into a strong currency or a strong asset if you will that is deflating. Right, the the simplest example is I'm a wealthy business person in Argentina and the peso is trading three to the dollar, three pesos to the dollar and the year is 2003. And now I can go forward and I tell you well, in the year 2020 the peso is going to trade 150 to the dollar on the on the blue market or the black market. That's going to be the real rate. So what's your best uh strategy? Work hard? Invest it? Diversify into other Argentine companies making pesos? No. Your best strategy is convert all your existing pesos into dollars and get it out of the country. And your next best strategy is forward finance your cash flows and convert those into dollars, get them out of the country. And your next strategy is sell equity in your ranch or your business in pesos in 2003 at three to one, three pesos to the dollar, and then buy dollars because the dollar is going to go up by a factor of 50. So what you're doing is you're financing in a weak currency and then you're converting into a strong currency and that's pretty obvious if you lived in Zimbabwe or if you live Lebanon went from 150 Lebanese lira to 700 7 went from 1,500 to 7,500 overnight. Whoa. So, it means it means you lost 80% of your money if you had it in a Lebanese bank. And so, the answer of course is convert your lira while it's 1,500 to the dollar into dollars before the devaluation. Right now, what can you do if you're a modern business person, right? If I can't convert to dollars, the next best thing is buy something tangible that won't lose 80% of its value overnight. Buy a boat? Buy land? Traditionally, people bought other tangible assets, gold, right? Something like that. But if you buy an asset which is valued based upon its expected future cash flows that are in that collapsing currency, that doesn't work for you. Like, you could own a whole every good business in in Venezuela. How's that going to help you when the Venezuelan currency collapses by a factor of a million? Jesus. It won't. Okay, so what's Bitcoin? Well, Bitcoin is the strongest asset the human race has ever invented. It's like gold with none of the defects of gold. So, define what the defects are. Why Why is it the greatest monetary invention? So, I buy uh a million dollars of gold. Okay, um if the price goes up, the gold miners first of all, the gold miners are going to create more gold and dump it on the market. If I could eliminate uh all gold mining forever, if I could wave a magic wand and make it impossible to mine any more gold, my million dollars of gold will hold its value better because it'll be scarce. But gold miners are inflating the value of the the supply of gold by at least 2% a year, or so. And then, if the price doubles again, investors will invest in more gold miners, and they'll create more capacity to mine gold. So, you'll create capacity to mine gold, you'll mine the gold, you'll crank up the rate at which the gold mines function. After that, people with gold jewelry will melt their jewelry down, convert it to gold bullion, and sell it, right? If If the price of gold went up by a factor of 20, you would be like converting all your gold stuff into gold bullion, cuz it seems like a good idea. They call it scrap gold, right? And then after that, um bankers will issue gold warrants and gold and gold paper and gold derivatives, and they'll sell them short without the gold, because they can speculate in it, and they don't have to have a one-for-one coverage of gold to the gold derivatives. And so, that's called hypothecation and rehypothecation. Okay? If it keeps going up, the government's holding gold will start to sell some of their gold to manipulate the price down. Right? And And all of these And if And ultimately, if it goes up enough, someone will club you over the head and take your gold, or a hostile regime will take your gold, or a politician will pass a law taxing your gold. Right? There's a There's a lot of ways you lose gold, because it's physical. How do you cure the problem? Right? I mean, uh Here's how you cure the problem. You make it impossible to mine any more gold, and then you make it possible to take custody of your gold personally, off of the exchange or off of the bank. So, that way the bank can't hypothecate it or rehypothecate it, miners can't inflate it, investors can't create any more gold miners, and then you make it possible to move it from here to Switzerland or Singapore in an hour for or for a nickel. And that way, if you don't like your bank or don't trust your bank, if the state of New York passes a law taxing it, you move it to the state of Wyoming. You know, if the government passes a law taxing, you know, the the ownership of land in California, you can't move the land out of California, can you? If you have a million dollars of gold in a bank in in a vault in New York City, you know, there's only a couple places you can move it. You can move it to London if you have 6 months. Okay, so you're going to be subject to the law of London or the law of of New York. Can you actually move to your favorite island or, you know, can you move to the Cayman Islands and bury your gold underneath your hut in the Cayman Islands and be safe about it? Not likely. Can't even get it through the airport. Right? So, so the problem with other properties and gold is the simplest example, but the problem the the challenge or the analogy holds with any property. I give you a bunch of money and I tell you you want to keep it and give it to your grandchild. Do you buy a building in Manhattan? Do you buy a ranch in California? Do you buy a stack of gold bars? Do you buy shares in a company headquartered in San Francisco? Do you buy bonds issued by a government or company? Or do you buy Bitcoin? And you can you can see the problem, of course, is the the debt is devaluing rapidly. The land in California can be taxed and is not movable. You know, uh the building in New York is not going anywhere. It might be valuable to a rich person that lives in New York. What about a rich person lives in Beijing? Do they want your building in New York? How you going to hide your building, right? Buildings get probably taxed. There's a very famous story about, you know, a bunch of luxury, you know, yachts sitting in Sardinian port, and the locals decided that that that it wasn't fair that all these uh people were rich people were sitting on their yachts in the port spending all this money, but they weren't paying enough taxes. Now, they were putting millions and millions of euros into the economy, but they came up with the idea that they were going to put a tax on the yacht on the value of the yacht. And so, they you know, they passed the yacht tax that would have cost people millions or tens of millions of euros if they stayed in the that port. And uh everything was happy, and uh all the restauranteurs and the hoteliers and and and the entertainment people in the port, they were all happy making tons of money off the yachts until the day before the tax went into place, and the morning that the tax went into place, the port was empty, and the economy died. Everybody left. Cuz yachts are floating capital. It just moves. It's floating property, right? So, it's a it's a very visible example, right? Why it's not that smart to put a an an unfair tax or an extreme tax on a yacht if people can float the yacht to the next port, you know, 100 miles to the left. So, one would be discouraged from taxing stuff that floats. On the other hand, taxing a building that's buried, you know, 100 ft down in the bedrock, that's easier. You can't move the building. So, Bitcoin represents the apex property rights of the human race. Like, I'm not Mind you, I'm not disputing the ability or or the, you know, legitimacy of a government to pass a tax. At the end of the day, they can tax your gold, they can tax your stocks, your bonds, your building, yourself, your income, whatever they want. But, the point really is you're a lot more likely to tax the stuff that you walk past, you know, every day on the way to work and you're lot and legitimately you can move yourself and you can move your property if it's crypto to another jurisdiction but you can't legitimately move a ranch in California. So, your property rights are stronger and the value of the property is higher. Right, you have a valuable thing in Manhattan and it's interesting to other wealthy people in Manhattan but when you have Bitcoin it's interesting to wealthy people everywhere on Earth. Right, it's you can liquidate a billion dollars of Bitcoin on the weekend in any currency you know, any any time. Try liquidating a billion dollar building. Right, that's three-year process, right? So, it's liquid, it's fungible, it's desirable and so that what that's what makes the asset valuable and it's very it's the it's the most difficult thing to impair. Tom, once I had a million dollars seized by the Argentine government. Here's how it happened. I had a million dollars in a bank in Argentina in dollars and it was a US bank. Um on on one day they said we passed a law converting it all to pesos and they and they converted everybody's everybody's account to pesos in the country. And the next day they devalued the peso 10 to 1. And 24 hours after they'd you know, done that I had 100,000 whereas I had a million before and they did it I mean, they did it quickly and easily to everybody in the country. Now in theory, you know, that if if it had been property they would have had to pass a law seizing 90% of the property of everybody in the country. That would not be so popular, right? To seize the property and if they wanted to seize 90% of the property of everything in the country, they would have had to subpoena a court in New York or Delaware and get my appearance, right? And there would have been 3, 4, 5 years of lawsuits going on. And if you really wanted to take something, you have to kidnap everybody and take them to jail and sweat their private keys out of them. And that's not very practical, right? So, at the end of the day, it's not likely that that the governments of all the world will just confiscate 90% of your of your crypto assets or your Bitcoin. But, in fact, it's a foregone conclusion that they're definitely going to compensate 90% of your currency. Right? It's happening at 1% a month or 2% a month right now. So, all you got to do is wait between 5 and 10 years and you're going to lose 90% of your purchase of your money if it's in if it's in a currency or a currency derivative. And they don't even have to pass a law. So, when all of this kicked off, I'm a relatively bright guy, but when all of this kicked off, um I told my and this being COVID, I told my um money manager, I said, "Look, I want to be as close to my money being buried in the backyard as humanly possible." And she just kept saying, "You don't understand inflation. Like, this is going to be a problem. Like, your money will go down in value." And I was like, "I get it, but I feel like it's happening slowly enough that I've got time to like get my head together. Like, this is so disruptive and so, um you know, Bill Gates predicted it, so I won't say it was unpredictable, but it was so surprising and unlike anything I had ever lived through. I just didn't know what was going to happen. And I didn't understand money markets well enough or finance in general. I'd always bet on myself as an entrepreneur. So, I understand how to build business. I understand how to create wealth. But, maintaining it is like a whole 'nother thing that, honestly, I know a little bit about now. I knew nothing about it then. So, I just kept saying, "Look, give me as close to buried in the backyard as I can." Then I come across you, and you talk about hurdle rate. And then I was like, "Oh my god, this isn't something I've got 30 years to figure out. This is something I have 4 years to figure out to get to like a halfway point to where I've already lost 50% of my wealth." So, I was like, "Woah, now I have to take action." So, now I start researching like crazy. Okay, is it going to be crypto? Is it going to be specifically Bitcoin? Is it going to be something else? And this idea of creating, basically turning sunlight into cryptographically protected money is a a very interesting idea. And so, I'd like to know now, so those are all the reasons why like there's you can protect yourself from the government, um but you have a compelling argument as to why I should be willing to stomach sort of short-term volatility. And why cuz that's like the argument. If I'm that average person on the street, I'm like, "Yo, literally last week, this lost like 30 or 40% of its value. So, that's terrifying. So, why would I be better off in that than, you know, even a bond with a negative yield, at least like I'm bleeding to death more slowly than the 35% loss or whatever that I just took over the last week?" Well, Bitcoin's the best-performing asset for the past decade, and it's, you know, it's a 100x better than gold, and it's 10x better than uh equity portfolios. So, the volatility is the price you pay for the performance that you get. And uh oftentimes the best investment idea isn't the most comfortable investment idea. Um I I think um if I told you there's a 100% certainty you were going to lose 7% of your money over the course of a year, you you think, "Well, you know, I have a decade before I lose half of my money. I have time to think about it. That's the That's the status quo when monetary inflation 7%. If I told you there's a 100% probability that you're going to lose 20% of your money over the next year, and half of your money over the next 3 years, well, I mean, you might think you need to move faster. What What What if I told you you're going to lose all your money? What if I told you the currency is going to collapse to zero in 3 months? Which is kind of what it did in Zimbabwe and Venezuela. Well, what if I told you we're going to have 95% inflation? I think the unofficial inflation rate in Argentina is like 85% this year. What if I told you we're going to have hyperinflation? Everything will be twice as expensive next year. Now, how long would you wait before you took a risk? I I can You know, if I really want to, you know, get you to jump out of the pot, right? I could just make it simple. Next Tuesday, I'm seizing all your money. Or you can spend it between now and next Tuesday, right? What I mean, that really uh What is the word? Focuses one, right? Right? It strengthens one stiffens one's spine and focuses one if I just made it very black and white. I'm just going to take all your money next Tuesday or you can spend it between now and then. So, how do you actually um get comfortable with the volatility? Well, I think first you have to get You have to understand how big your problem is. And the second thing is one of time horizon. And what are your What's your aspirational goal? For example, if you're if you don't aspire to change your lifestyle one iota, and you know, you're going to watch Netflix, let's say extreme. You're going to live in your parents' basement watching Netflix, order Domino's Pizza, and stream YouTube video for the rest of your life. Do you have an inflation problem coming? Probably not. If you want to If you want to buy your own house, you have a bigger inflation problem cuz housing went up 15%. If you want to get married, buy a house, have three kids, and if you know, if you want to take expensive vacations and have a have a house on the lake, you have a big inflation problem. Guess what? Luxury homes on the lake went up in price a lot. Same with education. If I plan to send those kids to school, I'm really in trouble. Yeah, so it really comes down to what is your aspiration and that that determines your hurdle rate. I mean, what you want determines your inflation rate and your inflation rate determines your hurdle rate and that makes a difference. I think uh in terms of historic metaphors, I mean, there's plenty. For example, my family came to um to the United States in 1736 on a wooden ship. Okay, and if you if you want to go study those voyages, they spent 8 weeks. Have you ever tried There's not a single person that's like probably got in a wooden ship with three sails for 8 weeks to cross the North Atlantic in order to come to America. The mortality rate is like 2 to 5% on that trip. The mortality rate to go from Europe to the Far East is like 35%. It's insane. Like one out of three people that started the journey dies on the trip. Okay, so the you know, we talk about volatility. Is Bitcoin bumpy? Is crypto We're just going to talk about Bitcoin. Yeah, Bitcoin is bumpy. What else is bumpy? Wooden ships in 15-ft seas. If you want the definition of a rocky ride, the the rocky ride was was leaving Europe. So, why'd they do it? So, you're saying that the bold are the ones rewarded? If you choose correctly. Right? I mean, the ones that moved too soon, you know, went to certain colonies, you know, that on the Potomac River and the James River and they died, right? So, there's a lot of early settlers took arrows in their back, you know, in the 1600s. On the other hand, by the mid-1700s, by 1736, you know, people have been living in in North America and you had Philadelphia and and you had Massachusetts, successful colony and the like. So, if you choose the right decision or make the right decision at the right time, you can have a better life, but there's still risk. Right? So, why did people come from Europe? They came for property rights and civil rights. Right? They either couldn't exercise their religion or there was no hope for them. All the property was owned by someone else. And the you know, property rights matter. If I a lot of people don't realize this. They think that they they think that property rights are a nice to have. Property rights are a nice to have the same way that that fat on your frame or an insulin or a nice to have. If I strip away your insulin, you're a type 1 diabetic. You can't form fat. If you can't form fat, you can eat all day long and you're going to starve to death. It's not a nice to have to store to store energy over time. Fat is an organic energy battery and property is a social energy battery. So, being able to store property means I can go 3 months without a job and not starve and live and live a life. There is no hope for a civil life without property. So, you know, people went from Europe to the US for property. When they got to the East Coast, they went west. It's an American ethos. Was there a bumpy ride taking a wagon train over the Rocky Mountains? You ever fly over the Rocky Mountains and look down? Before they had the railroad and before they had the highways, and then you ask how did people actually cover the turf? It's like Yes, it was a bumpy ride. There was a volatility along the way. You know, I think the risk and the discomfort today of owning Bitcoin is a heck of a lot less than the risk and the discomfort of getting in a ship or getting on a horse or you know, getting in a wagon or walking, right? Or settling and doing what you need to in order to secure your civil rights and your property rights and your freedom. But, um there is an analogy. Um the only way you make the volatility go away is you make the opportunity go away. Mhm. The The reason you went west was because people weren't living there and you wanted thousands of acres to yourself to live a better life, right? And when you got there, you found that there was no one that had come before you to, you know, to clear the thing, you know, and build a house for you and give you running water and hand the keys to you and do your bidding. Because, you know, you were going to a new place. That was where the opportunity was. So, I think I think it's very It's very uh quintessential to the American spirit or the or the entrepreneurial spirit or or or just the human spirit. You know, what about immigrants? A nation made of immigrants. People went from a country where they had nothing to a country where they could have something. That's the story that you see over and over again. Is there a volatility? Is there a risk? Yeah, always, right? Um is there opportunity? Yeah. When do you leave? Look, the I mean, the rich first sons of the nobles in Europe didn't come. Yeah, it was the poor disenfranchised the people that that didn't have a choice that came. Right? The The Protestants left Catholic countries, the Catholics left Protestant countries, the poor left every country, those who were, you know, hoping for a better life came. And, you know, if you're if you're sitting wealthy with lots and lots of stuff and a comfortable life style and a comfortable portfolio, you might not see the same impetus, right? You wouldn't have the same inspiration to do something. It's interesting. So, the humanitarian side of this is one of the things that I find more fascinating about the Bitcoin movement. There is something very encouraging about the fact that all the people in my life that came to me with this saying, "Tom, you really have to look at this." were young people. You know, the level of awareness that they have had that and I have a lot of employees that sort of straddle Are they the low low end of Gen Millennials? Are they the upper end of Gen Z? You know, I guess it depends on where you split it, but they're sort of early 20s and you know, they're looking at this as like, "Hey, this is this is the opportunity our generation has been looking for. There's finally a moment where we can really capture some upside. We're young enough that if we sort of invest poorly, it should be fine. That we should be able to make this money back up." They buy into the ethos of only invest where you're prepared to lose. You know, these aren't guys that are doing things on leverage. And so, that is is very hopeful. You know, when you talk about the beginning of the pandemic was this wealth transferred to people that basically owned bonds and assets. And now with, you know, hopefully this sort of prolonged and I think that's an important thing to note is yes, there's volatility to Bitcoin in the short term. I've heard you say, "If you're looking at a number in anything less than a 4-year increment, it's just noise." And that once you extend out to 4 years and beyond, suddenly it actually becomes a a story of, you know, growing. I think it's like 200% year-over-year, um which is, you know, pretty thrilling. Um how far does when you think about this being sort of the apex um property, how much goes into just the the fact that it's taking sunlight and turning it into something that's cryptographically protected, and how much of that stance is that this evens the playing field? You know, I I think of Bitcoin as like that shining city in cyberspace, where billions of people will eventually want to live. Right? Instead of moving from Europe to America, or moving from the old world to the new world, or whatever, or moving from the planet to cyberspace. We can't move to outer space yet. I can't get a billion people off the planet and settle on a better Earth, but I can move a billion people to cyberspace. Bitcoin is property in cyberspace. It's 21 million city blocks in cyber Manhattan. Um the people that move there first, right, get to buy the land cheapest. And then, you know, how many people will eventually want to live there? Well, unlike Manhattan, where there's a limit, there's really no limit. Why wouldn't everybody want to live there? Right? I mean, I don't know that there won't be other cities in cyberspace that that might meet other needs. I mean, I I suppose if the Chinese, you know, made it illegal to own Bitcoin, but there was a Chinese Bitcoin, there might be a Chinese version of Bitcoin in cyberspace, kind of like Alibaba, you know, and Ant, and and WeChat kind of branched off from Facebook and Google and Amazon. So, there might be some other digital dominant monetary networks, or dominant monetary networks, but but, but Bitcoin is the greatest the greatest um monetary network that the human human race has ever developed, and it's certainly the dominant one right now, and it looks like it's going to be continue to be the dominant one for as long as we live. So, um what makes it uh dominant? Well, I mean, clearly the the architecture is uh proof of work, or in other words, throwing up a wall of encrypted energy, right? It's all of uh the crypto hash power that's channeling energy through the hashing function, which creates uh creates the stability and the security. And so, it's based upon the architecture, but um but ultimately, the appeal of it is that it's an open permissionless protocol that everybody on Earth can engage in. Anybody can mine it. Anybody can So, anybody can contribute security to the network. And anybody can run their own node, and anybody can own it, and then any company uh can plug into it. And so, there's nothing that open. There is no Yeah, there is no monetary protocol or asset or currency that is so open as the Bitcoin asset. And so, that's what's driving its value right now. It's It It's an opportunity for people that are that have little that have uh little to lose and much to gain. It's all It's an opportunity for everybody, though. I mean, the way I think of it is it's a moral imperative, a technical imperative, and an economic imperative. Morally, it's an imperative cuz it's it's the best hope for 8 billion people to secure their property rights. If I give you a $50 Android phone, you can carry around in the Android wallet your property, and no bank or no hostile regime can seize it. And we've never And that's the best property right you're ever going to get. I think it's a technical imperative for the same reason. You got 8 billion mobile phones that will all have property. And so, what's more important? Storing your photos and your videos on your mobile phone or storing all your money? All your life force on your mobile phone. I mean, you worried about losing the photos you took on your iPhone or you worried about losing your life savings? Clearly, it's more valuable. So, so it's a it's a technology imperative for an Apple and Amazon and Google and Facebook and companies like Square and PayPal and Binance and Coinbase are already extraordinarily successful by embracing it. You can see that right now. And finally, it's an economic imperative because there's 500 trillion dollars worth of uh fiat derivatives, cash, and bonds, and stocks, and real estate that's valued based upon cash flows, and all of those things are being devalued at 1% a month. Something. So, we can go back and forth over what's the rate of currency expansion, but you know, it's it's not that hard to see that this is a 25 to 50 trillion-dollar a year problem for anybody with assets on Earth. Mhm. It's very rare that you find a a technology that's a solution to every rich person's problem and every poor person's problem simultaneously. What do you say to people that that say um the pushback I've seen on Bitcoin is, "Hey guys, sorry. I get why you're excited about it, but it's the Netscape of crypto." And uh you know, just as a a technological layer, it was early, cool, yay, thanks for sort of proving the model, but this is never going to last. People will build something way better. Yeah, well, Netscape didn't make it to a trillion dollars in market value in 10 years. Right? Uh if we if we if we calculate the amount of monetary energy on the network, Bitcoin would be more successful than Google, Facebook, Amazon, Apple, or Microsoft. In fact, it would be more and it's, you know, much more successful than than Netscape or AOL or anything from that genre. Those things never got to 1/100, right? I think Netscape, you know, at its peak, you know, was maybe 1/20th, 1/30th, 1/40th of what we're seeing in front of us right now. And uh the the difference really is there is no other uh there is no technology and architecture that's uh that's appropriate to replace it. The solution to the issue of long-duration asset or long-duration safe-haven store of value is is a very secure crypto asset network. And so, Bitcoin is the single most secure network in the world. It's the most secure database in the world. It's the most secure asset in the world. The way that you make it secure is through the extraordinary decentralization combined with uh the way that it uh that it converts energy into a very special specialized SHA-256 hash function. So, in order to attack that network, it would take extraordinary time and effort and energy and resources. It's It's pretty much the most secure thing we've got in cyberspace. And what about people that look at that and go, "Yes, cool. You've built this amazing protective layer, but it comes at the cost of the environment"? The actual cost is um you know, nominally 0.1% of the energy used in the world, but the economic value of the energy is not even 10 basis points. It's like three basis points. So, you're talking about like it's almost if you put it on a sheet of paper, it would be like a a couple of dots, but you can't even see it. The The overall energy generated in the in the economy is like 160,000 terawatt hours, and the wasted energy is 50,000 terawatt hours, and Bitcoin is 120 out of 50,000 wasted energy. So, it it really is insignificant as an energy load on the environment. But, if you dig a bit deeper, you'll find that actually Bitcoin is much cleaner energy than all the rest of the applications, cars, planes, trains, automobiles. It's pretty obvious uh planes use fossil fuels. There's no hope for them not to. Bitcoin doesn't. Bitcoin is actually something that runs on electricity. It doesn't run on fossil fuels. You know, most cars still use fossil fuels, and even electric cars are charged at charging stations that are charged with fossil fuels. So, So, the environmentalist ultimately are going to focus upon the energy grid, and if they want to shut down fossil fuels or change the energy mix away from coal or something, they'll do that. Bitcoin is the highest value application of energy on a wholesale basis that we have in the world. There's nothing Nothing more valuable There's no more valuable use of energy than Bitcoin. The latest generation of SHA-256 miners, they will generate almost 45 cents a kilowatt hour in value, which means you can take them anywhere on Earth to the North Pole. You can put a nuclear reactor on the North Pole and run and run Bitcoin mining from it. You can plug them into wind generators a thousand miles out into a desert. you can plug them into geothermal on an island like Iceland, and you can generate 45 cents kilowatt hour. The typical residential electricity cost is 13 cents a kilowatt hour. Industrial usage in the first world is 11 cents a kilowatt hour. And all that energy has to be co-located with the factories and the people. Right? We don't you know, we don't have an application, an industrial application of energy like Bitcoin that you can put anywhere on Earth. So, what's the result? The result is that Bitcoin is used to recycle stranded energy or wasted energy. If you have um if you have a hydroelectric dam and you have a lot of energy, but you don't have people to use it, well, the dam is generating energy year-round, but the people don't need it, but maybe a few months a year, or maybe they don't need it in the evening, they just need it during the day to run their air conditioners. Like air conditioner is a great example of a cycling energy use. Bitcoin is perfect, a perfect energy uh battery because you can run it at night while the people are asleep and the air conditioning is off. And so, you level out energy consumption on the grid, thereby driving down the cost of energy for everybody on Earth. And for any any plant that would otherwise be decommissioned, you have a use for it if you don't want to decommission it. And of course, as you can imagine, uh the sun shines in the desert where people don't live, and the wind blows in places where people don't live, and volcanoes, you know, and geothermal energy exists where people don't want to live. Those are three sources of energy, they're all sustainable renewable energy, but if you know anything about a power engineering, you know, you can't move electricity more than 500 miles on a grid. Period. It's a hard stop, a hard limit. If you happen to find geothermal energy more than 500 miles from Manhattan, we don't need it. And and newsflash, we've already got too much energy. Right? So, even if you found geothermal energy in the middle of Central Park, we still don't need it. And so, what if I told you, Tom, I've actually got infinite free sustainable energy and it's 1,000 mi away from the city. What are you going to do with it? Well, the I mean the the only obvious thing to do with is Bitcoin mining. So, Bitcoin is migrating to the ends of the earth to the most sustainable energy, which is also the cheapest energy, which is also the greenest energy. And um and it's a solution to the problem of how do we catalyze sustainable energy? How do we get green? It's also a solution to every country's problem. You know, you're you're in the middle of Africa with a waterfall and no industry. What's your best How you going to lift your people out of poverty? Well, you plug it you know, a turbine into your waterfall, you plug Bitcoin mining into the turbine, and now you have cheap uh cheap energy plug that's green that's plugged into a clean hard currency exporter that pays taxes, that elevates you out of poverty, that's environmentally friendly. So, I I think I think it's a good story here. People just don't They don't understand right just how powerful Bitcoin is as a force for for energy sustainability. Yeah, I would agree with that. Like the the attacks upon it from an environmental standpoint are relentless. And to be honest, I just sort of brushed them off based on the facts that you've given, it seemed like wait, people just don't understand the narrative or they don't understand the facts, they've fallen for a narrative. And until Elon Musk, who's sort of the king of clean energy, for the love of God, uh came out and expressed concerns over the environmental impact of Bitcoin. Um how is it possible if everything that you just said is true that somebody so into the world of clean energy could be against it? I think we got a lot of education to do. The The industry hasn't published um transparent statistics about the nature of the energy usage in Bitcoin mining because the Bitcoin miners are very decentralized. And so And so um encouraging transparency and gathering all the data and publishing it, that would be helpful because because there's a good story here. I think that the the the the mining uh the energy usage is not well understood. For example, 3 years ago someone thought that energy was used in transactions. And then they thought since energy is used in transactions, if we scale up the number of transactions, eventually Bitcoin will boil the ocean. And uh that wasn't true either because the Bitcoin network never increases the number of transactions and the and the energy usage is unrelated to transactions. And in fact, the energy usage is decreasing exponentially as as the transaction scale in efficiency exponentially. But the model was flawed and so people picked it up and no one's published a better model. So So we need to And if you only spend an hour thinking about it or spend a few hours, you might not understand the nuances. So I think that the industry needs to do a better job of transparently communicating the current usage of energy and transparently communicating how it's going to change over the next 20 years. Bitcoin energy usage, for example, is exponentially falling. The The latest generation of miners generate 5x as many hashes for the same amount of electricity. So in fact, energy consumption decreases 80% per exahash. Woah. it's massive. And then after the next halving, it gets cut in half again. And the protocol keeps cutting it in half every 4 years. And the technology advances are doubling it every year. Or more, right? And so, if I double every year and I cut in half every 4 years, and the transactions, the transaction efficiency is on or transaction cost is only scaling with the log of the price. I mean, most people can't do the logarithmic math in their head, but if you if you actually and they don't know the ratio between transaction fees and block rewards. But once you figure it out, let me boil it down to the summary. It's 200 basis points of the value on the network today. Falling to 120. Falling to 70. Falling to 40. Falling to 20. Falling to 10. Falling to 7 basis points. Going to 6. To 5. You know, eventually getting to 5 basis points. And that and and as it's falling to 5 basis points of the overall monetary energy in the network. The energy mix is rotating from more fossil fuel to less fossil fuel. And at the same time, the energy intensity is falling because the security on the network is coming proportionally more from the technology of the hash the hashing miners than it is coming from raw power. Mhm. And so, this there's a lot of things going on there. You know, if you're a journalist, you just write clickbait, right? And I and I think that they came across there might be an example of one power plant that was a fossil fuel power plant that was that was used to to run Bitcoin miners and so that became a very colorful story. Well, what about all of the hash rate? Well, it also got pretty colorful when when on Twitter you and Elon Musk were sort of going back and forth and I'm actually really impressed by the way and I don't know if this speaks to your vision into stoicism and having stoic values. But the fact that Elon was razzing you maybe the most generous interpretation on Twitter about sort of your views on Bitcoin and energy and all that. But then like I don't know, three or four days later you introduce him to miners in the US that are really making strides into being green. I'm curious what one, why not if somebody's coming at you like that, why were you so generous? Is it that you see yourself as as a an ambassador to Bitcoin and it didn't make sense to get into a pissing contest or is there something else going on? Well, first of all, I think Elon believes in the power of crypto for human freedom and sovereignty and sound money. I mean he understands the importance of the underlying technology and he also believes in Bitcoin. That's why he bought billions of dollars of it. Right? So, he believes that and so we all we all agree on 99% right? The power of technology to make the world a better place, the power of sound money, the power of responsibility, the importance of freedom and property rights, the importance of decentralization. We all agree on that. And so Elon has concerns that we should be the good guys, which means make sure that we pursue it in a sustainable fashion that's good for the planet and so you know, he he wants to encourage everybody to be on the right side of the energy debate. So uh not a lot of transparency, and I think the industry was uh not as organized as it could be. So, I said to him, "Have you met the miners? They'd love to hear from you, and can we work together?" And he said, "I would love to work together. I love to meet the miners." And so So, when people agree with you on 99% of your agenda, and they have concerns, and and Bitcoin has either real or imagined energy issues, right? They're either real, someone could fire up a coal power plant, and someone and people don't care for that. And then imagined, maybe people are worried that it's going on more than it is going on, or they're worried about the future. So, the mature, responsible thing to do when you have real and imagined problems is to is to bring everybody together in order to talk about your issues and solve your problems, you know, in the most transparent, responsible fashion we can. So, So, he was enthusiastic to meet them, they're enthusiastic to meet him. We shared everything that we're doing, they shared what they're doing, he shared his concerns, we talked about solutions. And uh and I think lots of good will come of it. I think that the miners will will now have a platform to communicate just how sustainable they are and their goals for sustainability. I think we can put together clear clear metrics and models for the future that communicates to the mainstream investors and mainstream media and anybody else that's interested in what's going on, and and I think that ultimately that's it's constructive and a a way for us all go forward together in in a in an environmentally friendly, appropriate fashion that everybody can get behind. I love it. Michael, man, seriously, I can't thank you enough A for coming on the show, but B for being a um an ambassador for this moment where if this really is that sort of once in a thousand year opportunity for people to get into something early that could become, you know, the dominant protocol in in a shift where money becomes technology. And as somebody who is just so hungry for the average person to have that kind of opportunity, for you to take the time to boil this stuff down to first principles, to walk people through this. I know what you have a company to run and yet you have taken, you know, hours to be with me. You've done this countless times to put this information out there. I watched your debate on gold. I mean it's just the the number of things that you're doing to help people understand what this is. And then obviously ultimately it's up to everybody to determine their risk tolerance and you know, what they're willing to do, but dude, I just I'm blown away by your willingness to engage this community and you know, give people a way to think through the problem. So, thank you for that. And where where can people follow you to get more of your insights? The best place to follow me is on Twitter at Michael_Saylor. And then if you're interested in Bitcoin, Bitcoin is hope. So, go to hope.com, h o p e. And I post everything on hope.com. And so thank you Tom for giving me a platform. I do think it's an opportunity to improve the lives of billions of people and but I think it's a complicated new subject and it merits, you know, information like you're conveying on your on your podcast here. Dude, thank you. Guys, trust me when I say that you're going to want to spend as much time with Michael Saylor as possible. I forced all of my family to set up wallets so that I could send them money myself so that they could buy crypto. I wouldn't even send them crypto. I made them go buy it themselves so they could understand how the process works. They could decide what coins they wanted to get, but this really like this I Michael has already said everything that he's going to say. You should definitely trust him over me, but I will just say this really feels different. This really feels special. This feels like a moment. It feels like a movement. That's the right way to say it. It feels like a movement and there is nobody and I mean nobody that I've seen in the space that is a better voice for that movement than Michael. I cannot encourage you enough to go spend, I'm not kidding, 10 hours watching his videos. You will be richly rewarded. You will have somebody walking through first principles about why this stuff makes sense and I get it if this was your first introduction, it's hard to wrap your minds around it. He's very consistent. You're going to hear those things over and over and over and eventually it's all going to make sense and you'll be armed enough to make your own decision, but please research this stuff. I beseech you just because I like to see other people succeed. I beseech you to research even if you walk away saying it doesn't make sense for me. I just don't want people to miss this opportunity out of ignorance. So, thank you guys for rocking this one. I consider this a very special episode. Again, Michael, thank you. Amazing to have you. And guys, speaking of things that are amazing, if you haven't already, be sure to subscribe and until next time, my friends, be legendary. Take care.