WBD269 Audio Transcription

The Bitcoin Bull Bull Bull with Michael Saylor

Interview date: Wednesday 14th October

Note: the following is a transcription of my interview with Michael Saylor. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

In the second part of my interview with Michael Saylor, the CEO of Microstrategy, we discuss his Bitcoin value proposition, his view on maximalism and alts, privacy, decentralisation and the Bitcoin circular economy.

“I think that Bitcoin is the best hope that people have to make the world a better place, by providing this sovereign empowerment.”

— Michael Saylor

Interview Transcription

Peter McCormack: All right, I think I want to dig into some of your ideas now, thoughts around Bitcoin.  Okay, so we talked about a few things the other day before we spoke; before we recorded, sorry.  Talk to me a bit about your Bitcoin value proposition and the size of the opportunity?

Michael Saylor: I think, if I was talking to an investor, I would say Bitcoin is the ideal treasury reserve asset, and it's the ideal treasury reserve asset because for the first time in human history, humans have figured out how to create a digital monetary network which is conservative in nature.  It conserves the energy you put into it; it's a closed system.  There are 21 million coins in the system and I wouldn't bother with the discussion of the hubbings and the block subsidies going down; I just don't think it matters.

There are 21 million coins that are going to be in the system.  The only thing that can happen is it heats up or it cools down.  If people are buying into this system at a price greater than them moving 200-a-week average, it's heating up; and if they're selling, it's cooling down.  So, Bitcoin is a digital gold and it achieves what gold bugs wanted to achieve.  It creates a perfectly scarce asset.  There is no inflation to speak of.  If you took the extra 1.5 million coins that are coming, divided by 100 years, you're like 0.1% inflation a year, if you wanted a comparison to something.

In essence, there's no inflation.  Compared to gold, gold's going to debase 2% to 3% under the best case, which means you're going to lose 88% of your wealth in a gold system.  You're going to lose none of that in a Bitcoin system.  In a fiat system, you're going to lose 99% of your wealth at a 7% debasement rate.

If you're looking at stores of value, if you put your value into big tech, then it's a crowded trade and you're taking all the counterparty risk, the execution risk, the competitive risk, the regulatory risk that all of these large companies hold; and, the likelihood that that's going to last for 100 years is pretty low.  It's a crowded trade, it's a known trade, people are already in it.  It's not an asymmetric risk/reward trade-off; it might go up, it might go down.  There are not a lot of people that think that Apple Computers is going to go up by a factor of 10 from here, or a factor of 100 from here. 

Ten years ago, if you wanted a good investment idea, buying Facebook, Amazon, Apple and Google, when they were unpopular but dominant, was a good idea.  If you're a tech investor, you buy a technical network when they're dominant, and by dominant it means $100 billion, they crushed everybody and they're 90% of the market, but they're unpopular.  When the rest of Wall Street doesn't quite get it, when Warren Buffett hasn't bought it, it's unpopular.

That's your opportunity, because you could have bought Amazon and got 20X your money.  You could have bought Amazon for $300 a share in 2012, 2013, 2014.  It was obvious they were already ten years into beating everybody.  There was no retailer in the world that was going to displace them by then, but they were still massively under-valued.

So, if you're thinking about equity as a store of value, the problem is it's a crowded trade and you're not beating everybody in the market; unless you manage to pick the one, the Zoom company, that's about to go through the roof.  But, you had to have bought Zoom in January or February or last December.  I mean, once 350 million know about them, they're trading at 100 times revenue, or 200 times revenue, and then you've just kind of missed that boat.  That's the problem with equity.

The problem with debt is that with interest rates at zero, the only way debt goes up is interest rates have to go negative and the wheels fall off the wagon in so many ways; it's a challenge.  And that leaves you gold.  The problem with gold is the counterparty risk is 95% likely to strip it all from your hands over a long term; but forgetting about that, the debasement is stripping 88% of it from your hands.  Then, forgetting about that, let's say you're short term, you're only going to hold gold for three, four years, five years, ten years.

The problem with that is, and I've thought about this, Peter; I thought about buying gold and I thought, the real problem with buying 50% gold and 50% Bitcoin is the same exact people that are running toward gold are going to run towards Bitcoin.  When they realise that Bitcoin is 1,000 times better than gold, all the money they chased into a safe haven of gold is going to move and chase into Bitcoin.  So, you're getting screwed two ways.

Intelligent people are going to mine more gold when the price goes up, and you're going to get hurt by that.  And then, intelligent investors are going to flee gold into Bitcoin as the price goes up, and also as they understand and get more educated.  So, do you really want to bet on people staying stupid and ignorant for long periods of time if you're entrusting your life energy?  And the answer is no.

Peter McCormack: No, of course not.

Michael Saylor: And by the way, that's why Warren Buffett didn't buy gold.  The real problem with buying gold is you're betting against human ingenuity.  You're betting that people are just too stupid and lazy to make more gold when the price goes up, and that's always an awful bet.  That's why, if you really believe in gold, you buy the gold miners, because at least the gold miners have the ability to make more gold and there's a competitive dynamic there.

Having said it all, I think Bitcoin is digital gold and it's the hardest, smartest, fastest, strongest treasury asset you're going to get; that's why you should buy it.  It's the ultimate long-duration asset.

Peter McCormack: Okay, so why is it you see Bitcoin as digital gold?

Michael Saylor: I think it's important for people to realise that Bitcoin is a virtual manifestation of gold.  So, what do people want in gold?  They want it to be hard.  And, Bitcoin is harder than gold because you can't more of it.  You can't mine 2% a year; you can mine 0.2% a year, and so it's totally capped and that's what makes it harder.

But, there's another way that it's harder.  Because Bitcoin is a living creature, the miners are changing, the nodes are changing, the software is changing, they are all upgrading over time, and the ecosystem has exchanges on the front-end, or servers on the back and clients on the front-end.  So, as all of that software upgrades, that makes it harder.  It's anti-fragile in that way, because Bitcoin will react to threats and adapt and fight back.

So, when we think about gold, we think, well it's been hard and the same for 1 million years, but Bitcoin is virtual gold and it's not going to be the same for the next 100 years.  It's going to literally get harder, more secure in many ways as the software and the hardware gets better.  That's an anti-fragile component.

I think that one of the key things with all technology networks, and the reason for the success of Apple, Google and Facebook, and Amazon and the like, is when you dematerialise a product or a service into software, you can make it smarter, you can make it faster, you can make it stronger.  The camera on Apple's iPhone is smarter, stronger, faster than the best camera produced before Apple came along, and we all have lots of examples of the way that it's smarter, faster and stronger.  YouTube is faster, smarter, and stronger video than any video network that came along before, and there are lots of examples.  And people get this intuitively when you dematerialise something. 

So, when you dematerialise gold, you don't just make it harder; you make it smarter, faster and stronger.  And the smarter is, I put $1 million of gold in Bitcoin and then I write some software, and the software does a million things, while I'm sleeping, with that asset that I wouldn't have done and couldn't have done.  If the stakes change, it writes an application that lets 10 million people post that they want to borrow against their Bitcoin and they post the price, and then 10,000 post they want a loan against Bitcoin against collateral and they post the price; the market clears and you've created like an eBay cryptobank, and that will run all the time. 

That's never going to happen with gold; you can't do it with gold.  And yet, not only can you do it with Bitcoin, it's going to get better every year forever when you do it with Bitcoin, and that's why it's smarter.  I mean, a bar of gold never crawled out from under your bed to go and earn interest for you while you're sleeping and then crawl back in bed with you; it's just not going to happen. 

If you think about it being faster, when you take the mass out of something, it can move at the speed of light.  In this particular case, you want to move $100 million of gold from New York to Tokyo, it's going to cost you $250,000.  It's a 3,000 pound block of gold.  You'd have to charter a global express, pay $10,000 an hour, put a bunch of guys with guns on the thing.  $250,000.  When you move $100 million of Bitcoin, it's $5.  And I'm always amused, right?  All these guys in the crypto community, they complain about transaction fees, and what they completely miss is the transaction fee to move gold is $250,000, and the transaction fee to move the Bitcoin is $5.  They're thinking about a world where transaction means, buy pizza and buy coffee, and that's thinking small.  What they ought to be doing is thinking about a world where I wanted to move $100 million or $1 billion at a time. 

Once they've thought about that world, they would realise the transaction cost and speed, Bitcoin in essence is infinitely fast and infinitely cheap to move; ridiculously cheap and fast to move.  You're just moving the wrong quantity of it, and that has consequences to the business in a way.  And that's why it's faster.  But, what does that mean?  That means that I could actually move it to Turkey, loan $10 million of it to somebody for four days, and move it back; and, the cost of moving it is $5 this way and that way, and it moves at the speed of light.

It's even faster than -- people say it's 10 minutes or 30 minutes to get the confirmations.  The point is, it's a bearer instrument and I can prove that I have it, and you can prove that you have it, and so the software can operate at 100 milliseconds.  So, we're not talking about ten times faster than gold; we're talking about ten million times faster than gold.

That takes me to strong.  And the strong element is, you're getting a full audit every ten minutes of the entire supply everywhere in the world, transparently.  There's no security and there is no asset on the planet where you have a full audit every ten minutes.  And, you've got a bid on it every second of the day, 24/7/365, in every currency, which means that you could actually mark to market someone's 3,800 Bitcoin every second in every currency in real time.  And that's God's gift to a banker, because what you want is perfectly transparent collateral that you can mark to market.

If I can do those two things, then that means we're really bordering on a world where money never sleeps; where truly, we're going to achieve the cliché of money never sleeps.  And, if you want to see it in full view, all you do is pull up a crypto exchange on a Saturday night or a Sunday morning and just watch the ticker scroll.  Literally, it's the only thing in the world that you've got a bid on, nothing else.  So, you put those three together and you say, "I created a bar of gold, I virtualised it, it moves at the speed of light one million times a second, and I've got computers that think a billion times faster than I think talking to other computers that are thinking a billion times faster than I think". 

And then you try to value that, and is that worth 10% more than a gold bar?  No.  It's worth -- what's the value of Rand McNally when they printed a physical map?  And I wrote about this in The Mobile Wave.  It's like the entire map company was worth $50 million, $100 million.  What's the value of Google Maps?  $50 billion, $100 billion?  You've got a map company worth some millions, and you had an intelligent, smarter, faster, stronger -- and by the way, how smarter, faster, stronger?  Google creates a map that tells you how to drive, how to get there, lets you duck the traffic, shows you the restaurant, tells you it's open and then tells you, don't bother going because everybody hates this restaurant.  That's a smart, fast, strong map.

You create $100 billion businesses on those things when a billion people start to rely on them.  That's the part of digital gold I think investors, people, don't get.  If they got that, there's no way you would say to me, "I guess I'll put 50% in gold".  50% in gold and 50% in Bitcoin is like saying, in the year 2010, "I'm going to put 50% of my money in Canon and Kodak and the other 50% in Apple".  And it's like a laughable thing, it's like, yeah, that was really smart of you!

It reminds me, Peter, of all the Wall Street hedge fund guys back in 2011, 2012, and I used to talk to them, because I wrote this book called, The Mobile Wave, and I was a big bull on Apple.  And they said to me, "Why do you like Apple?" and I said, "Well, Apple is going to dematerialise everything you can hold in your hand, every book, every camera, every recorder, a wallet, a television.  Every device is going to dematerialise on the Apple network and every wealthy person that I know has one of these, which means that 90% of the wealth on the planet is going to be getting everything they can hold off of Apple and they're going to have a trillion-dollar mobile network".

They said, and this is classic; they said, "Well, this is all well and good, but if you invest your money with us, we provide you a service and whenever Apple stock goes up, we'll sell it and diversify it into all the other computer companies so that you don't have too much exposure to Apple, because it's kind of risky to have all your money in one stock".  And I said, "What, you're going to buy all the desktop computer companies that are going to zero when Apple eats them all?" and they said, "We don't see it that way". 

I said, "Well, technology is dematerialising all these products and services; it doesn't make any sense to me".  And they said, "Well, when your technology portfolio gets too high, our service to you is, we're going to sell your tech stocks, like Amazon and Google and Apple and Facebook, and we're going to buy cyclical, non-tech stocks to diversify your portfolio to protect you and hedge you".  And I said, "Isn't it the case that technology's going to eat everybody and there's not going to be any non-technology companies?  Eventually they'll all be gone; every newspaper, every television station is going to be dematerialised and eaten" and they said, "We don't see it that way".

And I would say, as a student of history, especially science, you want an interesting read, go read the history of John D Rockefeller and then read the history of Andrew Carnegie and then read the history of Henry Ford and then read the history of Hershey and then go to the Kraft factories.  And what you'll conclude is, every successful business in modern history was a technology company.  General Electric, electricity was technology; automobiles was technology. 

The idea that investors don't buy technology is a silly notion and once you understand that, you realise that the only issue is, is the technology at the beginning of the S-curve, or is it toward the end of the S-curve?  The beginning of the S-curve is when it works and everybody can see it's going to work, but most of the old-school still doesn't understand it.  The end of the S-curve is when it works and everybody sees it, and all of the old-school understands that they're not going to vanquish it and they all rely on it.  And then, the politicians start to regulate it.

At the point the people decide it's a human right, everyone has a right, it's a utilitarian right.  When they start to put price controls on it, or they start to mandate universal access to it, or regulate it, it's a utility.  And one last point on this: the richest person in the world shouldn't be a Jeff Bezos; it ought to be the person that delivers your electricity to you, because if I really wanted to wreck your life, I would just turn off the power.  There are a lot of things that people rely upon that are more important than Facebook, Google, Amazon, Apple.  I mean, they're important, but electricity is more important.  You would kill a million people in New York City if you turned off electricity.  And then after that, water.

If I turned off the water, we'd all be dead in three days, maybe two days.  Yet, name me a water billionaire, and name me an electrical billionaire?  We had them when everybody disagreed with the need for it, right, and then as soon as everybody agreed we need water and electricity, it's not so good an investment anymore, and that really changes your dynamic here.

So, that's why I think that Bitcoin, as digital gold, is so compelling.  And that's why I think that once people understand it, they're not going to want to buy 1% of it, because they're holding 99% stuff that's getting hammered to death by it, and the question is how hammered.  

Peter McCormack: So, explain to me how people think, you know, wealthy people think, because it's not a world I live in.  So, multimillionaire, people worth hundreds of millions, billions, how do they tend to invest; and especially at a time like now, the world in mid-pandemic, the Fed is printing unlimited amounts of money; how do people tend to invest and what are the hurdles you think some of these big investors are having, or the hurdles that are in their way to adopting Bitcoin?

Michael Saylor: Well, let's just tick through the list of things that keep people from buying Bitcoin.  Number 1: reputation.  The mainstream media characterises it as casino, gambling, money for hackers, money for criminals, scary, using it to evade currency control or something.  So, the narrative of, it's for contrarians and the like, will scare away an insurance company or a big bank.  It's going to scare away those two strong investors.  So, flipping that narrative is important. 

I think the next narrative is, this is unregulated cyber-Vegas.  That doesn't help.  I think all of the unregulated cyber-Vegas, although it appeals to someone who is a libertarian, cyberpunk, genius hacker; they might like that.  But, it's not going to appeal to someone that has lots of money that they've got in T-Bills and Nasdaq stocks.  They're going to think, I don't -- they don't want to go to Vegas and gamble.  They definitely want to be anywhere regulatory off-bounds.

What they want is to put their money in the world's safest vault.  If the narrative was, it's a vault of encrypted energy; it's a crypto-vault; or, it's the world's safest savings and loan, the savings and loan at the end of the universe; as marketed by Douglas Adams, the world's safest, most technically advanced savings and loan, protected by the strongest wall of encrypted energy and it's impossible for anybody to get through it; your money is safe here, safer than Fort Knox, safer than any bank; it can't be destroyed by a bank, it can't be stolen by a criminal, it can't be destroyed by a government, right, that's an appealing narrative.

I think that the crypto industry, it repeats and tropes that are counterproductive that don't help it.  For example, people always apologise for Bitcoin being volatile, "As you know, it's volatile.  Don't put more than the amount you can lose in it".  Okay, well if you look at it over the past four months, it has been no more volatile than any of the big tech companies.  I mean, when I check it, Apple Computers is more volatile than Bitcoin for the past four months.  Apple Computers is on the Dow; it's the bluest of blue-chip stocks, owned by an octogenarian, Warren Buffett, and it's more volatile than Bitcoin.  And, it's ten times bigger than Bitcoin and it's an establishment stock.  So, why apologise, people in Bitcoin, honestly? 

It used to be volatile.  It's a lot less volatile now.  And in fact, of late, the other day I looked and it was a bad day in the market.  The 30-year treasury was more volatile than Bitcoin.  The ten-year treasury's more volatile than Bitcoin.  Every big tech company was more volatile than Bitcoin.  The Nasdaq was more volatile than Bitcoin.  Silver and gold were more volatile than Bitcoin.  And I scratched my head and I was like, "Why do bitcoiners keep telling everybody they're volatile?"  Why don't they just say, "There's stuff that's volatile.  Our volatility used to be legendary, but it's a lot less volatile now"?

Peter McCormack: Well maybe, you know what, if people like Square keep putting money in, we could go through another one of these crazy bull runs where it does look volatile again?

Michael Saylor: I guess it would be nice if it was volatile to the upside, but when you're apologising for volatility and you're warning people that this might be too volatile for you, you're sending the message that this is a crazy unregulated casino where you could make fortunes or lose fortunes.  That's not what people want.  I think, if you just said, "You can put your Bitcoin in and it's highly unlikely you'll lose it", I think that's enough.

There are a lot of people that would be happy just not to lose their stuff.  So, a lot of people in the crypto community feel the need to reach for yield and they feel the need to apologise for past volatility.  And, if they simply said, "Here's a stable treasury asset.  It should have a positive real yield over time, because we're not printing more of it", then they could stop.

There's another narrative which hurts which is, everybody's number one pushback, if they think about it, is after they get past the, "Is this for criminals and casino gamblers?"; they have to get past that.  Then, the next pushback is, "Well, it's not really scarce because I can copy the code and create my own coin".  The proper answer to that, and by the way, somebody forked it and there'll be another fork and another fork and another fork.  The proper answer to that is, Bitcoin is the winner of the crypto wars and has risen above the thousands of other crypto networks to be the one and only true, winning, dominant crypto.

If you stock the other crypto networks that are designed to be asset networks, a crypto asset network to store your value, Bitcoin's 94% of it and the next one is 50 times smaller, called Bitcoin Cash, and the next one is 60 times smaller.  And then we can't remember the number 4.  And so, you're buying the category killer of the crypto asset network, and it has been attacked a thousand times and they have all failed.  And yes, you could make your own, but you're not going to get the $200 billion worth of fanatic maximalists who will fight to the death to defend this one and so, why would you create one which is identical to this one, which is ten years behind and $200 billion behind?

Bitcoin is the Facebook of monetary networks and you could duplicate Facebook too, but you won't because none of your friends are going to switch over to the "Yoyobook".  And I think everybody understands that once they've used, it's why you're not going to switch from Twitter or YouTube or Facebook or Apple because there's a massive barrier to switching; the network is dominant.  And so, if the crypto people just said, if they segment in the market and said, "Bitcoin is the dominant crypto asset network; done", you might carve a channel and pull tens of trillions of dollars of money into the crypto space.

When I look at crypto, I say it's a $300 billion pond on a beach next to a $300 trillion ocean of asset.

Peter McCormack: Crypto or Bitcoin?

Michael Saylor: Crypto.  I'm going to get to the point that the crypto pond is $300 billion and Bitcoin is $200 billion of it.  And now, the entire crypto community spends a lot of time talking about old coins versus Bitcoin and bickering between those two.  What they ought to be doing is talking about old assets versus Bitcoin and they ought to be saying, Bitcoin's volatility compared to silver or gold is trending down, or Bitcoin's volatility compared to Apple's stock is trending down.

I can actually find metrics of Bitcoin's volatility versus Tron, but it's kind of a joke because the $300 trillion is not choosing between Tron and Bitcoin; the $300 trillion which, by the way, is 99.9% of all the wealth and power in the world, so all the money, all the power is not in the pond.  If you want to make this entire industry successful, even if you're an Ethereum person, if you're Tron, Ethereum, EOS, Chainlink, Tether, it doesn't matter, you know, Ripple, whatever you are, every one of them has a vested interest in carving a channel between the crypto pond and the asset ocean and then getting $10 trillion to flow into that pond, and the gateway to that is going to be Bitcoin.  

The only way someone is going to move money from gold, silver, equity, indexes, bonds, real estate into crypto is first, through Bitcoin.  Once it's in Bitcoin, then you can go at this issue of, can I generate yield on it; can I wrap it; can I do other stuff?  The other part of the crypto market is going to be crypto applications, cryptocurrencies; other types of cryptoassets could thrive.  I can conceptualise them but none of, I think, have a chance of thriving unless Bitcoin emerges to be the digital gold of the 21st century.  So, that's what I think people miss in their narrative. 

And, one last point, they've got a very pernicious number; it's an awful number.  The number is dominance.  They should not be saying, "Bitcoin is 59% dominance", and then listing 25 other cryptos on their exchange pages.  What they should be doing, like any good venture capitalist, or any good executive, is they should segment the market and divide and conquer.  They should say, a cryptocurrency is a stable coin running on a decentralised network that holds a stable value against the euro or the dollar; that's the currency. 

And then, an application is a world computer that will run a complicated smart contract or some application, or exchange, or what have you, and Ethereum is targeted to be that, and Ethereum is 60% of the applications market.  If I was Ethereum, I would rather be 70% of the crypto application market than be 20% of the crypto market, right?  Why would you pick a fight with somebody you can't beat with every disadvantage, when you could be 70% of the market where maybe you have a chance?  And then you would say, crypto assets, that's people that want to be digital gold, and that's Bitcoin.  Now, what happens next? 

What happens next is somebody with $1 billion and they've got their money here and there, they've got half an hour and they say, "What is this thing?" and you say, "Well, there are applications, assets and currencies", and they're like, "Oh, okay, so this is digital gold.  Well, isn't that going to get copied?"  "Well, no, it's 94% of the market and 1,000 things have failed".  They're like, "Okay, that's the Apple Computer of digital gold, right?  I can buy that.  That's the Facebook of digital gold?  I can buy that.  Okay, give me $50 million of that".

And then the next thing you say, "Well, the next thing is crypto applications; what's this?"  "Ethereum".  "What are they doing?"  "Decentralised exchanges that's competing against this and that".  "Well, is that risky?"  "Not risky".  "Well, maybe our venture capital fund will put $10 million into that.  We've got venture capital for that; it's a bit riskier.  What's this next thing?  Currency?  Okay, what's that going to yield me?"  "Well, that's just stable, probably not that much".  "Well, I've got some money market something.  Just park $3 million in that just in case".

Give people simple metaphors and let them put their buckets of money into those things and don't try to co-mingle a casino with a grey market with a savings and loan, because that doesn't help anybody.  And when the guys in Ethereum are ripping down Bitcoin, it just reminds me of a bunch of crabs in a pot.  You're cooking the crabs and one crab tries to crawl out, and the other crabs are just dragging it back in.  You're just like all the crabs.  You guys are in 0.1% of the market.  You ought to cooperate with each other.  0.1%.

Peter McCormack: You think?  So, that says to me you're not …  Are you maximalist, or do you have an interest in other networks; where are you at with that?

Michael Saylor: My view is, the idea of a crypto network is I'm going to form a decentralised set of nodes that use a consensus mechanism, ideally with a very difficult, a very stable, mechanism like proof of work so it's very difficult for someone to hijack it.  I'm sold on proof of work and I'm sold on that idea and then from there, I'm going to provide someone with immortal sovereignty on something.

So, why would I go to the trouble of a proof-of-work network?  Because I wanted it to transcend any company or country, right?  I need to get all the counterparty risk.  So, what's important enough to want to do that?  Well, all my life force.  Money is energy; all the money in the world is all the energy in the world; so all of my life force from now until eternity, that's probably worth protecting.  So, protecting my money; that's a useful application.

Now, are there other applications that you could run on that network?  The idea of a smart contract tied into the Bitcoin network is interesting to me.  I don't think it's proven to be commercially viable, but there are other things that I might want immortal sovereignty for, or long duration.  For example, let's take a trust.  I want to leave money to my children's children's children.  Well, people use human constructs that are trusts right now.  It's a foundation of people and I am trusting the people. 

If I could create some application that would run for 30 or 40 or 50 years that would give my granddaughter an amount of money to get through college or get a house or something, then maybe I would actually do that on a crypto network.  Maybe I would jack it in.  I would probably power it up with Bitcoin, but I wouldn't say to a Bitcoin core developer, "Can you please add a bunch of complicated code to deliver flowers to my granddaughter on her 21st birthday?"  I just don't think it's worth the trouble.  I wouldn't risk the core network for complications; they break.

But, I think that maybe you want to publish your Last Will and Testament in an immutable fashion that will last for 100 years so no one can mess with it.  Is there a place to publish something forever; or, how about to transfer title or Ts or rights or licence or to prove provenance?  All these things might be interesting on a long-duration crypto network.  They're not proven, but they're interesting.

On decentralised networks, the number 1 use of a decentralised exchange is regulatory arbitrage and the number 2 use maybe is innovation, cross-domain innovation.  By that I mean, if I'm being slowed down by the lowest common denominator of 100 jurisdictions I do business in, I can't do this because there's one place out of 100 places that would shut me down.  If that's the case and innovation is crippled, then a decentralised solution might actually allow innovation to accelerate.

So, I could imagine a legal, ethical basis for a decentralised application network.  I can also imagine a lot of non-compliant uses.  If I'm using an application network to evade currency controls, eventually it's going to get shut down in the country where it operates.  So, those are short-duration projects, if all you're doing is getting around a -- like, running an exchange without KYC operating it; eventually you're going to get shut down, right; we see that happen, so it's no good for that.

I think that maximalists have a reasonable argument in saying that nobody's proven that this is going to work for anything other than money, and Bitcoin is the money.  Yeah, now.  But, I think theoretically, it's possible to imagine an application on a decentralised network, other than Bitcoin, that will have value to someone.  I think that people should try those things and we'll see what happens.  And of all of them, I think that the most magical things that will happen will likely be combinations of Bitcoin, as a decentralised monetary power network, powering centralised and digital applications in the future.

For example, if I want to give flowers to my daughter every year for 50 years after I'm dead, I kind of want to plug Amazon into Bitcoin, right?  And then maybe, 35 years from now, when Amazon stops delivering flowers, I want one human being to be able to plug in "Flowerzon" into my Bitcoin account and my Bitcoin account will pay for the flowers to get delivered.  I'm not really concerned about the fact that Amazon will stop the flower business, or maybe a country will fail, because I've got the money; I've got the power jacked in on a decentralised network; and will I actually use a decentralised flower delivery app versus a centralised flower delivery app?  I kind of think that it will just not be important enough to develop a crypto to deliver flowers.  But, I won't say that there's nothing that I could imagine that would be important enough to develop a purposeful crypto network for. 

And then, we get into this area of hybrid networks, where maybe they develop it, but they're jacking into Bitcoin security and Bitcoin rights or keys in order to provide the security to run the other thing.  That's interesting to me.

Peter McCormack: But, you're not going to use it for the flower thing really, because that's turning Bitcoin then into like a small, low-ticket purchase medium of exchange, which you're kind of against really?  You don't think that's a real use case for Bitcoin?

Michael Saylor: Well, what I'm going to do is I'm going to leave my Bitcoin in my Will to my non-profit foundation in order to power the foundation for 100 years to pursue its interests.  For example, one of my interests is make education free for everybody forever.  And I have a website, saylor.org, and it does that; it gives away free education.  We have 500,000 students.  And, when I'm dead, I have no heirs and so, my money will flow into that foundation and someone's got to pay the bills.  So, will it actually pay the bills via transactions every hour?  No.  It will probably deposit $X worth of Bitcoin, converted to fiat currency, every quarter or every year and do that forever, or until the money runs out, right?  And maybe the money will never run out. 

I mean, John D Rockefeller did this 100 years ago.  You had a pot of money; you formed the Rockefeller Foundation; you appoint a board of directors of five or ten wise people; when one retires in 20 years, there's another board.  The foundation takes all the money; they invest it in a portfolio of stocks or real estate or other assets; and hopefully, that keeps up with the inflation rate; and then every year, they make grants.  And that's the traditional 20th century way of endowing a foundation to see out your life's work, whatever that might be.

Peter McCormack: Would you therefore say that in some ways, the crypto industry as an industry which has Bitcoin in it is quite misleading to people.  Because, outside of the fact that yes, these other networks use a blockchain and yes, they talk about decentralisation, really they're not very similar at all? Bitcoin is money and they're just applications doing other things.  Is that unfairly confusing to potential investors? 

And the reason I ask is, Stephan Livera, you were on his show, he often says, "Bitcoin, not crypto".  He's very much of the idea that we should separate Bitcoin from the rest of crypto.  Do you feel the same?

Michael Saylor: Yeah, I do.  If I'm Bitcoin, I would say Bitcoin is digital gold based on cryptographic technology and blockchain and a bunch of other things.  I think that's one narrative.  If you're a bitcoiner, you just point out Bitcoin is digital gold and you should buy it because it's better than gold.  And, there's $100 trillion worth of assets that are considering gold.

All the big banks in April were saying that you should put 25% of all your assets in gold.  I had my stockbroker calling me saying, "Move 25% of your assets in gold.  That's the call of 50,000 private wealth advisers".  And I said, "Well, I like Bitcoin", and they said, "Well, we can't sell that to you".

Peter McCormack: That's so funny!

Michael Saylor: So, the conventional way is, Bitcoin is digital gold.  If you're considering putting your portfolio into something that's going to be an inflation hedge and a store of value, this is the most precious virtual metal invented in the history of the world.  The way you communicate that is you show the dominance of Bitcoin and you compare Bitcoin -- and you show the market cap of Bitcoin, and you lay to rest people concerned about the forks of Bitcoin.  And, you point out that there's an army of fanatic maximalists that will defend the Bitcoin network and Bitcoin is not going to go away any more than Facebook or Twitter or Apple or Google are going to go away.  It's on the firmament; it's done.

Then, if they hear about volatility, say, "Here's the chart of volatility of Bitcoin versus silver and gold, Apple stock, Amazon stock, T-Bills alike.  See, it's not that bad?"  And by the way, you don't show them volatility over the last decade and you don't say, "Well, you know, it could go down by a factor of ten, because it did back in 2013".  It's not 2013!  You would say, "This is what it's doing this year.  A lot of people are discovering Bitcoin this year, especially since March.  This is how it compares to all your other assets.  If you want to buy the Facebook of digital gold, here it is", and you stop.

And, if you want to scare them away, then you start talking about every old coin and you start talking about Ethereum and you start shitting all over Bitcoin and talking about how transactions are expensive and it's not scalable.  These are all the things that the rest of the crypto community does, the crypto crabs, right, and they think that the world is 0.1% and that they want to just get Bitcoin's amount of it.  It's a foolish notion, because the world is 1,000 bigger than the crypto pond.

If they were smart, what they would do is say what the Lightning network is doing, "We're going to make Bitcoin better".  Or, if I'm going to build a smart contract anchored into a Bitcoin security model; build your stuff linked into it harmonious with it.  And if you're going to do your -- the ideal thing is you want to actually cap into the world's most secure blockchain network, which clearly is the Bitcoin SHA-256 network; that's probably what you want.  Just the key, for example.  If you just had the keys …

Have you ever seen a lockbox on a house; a big house and there's this little lockbox and the keys are in the lockbox?  You go up and you go tap, tap, tap and you take out the keys and you get in the house.  If the Bitcoin network was just the lockbox and it held the keys to activate 100 other applications; they could be centralised or decentralised, it doesn't matter.  I think the religion of decentralisation, it only makes sense for something that requires immortal sovereignty, and Bitcoin does.  The immortal life is worth it, I get it.  But, for other things, I think people are missing the point.

For example, Bitcoin cash, you don't need a high-speed transaction network to buy a cup of coffee, because no crypto network with a proof of work or a proof of stake, or any decentralisation, is ever going to be competitive with Apple Pay.  It's not going to be competitive with Apple Pay for two reasons.  One reason, because Apple has a monopoly on the damn phone and they own a billion devices and they're going to be able to get between the customer and the wallet one step closer than you.  You will never get that close, and that's a pretty compelling reason.  They can build it into the chip; they can build it into Touch ID; they can build it into Face ID; they can build it into speech.  You're not going to get that close to a consumer transaction.

The second reason is, because it's a billion times more computationally expensive to use a proof-of-work network to do it.  So, it's always going to be a billion times more expensive and it's always going to be one step or two steps removed from Google, Apple, Facebook, Amazon; they own the customer.  So, it makes no sense to do that.

What makes sense is, you store 95% of your wealth, or your power, in the crypto network and you take 4% and you move it into your mobile account and then you use the existing standard digital network, which runs a billion times faster, a billion times better, and you risk 1% of your assets while you use it.  And, the entire universe is quite comfortable risking 1% of their assets to use an Apple iPhone. 

If they weren't, no one would have an iPhone and they would all be living in shacks with rocks in the middle of the wilderness and they would not rely upon modern electricity or modern comforts, and they would never get in a car and trust and auto company to build a car for them.  It's just called civilisation.  People don't have a problem trusting 5% of their wealth, or 1%.  So, a lot of experiments in crypto, they're chasing after digital applications where the problem's been solved by Square or Apple or Amazon.

By the way, Square is a heroic achievement.  The fact that Square can be a payment wallet while they're competing with Google and Apple is amazing, right, because Google owns Android and Apple owns iOS and so, you've got Square which is competing between the two 800 pound gorillas.  Apple has more money than God and Google has more money than God; and one of them has 1.5 billion loyal users, the other has 5 billion loyal losers; and Jack Dorsey is actually making headway against them with Square.  It's hard.  He's got $80 billion, $100 billion in capital.

So, you think the crypto industry is going to out-Square Square and out-Square Android, or out-payment Apple and beat PayPal?  It's a silly notion to pursue.

Peter McCormack: Well, what about, let me throw something in here for you.  That's for convenience, day-to-day convenience.  In a coffee shop, down the pub, in a restaurant, do my shopping, whatever.  I was reluctant to use Apple Pay for a long time and I was like, hold on, this is so much easier than getting out my debit card; just double-click, done.  So, I get the convenience thing.

But, what about those people where convenience isn't the number 1 requirement; they want to buy something illicit, or something our government wouldn't look too kindly upon, or they just want general privacy, and that's not just in places like the UK or the US?  Maybe people living in authoritarian regimes; what about that scenario; we still need to think about those people, right?

Michael Saylor: If you're a refugee fleeing a war zone, then $10,000 in Bitcoin might save your life.  It will be a one-time transaction and you're not going to care whether it takes 22 minutes and whether it costs $5 in transaction fees.  So, if it really is a life-changing transaction across jurisdictions, then it can go in 30 minutes and you can pay $3.  You don't need to change Bitcoin.  And Bitcoin Cash or some other lightning fast thing isn't going to be relevant; it doesn't matter.

On the other hand, if somebody wants privacy and they really feel strongly about it, then there is a place to build some kind of application that ideally, the thing that probably is going to work, is going to be like a Lightning wallet with privacy tapped into Bitcoin, where you move money into a small wallet and all of your transactions on that wallet are private.  You can probably do it with a second chain, or an off-chain solution, which might be centralised or might be decentralised.  Maybe you need a Monero, or you need something like that and if so, the market will determine that.

Let me tell you what I think.  There's a $50 trillion requirement to store your money in a way that you don't lose it all and I think there's a much smaller requirement to store money in a privacy wallet.  I'm not going to judge people on how they spend their money, but what I'm going to say is, if Bitcoin diverted all of their energy to make itself private and became known as a network of complete and utter privacy, it probably is counterproductive to its own interests; because, you don't really want the United States Government to say, Bitcoin is completely private, because now it becomes the perfect tool for money-laundering; now it becomes the enemy; now they're going to shut it down.

Peter McCormack: Right, okay.

Michael Saylor: So, you're better off to actually have other off-chain solutions that solve that problem.  There's no way you're going to get $100 trillion to flow into Bitcoin if its use case is directly against the interest of a government that it's within, right; you don't want to be that good.  I think most politicians and most reasonable people will say, "Oh, you wanted to create a better version of gold, because gold is heavy and ancient and bleeding energy 3% a year; I get it, okay".  I think they're okay with that.  I think that when you go beyond that, you're getting into another regime.

Now I'll make a point which is, there are people that are really passionate about, Bitcoin is the "bank the unbanked".  Okay, well if bank the unbanked means let someone flee their country and save their life with a life-saving transaction, then yeah, good.  But, if bank the unbanked means some dude in the Sudan needs to do 37 Bitcoin transactions a day to buy coffee at a dollar a transaction, it's silly.

Peter McCormack: Good luck, yeah.

Michael Saylor: That's not what that guy needs.  And by the way, the problem with that would be, if you wreck the network, like for example, if we all abandon Bitcoin to go to Bitcoin Cash so that it does transactions a little bit faster for the dude on the bicycle in Sudan who wants to buy a cup of coffee, then what about the dude that wants to actually send $100 million from New York to Tokyo and not lose it; what about that?  You just gave up 50X security.  That guy's not going to sacrifice 50X security because he wants to save $3.  So, they're different ideas.

I think that the reason Apple won and not Android, and the reason everybody else got crushed, was because although Apple didn't have 80% of the market share, Apple had 80% of the wealth share.  If you look at the money in the world and if you lined up 100 wealthy people in a room, 90 of them will have an iPhone or an iPad.  And at the point that you saw that, you knew that Apple's revenues on their application store and their profits were going to be insane.  At one point, I think they said that Apple had 150% of all of the profits in the mobile phone business.

Peter McCormack: Wow.

Michael Saylor: Which means that everybody else was losing money to compete with them.  Why?  Because they had the wealthy customers.  Now, it was important to sell luxury devices.  It's 1,000X as important if you're selling financial services.  For example, the biggest bank in the world is not the bank with a billion customers, because the first 10 million customers have 80% of the money in the world, right?  I could build a bank with 1 million customers that would be 1,000 times as big as a bank with a billion customers, because they don't all -- the value and use of the financial product scales with the amount of the money you're putting into it, not the number of heads.

So, if you're creating a crypto network to move a dollar around, and if all you can imagine is people with $37 that are irritated that they couldn't buy coffee with their crypto, then you're building a bank for people with no money.  This is a snarky observation, but it's amusing.  You're building a bank for people with no money.  There's another bank building a bank for Warren Buffett; and, Warren Buffett, one decision, will put more money in your bank than the bottom 5 billion people on the planet that are happy with the product.  So, you have to be thinking, "What am I trying to build here?" 

And by the way, I get the fact that it's a humanitarian thing, right.  I care about the human empowerment and human rights here, but I think this is an example where the way to help them is to make Bitcoin a successful monetary network, as opposed to making it a trivial transaction network.  So, on the day that Warren Buffett buys $10 billion worth of Bitcoin, every single person in Africa and Asia and every disadvantaged economic refugee everywhere in the world is going to be benefitted.  He will have done more for them than any amount of tinkering with the code to make it quicker and easier to do your transaction.

Peter McCormack: How; how so, though?

Michael Saylor: Well, first of all because, if you own one Bitcoin when he does it, it's going to drive the price of Bitcoin to the sky and you're all of a sudden going to be the economic beneficiary, because the price is going through the roof; and that's a direct benefit.  The second benefit is that, if all of the institutional wealth in the world starts to see Bitcoin as a safe place, as a digital gold and as a treasury asset, they're going to use all of their communication skills and political skills in order to legitimise it and protect it, and you're going to have people protecting the crypto rails and the functionality of it in the corridors of power in London and Paris and New York and DC and Moscow and Beijing, right, because that matters.

What's different, right now wealthy, powerful people use Apple stock as a store of value.

Peter McCormack: I know.

Michael Saylor: That's what going on; and Amazon.  They're basically using big tech.  For a while, they used bonds, but now they're using big tech, and they're tinkering with gold.  But, let's think this through.  Somebody in Africa can't buy $1,000 worth of Apple stock; maybe they can't buy it at all.  If they did buy it, there's no way they can wire it to their sister across borders to get her home safely, you know.  There's no way they can hold it from seizure from a hostile government.

So, if Apple stock, or a big tech, or Nasdaq stocks are a store of value, and all of the wealth and power on earth is supporting them, that's not going to trickle to the other billion people that are in countries where the currency is collapsing; that doesn't help them at all.  People talk about the inability to get dollars, right?  If you're one of the "unbanked", you can't get dollars; you certainly can't get stock; you can't get gold.  If you got gold, someone will club you over the head and take your gold, right?

So, what can you get?  You can get a mobile phone.  And I wrote about this in The Mobile Wave, where Africa leapfrogged the US and everybody just went directly to mobile networks; they never bothered with the land networks.  If I can get a mobile phone running Android or iOS, then I can carry around $10,000 worth of Bitcoin on it, and that would be a fortune for someone in some countries.  That would be enough to start a life.  And it could be $1,000; it could be $100; it doesn't really matter what it is. 

The point is, I have a bank, now I need it to work and I need the political patronage.  I think that the political patronage comes when you have the institutions buying into this as a store of value.  There's nothing you can do to help people more than to defend them in the court of public opinion and the court of political opinion, right; one way or the other?

Peter McCormack: Do you see any situation where, if the companies come in too quickly, that it pushes the price, like a lot of people will miss out on the opportunity?  I know it can also go up and people will say, "Oh, we say that every cycle", but in some ways, I kind of want my friends in before I want the companies in.  I want them to ride the benefit of that massive wave.

Michael Saylor: Well, Peter, that's why I was buying it before I was talking about it!

Peter McCormack: Yeah, I know, man.

Michael Saylor: Any reasonable person would buy it first.  But, I don't know what the price will do.  Who was the president that said, "If you see ten problems driving down the road at you, nine of them will probably drive themselves into a ditch before they get you"?  But, it will never be a problem.  It would be a good problem to have if you were successful.  If you were inconveniently successful, I would prefer that to the other problem, which is not being successful.  But, I don't think that will happen. 

I think that as this evolves, the ecosystem will grow and more opportunity will spread to everyone in the world via mobile networks to the palm of your hand.  And, I think there's zero chance that people buying gold is going to cause mobile phones in Africa to help anybody, because you can't programme it.  And I don't think there's much chance that people buying sovereign debt or equities on regulated stock exchanges, from prime brokerage, is going to spread to the billion people on the planet because, if it was going to, it would have.  Will Robin Hood be out there gallivanting around?  I just don't think it's going to happen.

So, I think that Bitcoin is the best hope that people have to make the world a better place through providing this sort of sovereign empowerment.

Peter McCormack: Okay, what about the people and the companies who are focussed on -- I think I know what you're going to say about this, but on the Bitcoin circular economy, when they're talking about they've got companies who only use Bitcoin as a currency and -- sorry, not only; use Bitcoin as a currency for buying and selling, and they also use Bitcoin as their balance sheet; they try and run entirely Bitcoin businesses?

Michael Saylor: It's a good point.  A lot of people in the community are really enthusiastic about BTCPay and, "We want to sell stuff in Bitcoin and we want to pay our employees in Bitcoin", and the like.  With all due respect, I think it's the wrong model.  A much better model would be, Bitcoin is a cryptoasset and you put it on your treasury, on your balance sheet, and you hold it; and when you need money, you take it out and convert it to fiat.  And, when you have excess fiat, you convert it back into Bitcoin.  I think that's the right model.

And, I think there ought to be something else called a cryptocurrency, and the cryptocurrency is Tether or Dai, a stablecoin, and that ought to be a stablecoin in the sovereign currency in the domain where you do business.  And, I think those two things can thrive, but I don't think Bitcoin can be a currency and I don't think that other cryptos should be an asset.  I'll tell you why; a very simple reason.

Peter McCormack: I think you'll get challenged on this a bit?

Michael Saylor: Hopefully, but let me tell you why I think it just makes sense.  The IRS tax code in the United States, it characterises Bitcoin as an asset.  When you buy it and you hold it for a decade, there's no tax on it, no tax to hold on it.  And by the way, the IRS, the tax code has an extraordinary impact on the valuation of assets.

Peter McCormack: That's a Hodl code; that's like an incentive to Hodl?

Michael Saylor: Well, more than an incentive, it beats you to death if you don't, and I'll get to that.  If you buy $1 million worth of real estate in Florida as an individual, you pay 2% property tax per year forever.  So, that means you're going to pay $20,000 in tax every year and in 50 years, if the real estate's not reappraised, you're going to lose your house.  It's even worse than that, right?  You're going to have to come up with $1 million in cash and $1 million in money to buy the house.  So, the only way to hold real estate in Florida is to have twice as much money as the cost of the real estate; that's the impact.

If I buy Bitcoin, $1 million worth, and I hold it for 50 years in Florida, there is no property tax on Bitcoin in Florida; there is no property tax on it at the US level; I will still have the same Bitcoin and it will be worth 1 Bitcoin times the price at the time.

On the other hand, if a company like mine buys $1 million worth of Bitcoin and then we pay you and I pay you $100,000 a year and the price of Bitcoin doubles, then I actually have to pay you $130,000 a year, because I convert the Bitcoin to cash, pay you $100,000 in cash, and the I owe the IRS $30,000 because I have to realise the capital gain on the Bitcoin.

Peter McCormack: Right, yeah, yeah.

Michael Saylor: And by the way, I can't escape this.  If you say, "Pay me in Bitcoin", I give you $100,000 worth of Bitcoin; I still have to calculate the price in dollars when I transfer it to you and account for it as if I have sold it.  And now, I owe the IRS $30,000.

So, you can see from my point of view, if I were to put $500 million into Bitcoin and then I were to pay $500 million worth of bills with it, and if the price doubled, I would bankrupt myself; I'm bankrupted.  What you're doing is you're accelerating the tax forward 30 years and one of the cardinal rules of an investor in life is, you always want to roll over your investments, tax deferred; you never want to pay the tax.  What do you think would happen to your Bitcoin if the UK government passed a law saying, "You have to pay unrealised capital gains tax on the Bitcoin at the end of the year if the price goes up versus where you bought it from"?

Peter McCormack: Well, there are a number of consequences of that.  I mean, firstly I would leave the country; but secondly, it puts sell pressure as well?

Michael Saylor: Would you say that's a hostile tax code?

Peter McCormack: Of course, yeah.

Michael Saylor: So, what I'm saying is, the existing tax code is hostile to using Bitcoin as currency; it's a hostile tax code.  That's why what you want is a stablecoin.  The definition of a currency is that thing that you can buy and sell with for which the government is not hostile to you.  And so, there's talk about Israel having a law that deems Bitcoin a currency, and that means that you wouldn't get taxed on the capital gain; that you wouldn't recognise the capital gain at a loss when you transferred it.  That's a friendly tax code.

But the point of course is, unless you're a criminal and you don't pay taxes, that's -- if you don't pay taxes, yeah sure, you're a criminal, but they all get busted.  Like Al Capone and the like, they all get busted.  McAfee just got busted for not paying taxes.  They'll get you on not paying taxes long before they'll get you on the other stuff you did.  So, tax is a bright line.  So, if you're not a criminal and you intend to file your tax returns as a law-abiding citizen, then you have to pay taxes. 

Now, what you see is there are two crippling problems with using Bitcoin as a currency to buy anything or sell anything.  The first crippling problem is, I sell 100,000 things a year and the price is different every time I sell it.  I have 100,000 different accounting entries.

Peter McCormack: It's a nightmare.

Michael Saylor: The price of Bitcoin when I sold it.  And then, I pay 100,000 a year and I have to calculate the price of Bitcoin when I paid it.  And then the question is, which Bitcoin did you transfer, or did you sell, when you sold it, because there's a different combination.  So, I have to come up with all of these combinations and it's an accounting nightmare.

Peter McCormack: Well, there's software that does it for you now.  I mean, I still think it's an accounting nightmare even with the software, but at least there's software that does that for you now, you know, recommends which coins, etc.

Michael Saylor: Let me go on with the next point.  It took me a decade to install the software that I run my company on; it takes ten years.  And I'm running that software in Japan, Korea, Australia, everywhere in Europe, Rio.  It's in a different currency.  It's 27 countries; not 27 currencies, but 15 currencies.  Every single place, we're selling in local fiat, we're buying in local fiat, we're paying taxes in local fiat, we're keeping a ledger in local fiat, then we're converting into USD, then we're calculating corporate taxes, then we're sleeping in the treasury.

By the way, we're not a big company.  $500 million is a mid-sized company.  A lot of companies are bigger than us.  It would take us three years to rebuild our accounting system to do what you've described what we want to do in Bitcoin and then, at the end of the three years and 30 people to do it, the reward that I would get is probably about $30 million a year in excess taxes.  And 0.1% of the people in the world have Bitcoin.  So, why in the world would I incur …

By the way, if I generate $50 million in operating income, it's a pretty good year.  Why would I give two-thirds of my operating income in taxes to the Federal Government for the privilege of bragging that I'm doing business in Bitcoin?  By the way, half my finest support will probably quit and the software would break and if I went to my …  By the way, if I went to my provider; do you know how long I've been using the same software to do my accounting, Peter; do you know when I installed it?

Peter McCormack: You're going to tell me 20 years or something, aren't you?

Michael Saylor: 1996.

Peter McCormack: 1996?

Michael Saylor: 24 years ago.

Peter McCormack: Jesus, I was still at school, dude!

Michael Saylor: Okay.  And, you know what would happen if you came in my office and you suggested to me that I rip it out and replace it with something different?

Peter McCormack: Everything would collapse!

Michael Saylor: I mean, that would go nowhere; maybe a polite chuckle.  By the way, the bigger players are people like SAP, and people spend $300 million to install this software and they take three to five years, and then they don't change it for 30 years.  So, the first problem is accounting.  Even if I wanted to, it's rewiring the DNA of these multinationals; not going to happen. 

The second problem is tax.  You would have to be a moron to want to pay hundreds of millions of dollars of tax on the volatility of the asset you're holding, electively, for no reason whatsoever, right?  Why would anybody want to accelerate taxes forward 30 years and pay them today with money they don't have?  What would happen, by the way, is that Bitcoin would become a volatility engine.  If you had to pay tax on Bitcoin based upon the closing price each month and you had to pay it to the UK Government, your Bitcoin would shrink to nothing, because you'd have to keep selling your Bitcoin to pay the taxes.  You can't get the refund, you know.

Peter McCormack: Yeah, you don't get the refund when it goes the other way!

Michael Saylor: So the problem really is, the tax code defines what the asset can be.  You can buy it and hold it for 20 years -- and by the way, the last point is, if you really want to be successful as an investor in the treasury, the plan is to buy something you can hold forever, never sell it, and if you ever need cash, you're going to borrow against it, pledge against collateral.  People pledge their real estate as collateral; people pledge their stock as collateral.

For example, Peter, if you had $10 million worth of Apple stock, do you know what the lending rate for Apple stock is; do you know what you can do with that?

Peter McCormack: I've no idea; tell me.  This is just for short sellers?

Michael Saylor: You can walk into a bank, you can pick up the phone, call your bank and you can borrow $5 million, maybe $8 million against the $10 million Apple stock at Libor plus 50 basis points, which means 0.62% interest right now.  And do you know what the tax treatment is on that; like, what is your tax bill?

Peter McCormack: Tell me.

Michael Saylor: There is no tax bill.  So for example, if you had $1 million worth of stock and if you needed $100,000 to live, if you sell $100,000 worth of stock, then you pay 25%, 30%, 35%, 40% taxes; up to 50% taxes.  So, you would sell $100,000, but have £50,000.  So, you have to sell $175,000 and now you've only got £800,000 worth of stock left.  You do that five years in a row and you have no stock left.

Peter McCormack: You're wiped out.

Michael Saylor: So, you're selling your asset; you have no assets; and by the year 6, you are poor.  So, what do you do?  You have $1 million worth of stock; you borrow $100,000 against the stock; and you pay 1% interest.  So, you have to borrow $101,000 against the stock and there's no tax on it.  You have no income, you have no capital gains.  How long can you do that, Peter?

Peter McCormack: You can do that forever.

Michael Saylor: If the asset goes up 10% a year -- so for example, if I have $1 million worth of the stock and it's going to go up 10% a year and I borrow, let's say I borrow $80,000 a year against it, I can borrow against it forever.  Where does that happen with real estate in New York City?  I own a city block, it goes up by 8% a year, my family never sells it, we gift it to each other, I need some money 82 years after my grandfather bought the real estate; what do I do?  I go to the bank and I, have you ever heard the phrase, "refinance"?

Peter McCormack: Yeah, of course.

Michael Saylor: I refinance the real estate, which means when my grandfather bought it, it was worth $10 million, but today it's worth $187 million and we've got $120 million in debt on it.  So, we change it to $140 million in debt and I take $20 million of debt against an asset.  And, I don't have a capital gain because I didn't sell anything.  And, I have no income because I've got a liability to offset my asset.

Peter McCormack: Hold on, is this what Donald Trump's been doing?

Michael Saylor: This is what every real estate investor has been doing for 100 years, and he is included.  Yeah, that would explain it.  For example, what could be sweeter than this, Peter?  I find a $1 billion building, or $1 billion worth of real estate; I have $100 million; I pledge $100 million in equity; I borrow $900 million; so, I've got $900 million in debt, I have a little bit of equity.  And then the Fed prints some money and all assets inflate by 20%. 

Now, my building is worth $1.2 billion and I have $900 million in debt on it, $100,000 in equity, but I have $200 million in unrealised capital gain.  You wouldn't sell the building, because you'd have to pay tax on the $200 million.  You would refinance the building and you would take another $200 million out of the building.  And then, you pay off the equity.  Maybe I borrowed the equity from somebody else; my cousin.  I pay them off and I've got $100 million free and clear and I hope that someone else prints some more money so the building goes up by 8% next year. 

And if it goes up by 7% a year for four years running, I'll have a $2 billion building and I'll have $900 million in debt against and I'll refinance it again and I'll take out $500 million and I'll pay 0% tax on it and I'll go buy another building.  And, I'll go borrow money against that, so I'll leverage that up and pretty soon, you have lots of things that have debt on them and you never made any money your entire life and you never paid any tax your entire life, and what do you need?  You need two things

You need low interest rate loans; you need bankers, you know, you need good banking relationships, you need to get along with the bankers; and then, you need for the monetary supply to expand so that asset prices expand.  And if you have those three things, you use leverage to acquire assets and then you borrow against your assets. 

And by the way, my point really is, you don't really want to be generating income.  This is what Kaya Saki says, right?  You don't want to generate income and pay tax; you want to own something which appreciates without being taxed with the ideal holding period of forever.  Warren Buffett says it.  You just want to hold it forever.

Peter McCormack: That's Bitcoin.

Michael Saylor: That's my answer to all of the people in the Bitcoin community that are desperately trying to actually get it to be a way to pay employees or sell things.  It's a really difficult, heroic task, but it's too hard.  A much better idea is, if you want the benefits of crypto, buying and selling in a cryptocurrency like Tether or Dai, if you really want cheap, fast transactions, run a stablecoin on a fast network, either centralised or decentralised, and then convert your Bitcoin into stable and then move that back and forth, because there's no tax bill and the accounting is simple.

Peter McCormack: Okay.  I'm just conscious of time.  We've done three hours.  We could have done another three hours.  There is one other thing that I specifically would be interested in your view on in that, you mentioned towards the start you've come to understand essentially the different sects, factions within Bitcoin.  We have the Austrian economics; I kind of mentioned them, the libertarians.  But actually, there's a very strong group of bitcoiners who want to see an end to the Fed, they mainly want to see an end of the government.  They want to defund the government and hopefully Bitcoin can do that.  Where are you with all that side of things?

Michael Saylor: I think I'll live with the government!

Peter McCormack: Okay, you statist!

Michael Saylor: I think that, to the extent that Bitcoin gets affiliated with hostility towards local governments, that's not going to be good for Bitcoin for obvious reasons.  I'm not a complete anarchist; so for example, I do acknowledge that there's a place for government.  So, there are two phrases that pop up: inflation is theft; and, taxation is theft.  I agree with the first; I don't agree with the second.  I agree that inflation is theft, that when you print money, you're stealing energy and purchasing power and wealth from disadvantage people; I agree with that.  I think that taxation is not theft.  I think that taxation can be inconvenient and sometimes it can be oppressive, like too much.

On the other hand, there's a place for highways.  I don't have a problem with the government providing security and clean water and hygiene and schools and public utilities.  And, the libertarians debate back and forth over the role of government and there are arguments that these things can all be accomplished by private entities.  I'm not so sure but I would say clearly, I'm in favour of the camp of less government.  I like Ronald Reagan; I like the guy that said less government is better and let's see what we need to do.  I don't think it's very practical to go to zero government instantly, right?  That creates another set of problems and I don't think that's constructive.

Peter McCormack: No, I agree with that.  The big, red button would just lead to chaos, because people are institutionalised with government.  But, I've brought it up so many times, but I did an interview with Eric Voorhees who, you obviously mentioned his debate with Peter Schiff, and I kind of asked him about that, because I just don't see it working.  He said, "I don't want that right now.  Let's not start at that point.  Let's just start with 1% less government, or 5%.  You know, 5%, a smaller budget.  Let's just try and reduce government", and I've kind of always liked that idea of almost …

I mean, you've got a software company so you'll know about A/B testing, right?  I almost see, we need to wean ourselves off the government and A/B test what works and what doesn't.  What can go first and what do we need?  I know security and border protection and other things that are very important and in the UK, the NHS is seen as very important and the highways are seen as important.

But, what are the stupid bits we could definitely get rid of?  And, if the government was forced to stick to a budget, where would it cut itself first?

Michael Saylor: Yeah, I think the political conversation is ongoing and there are lots of different views on it.  I don't think it's very constructive and I think it's counterproductive to allow that to dominate the narrative of the Bitcoin community.  It would be an example of the perfect being the enemy of the good.  Even if you believed that, even if you had a very strong view on government, I believe that it's counterproductive to the interests of Bitcoin.

A much more constructive thing to do would be to incrementally improve the world.  And I think that, if all you did was keep people losing their money by getting taken advantage of by gold merchants, the world's a better place.  And if we gave people a simple savings and loan that yielded 5% interest where they weren't going to get ripped off, I think you could be proud of that.  I mean, there's how many billion people on the planet don't have any safe place to put their money right now, right?

Peter McCormack: A lot.

Michael Saylor: You don't have to topple every government to make Bitcoin a safe place to put your money.  So, if you gave 7.5 billion people a safe place to put their money, the planet would be a better place.  Then, if you gave them a little bit of individual sovereignty or a little bit of control, it would be even better. 

So I think, make the world a better place is a logical place to start.  There aren't a lot of people that are going to say, "I disagree with you about that making the world a better place thing".  A lot of people can come together on that but, on the other hand, if we get down into prescriptive actions about what the government should or should not do, I think you're going to have huge amounts of information pushed back and bona fide debates.

And of course, it distracts from the matter at hand because, what is more important than anything is that we go from 20 million people that use Bitcoin to a billion people that use Bitcoin; and, we go from a narrative where people are afraid of it, don't trust it, or are worried that there's some negative connotation, to a world where they say, "Oh, Bitcoin, it's just like Facebook for gold; it's Facebook for digital gold, or it's Apple for digital gold". 

And by the way, when Apple and Facebook and Twitter and Google got big enough that they're all trillion dollar companies, politicians started worrying about them a bit, and there's a debate about, you know, Twitter and Facebook and Apple and what they should or shouldn't do.  Why don't we just leave that debate for about another decade about whether it -- people are worried that Google works too well, or that Twitter works too well, or that Apple works too well. 

Why don't we wait until Bitcoin is 100 times bigger than it is and then people are worrying that it works too well, and then we can engage in politics because right now, this is a much simpler discussion?  All you've got to do is say, "We reinvented gold and made it digital gold.  It's 100 times better than gold".  And then you've got 100,000 stockbrokers stampeding millions of people into gold and you can just say, "Hey, we're that, but better".  And then, everything else that everybody wants, whatever their hopes or aspirations are, are 100X more likely to be realised if Bitcoin is successful as a digital gold.

There's no reason to fight these other battles now, whatever they might be.

Peter McCormack: I mean, I don't disagree; other people will, naturally.  I don't disagree.  I certainly think there is a secondary benefit though to more people having the ability to store money in Bitcoin and have it seizure-resistant, censorship-resistant, in that it does reduce the -- you get to a kind of tipping point where it will reduce the effectiveness of the government; they'll maybe have to consider their budgets.

But, that said, we've seen plenty of states fail, currencies fail, and it's not like we've always seen a positive revolution that's come out afterwards.  Venezuela, Zimbabwe and we've not even seen much progress in Lebanon right now, so I'm nervous about the collapse of the state.  I understand the utopian goal; I'm just nervous about it.  Civilisation has progressed over hundreds of years; are we really in that bad a state that we want to tear it all down and start again?  I honestly don't know the answer, but yeah.

Man, we've done a long time; are you feeling all right?

Michael Saylor: Yeah.  I've probably got another 10 to 20 minutes in me, or we could take a break right now.

Peter McCormack: Well, you know what, that's a record-length interview now.  You've hit a good point.  I've got a couple of things I want to close out on, because there are a couple of other rabbit holes we could go down; we could do those another time. 

So, listen, you've made your big bet, you're in, you're in the world of Bitcoin, but there are other people who are still on the sidelines and you've given us some great, articulate and eloquent answers.  But, I really want your elevator pitch now for Bitcoin.  All these people thinking about, should I be in, whether it's company treasuries, whether it's personal wealth; what would you say to them?

Michael Saylor: I would say, our current macroeconomic environment implies that we're going to see 10% to 15% expansion of the monetary supply every year for the next three to five years; assets are going to inflate.  Bitcoin is digital gold; it's going to have the highest real yield because you can't make any more of it.  All the other investments are crowded trades.  Bonds are well understood; stocks are well understood; gold is well understood.  They all have the same upside as downside at this point and there's no way for you to get an edge.

Bitcoin has an asymmetric proposition.  You can get an edge here, because it has a history which has scared some people way, and so it hasn't been embraced by the institutional community.  If you're the first, then you'll have an edge.  It's been traditionally difficult to buy and a lot of people, they can't pick up the phone and buy it.  So, if you go to the trouble to figure out how to acquire it, that will give you an edge.  And, it has all of the technology upside of Apple, Google, Facebook and Amazon from a decade ago, and you saw what they did over the past decade.

Bitcoin is the first successful digital monetary network and so, if you come into it right now, you're coming into it with a $200 billion market cap and it's gotten to this point without the institutional interest that it's currently gleaning.  So, it makes sense to be early to this trend.  As the price goes up, the value of the offering goes up, because the liquidity is the value proposition.

So, this is an example of something where the higher the price goes, the more value therefore it gets, the more people want to have it and the more robust it gets.  That's not true with a stock.  If the price of a stock goes up, it delaminates from its cash flows and it's P/E goes from 20 to 30 to 40 to 50 to 80 to 100.  So, with many things, as the price goes up, the risk gets higher.  But, with Bitcoin, the price goes up, the risk probably gets lower.

And, it's such a simple thing.  It doesn't have all the execution risk and regulatory risk and competitive risk that so many other things have because it is so very simple.  It's just 21 million gold coins in cyberspace.  Buy one and as people adopt the network, the value proposition increases; as technology gets getter, the value proposition increases; as the economy works and people are productive, they'll sweep more cash flows into it, the value proposition increases.  And, as the central bankers print more money, the value proposition will increase.  That's my pitch.

Peter McCormack: Listen to that; amazing.  Well, look, if people want to follow any of your work, there are a couple of things I think you should point them towards.  Point them towards your own personal Twitter; also, you talked about the education resource?  And then, anything else; anything else you want to point people towards.

Michael Saylor: I think three things to get check out.  Check me out on Twitter @michael_saylor and then also, you can go to microstrategy.com and we actually have a bunch of stuff on our own business, and also we have a Bitcoin section, and it's a curated Bitcoin section with videos, articles, books and regulatory filing, so it will be interesting to someone.

And then, if you're a student, free education, or you know anybody that wants a free college degree, go to saylor.org.  We're trying to give it away.  It's not easy to give stuff away, but if you want to promote free education for everybody, just go to saylor.org.  Anybody can get an account, everything is free, it's all creative comments, open-source licence, and the idea is anybody in the world can get a computer science degree and make a living.  So, if you want to check that out, feel free.

Peter McCormack: Amazing.  Well, listen, look, amazing work.  Congratulations on everything you've achieved so far.  You've come through Bitcoin like a steam train this last couple of months, or few weeks, and it's been fascinating to watch.  It's great to get to know you, great to talk to you a couple of times.  I expect, well I hope and then if it's possible, expect we'll do this every maybe six months to a year; we'll have a catch-up, we'll do another one of these, hopefully in person at some point, we'll actually sit down and do this in person and maybe go and grab some food. 

But, anything you ever need from me, you know you can reach out to me.  You've got my number and everything now.  Look, I wish you the best and obviously, hope your investment is super-successful because that will be great for me as well.  So, all the best and take care.

Michael Saylor: Thanks for having me on your show, Peter. I've learned a lot and I always enjoy our conversations.