Compiled & edited by TechFlow
Guest: Michael Saylor, Founder of MicroStrategy
Host: Bonnie
Podcast Source: Bonnie Blockchain Bonnie Blockchain
Original title: Bitcoin Jesus Michael: This generation’s opportunity to turn around! You just have to do this!
Air Date: November 16, 2024
Background Information
Michael, known as "Bitcoin Jesus", and the US listed company MicroStrategy he founded are considered one of the most visionary Bitcoin securities issuers in the world. With his bold investment strategy and firm belief in Bitcoin, he led the company to transform from a traditional software business to become one of the best performing companies in the US stock market in 2024. Below, we will explore his path to success and his unique insights into the future of enterprises, individuals and Bitcoin.
Childhood reading competition
Michael's Growth
At the beginning of the podcast, Michael shares his childhood experience with reading. His father was in the Air Force, so he lived in different countries, including Japan and New Zealand, as well as multiple states in the United States. He recalled his love for comic books in first grade, even though each comic book cost 25 cents at the time and he couldn't afford it. To motivate him to read, his parents promised him a 10-cent reward for every book he finished.
Inspiration from reading competitions
Michael's teacher held a reading contest, which inspired his competitive spirit. He discovered that he could check out seven books at a time, so he began checking out science fiction books. Over the summer, he read a lot of books to earn money to buy comic books. Eventually, he not only completed the contest, but also developed a real interest in reading, especially science fiction literature, discovering the works of authors such as Robert Heinlein, Arthur C. Clarke, and Isaac Asimov.
The impact of reading
Michael says the experience accelerated his intellectual development and had a profound impact on his later life. Although he no longer reads comic books as much as he once did, his love of reading remains.
Diversify your risk
Microstrategy's investment strategy
Bonnie asks Michael about Microstrategy’s investment strategy, especially its decision to focus on Bitcoin.
Michael confirmed that Microstrategy currently holds 252,220 bitcoins, while his personal bitcoin holdings have increased slightly from the 17,730 announced four years ago. He pointed out that although traditional financial concepts advocate diversified investment, in some cases, concentrated investment may be more sensible.
The logic of concentrated investment
Michael explained his view on diversification. He believed that diversification is suitable for situations where there are multiple options and the risk is high, but if only one of the options is viable, then concentrated investment is a better choice. He used the metaphor of a sinking ship and lifeboats to illustrate this point: if there is only one lifeboat that is safe, it is not wise to spread everyone to different boats. In the case of hyperinflation in the economy, choosing to diversify will only lead to greater risk.
Bitcoin’s uniqueness
Michael further elaborated on why Microstrategy chose Bitcoin as an investment. He pointed out that when the company had $500 million in cash, the interest generated was 0%, while the cost of capital was between 15% and 20%. In this case, holding cash instead caused the company to lose money, so it was necessary to find an investment that could bring higher returns. Bitcoin is considered the only truly scarce commodity in the world that can outperform the S&P 500 index in the long run.
Advantages of Bitcoin investment
He stressed that Bitcoin is not only the only digital commodity, but also has no issuer, which gives it an advantage in regulation. For publicly traded companies, the restriction of holding more than 40% of assets in securities makes Bitcoin an ideal investment option. Microstrategy chose to innovate and try new investment concepts in the face of life and death, thus achieving a turnaround.
I have to convince myself first
The challenge of persuasion
Bonnie asked Michael if it was difficult to convince others to accept Bitcoin because many people still thought Bitcoin was a scam at the time.
Michael shared his process of convincing himself in 2013. He was skeptical about Bitcoin at first and thought it might fail. He mentioned that the value of Bitcoin often lies in whether people need it, and many people will regard it as a strange thing when there is no urgent need.
The evolution from suspicion to trust
Michael described how he gradually changed his perspective. He believes that everyone starts out as a skeptic, and after a few hours of thinking, may realize that Bitcoin is an asset, and then turn into a trader and start trading Bitcoin. After about 100 hours of learning, he began to see Bitcoin as an investment, thinking that it is like a "bank in the network" that can transfer funds without an intermediary.
Bitcoin investment philosophy
After 1,000 hours of intensive research, Michael considers himself an "extreme supporter of Bitcoin". He believes that Bitcoin is not just an investment, but a tool to provide property rights to 8 billion people around the world. Compared with traditional assets, Bitcoin gives everyone the same property rights, no matter where they are. He emphasized that buying Bitcoin means you participate in a global network of participants who are working to improve your wealth.
The ethical significance of Bitcoin
Michael believes that Bitcoin is not only an economic tool, but also a means of economic empowerment that can provide opportunities for every person, every country, and every institution. He emphasized that this is the first time in human history that property rights can be passed in a way that cannot be easily taken away. This concept is profound and important to him.
Keeping flexible options
Reasons to choose Bitcoin
Bonnie expressed her views on Bitcoin, saying that if you want to buy an asset that can be passed down for generations, you should choose an asset that the government cannot issue at will, such as Bitcoin. She mentioned the recent news about a wallet that may belong to the US government being hacked and $20 million was stolen. This triggered her thinking about how to store Bitcoin.
The best way to store Bitcoin
Michael responded that there is no one “best” way to store things, especially given one’s personal time horizon and needs. He noted that the longer the time horizon, the more important it is to keep your options flexible. He gave a few examples:
Short-term investor: If you are 75 years old and have a stockbroker who you can ask to buy Bitcoin for you over the phone, you might choose to buy Bitcoin in the form of an ETF through a company like Fidelity or Blackrock.
Large Corporates: If you are a large, regulated corporation, you may prefer to buy Bitcoin directly rather than an ETF and choose a compliant custodian.
Individuals in Unstable Countries: If you live in a country with a collapsing currency or unstable government, self-custody of your Bitcoin may be a better option. In this case, Michael recommends either transacting through an overseas entity, or self-custody altogether.
Choose storage method according to the situation
Michael emphasized that the key to choosing a storage method lies in the type of entity (individual, family, church, union, city or bank, etc.) and the environment (such as war-torn areas or stable countries). In addition, the time span is also an important factor. For example, if you want to leave Bitcoin to your granddaughter and she may live in another country, it is best to choose a self-custody method that gives her full control.
The Importance of Staying Flexible
Michael concluded that keeping your options open is key. He believes that if you can sum up what you learn in business school in one sentence, it is "keep your options open." Therefore, owning Bitcoin itself and understanding how to self-custody is the best way to maintain flexibility.
MicroStrategy as top-performing U.S. stock
Comparing Bitcoin and MicroStrategy
Bonnie mentioned some impressive numbers: Bitcoin is up 97% in the past year, TSMC is up 116%, Nvidia is up 222%, and MicroStrategy is up 455%. She asked how investors should think about this difference and why MicroStrategy's stock is trading at a premium to its underlying assets.
The multiple values of holding coins
Michael used oil as an example to explain the difference between investing in Bitcoin and investing in Bitcoin-related companies. He said that the value of owning a barrel of oil is clear, but if the oil company also owns a refinery and can produce a variety of petrochemical products, then the value of the company is not just the value of its oil reserves. As a Bitcoin reserve company, MicroStrategy owns $17 billion worth of Bitcoin, which makes it quite valuable in itself.
What Makes MicroStrategy Different
Michael pointed out that MicroStrategy is unique in that it securitizes Bitcoin. MicroStrategy has created a series of securities to attract capital market investors who do not want to hold Bitcoin directly. These investors prefer investment tools with higher performance rather than simple Bitcoin. For example, MicroStrategy's stock provides 1.5 times leverage on Bitcoin, which means that its volatility and return rate are higher than Bitcoin itself.
Highly leveraged investment options
Michael further explained that there are investors with different needs in the market. Some investors want to get a higher leverage Bitcoin investment, such as MicroStrategy's derivatives (such as MSTU and MSTX), which provide 2 times the leverage of MicroStrategy, actually achieving 3 times the Bitcoin investment. In addition, MicroStrategy's options market also shows huge open interest, exceeding $40 billion.
MicroStrategy creates leverage by issuing convertible bonds, which provide investors with a relatively safe investment option. Investors can obtain principal protection when the bond matures, while enjoying potential upside gains when the company's stock rises. Michael mentioned that a recent convertible bond transaction performed very well, rising 45% in just four weeks.
Liquidity and Volatility
Michael emphasized that MicroStrategy's high liquidity and high volatility enable it to borrow funds at low interest rates because lenders want this volatility. If MicroStrategy puts its funds into low-volatility Treasury bonds, it will weaken its ability to create value. He likened this volatility to the temperature of a car engine, arguing that in order to drive fast, the engine must be kept hot.
Volatility and risk are not the same
Definition of Volatility and Risk
Bonnie asks Michael if he gets nervous when the price of Bitcoin drops.
Michael responded that he was not nervous and pointed out the difference between volatility and risk. He explained that volatility is when something goes up or down or changes drastically, while risk is when you expect the value of an asset to drop to zero. Bitcoin is volatile, but this volatility does not mean it is high risk.
Bitcoin Liquidity and Leverage
Michael further elaborated on the liquidity and leverage characteristics of Bitcoin. He mentioned that if you need to sell $1 billion worth of Bitcoin with 10x leverage on Saturday night, you only need to provide $100 million in collateral to complete the transaction. This operation is impossible in other asset markets, such as gold or real estate.
Michael emphasized that the Bitcoin network provides extremely high liquidity and leverage, which makes it attractive even when the market fluctuates.
Limitations of other assets
He pointed out that other assets, such as gold and real estate, lack liquidity and credit when the market is stressed or panicked, which makes them less useful. For example, in times of crisis, people may want to sell assets, but it is not easy to sell large assets in these markets. In contrast, Bitcoin's volatility reflects its practicality and flexibility as a financial tool.
Where there is vibration there is energy
Michael compared Bitcoin's volatility to the heat in a jet engine, emphasizing that this volatility is the energy that drives the performance of the financial system. He said that although jet engines make loud noises and release hot air when running, this is not scary because it is the power necessary to achieve a flight from New York to Tokyo. Similarly, Bitcoin's volatility is a manifestation of its financial energy and a key factor driving its superior performance.
Michael's point is that volatility does not equal risk. Bitcoin's high volatility is actually a reflection of its liquidity and leverage characteristics, which allow investors to trade more flexibly when market conditions change. This characteristic makes Bitcoin uniquely valuable and attractive in the financial market.
Ultimate financial operation
Features of convertible bonds
Bonnie asked about the situation for convertible bondholders: what happens when the bonds mature and MicroStrategy begins to repay the principal?
Michael explained that when convertible bonds mature, holders can choose to convert their bonds into MicroStrategy shares. He mentioned that the conversion price of the first batch of bonds issued by MicroStrategy was about $39, and now the stock price has far exceeded this price, and those who hold these bonds have obtained huge capital gains.
Bond conversion and corporate strategy
Michael pointed out that most of the bonds currently issued have exceeded their conversion prices. He said that it is unlikely that the principal of these bonds will be paid, but it is expected that these bonds will eventually be converted into stocks. He listed the conversion prices of different bonds and emphasized that as the price of Bitcoin rises, bond conversions will become more common.
Bitcoin’s growth expectations
Michael's long-term prediction for Bitcoin is that it will grow by an average of 29% per year. He mentioned that even in the current market environment, Bitcoin's growth rate has exceeded this expectation. He explained that if the asset grows by 21% per year, it will double in about three years. Therefore, the duration of the debt is about five years, which allows MicroStrategy to realize capital appreciation when the debt matures.
Leverage and Investment Strategies
Michael emphasized that MicroStrategy's goal is to maintain moderate leverage in order to remain competitive in the market. He believes that if the company has no leverage, it may face volatility similar to Bitcoin, and the company's investors are all supporters of Bitcoin. He compared the company to a real estate company, pointing out that the strategy of using low-interest borrowing for investment is more attractive than a strategy with no leverage at all.
Goal of increasing Bitcoin holdings
Bonnie concluded that MicroStrategy’s ultimate goal is to increase the number of Bitcoins per share.
Michael confirmed this, stating that the company is focused on acquiring more Bitcoin in creative and value-added ways. He introduced the concept of “BTC yield,” a measure of the growth of Bitcoin per share.
Calculation of Bitcoin Rate of Return
Michael explained how to calculate the Bitcoin yield, which is to divide the number of Bitcoins held by the number of fully diluted shares to get the growth rate of Bitcoin per share. He pointed out that if the company increases the number of Bitcoins in a certain year and the Bitcoin yield is positive, then shareholders will not be diluted but will benefit.
How much money will you have in 10 years?
Long-term outlook for Bitcoin
Bonnie asks Michael about the future price and growth potential of Bitcoin.
Michael said that his basic expectation is that Bitcoin will continue to grow as digital capital and become a tool for long-term global value storage. Currently, Bitcoin accounts for only 0.1% of global assets, about 1.4 trillion US dollars, while the total global assets are about 900 trillion US dollars. He believes that the addressable market for global long-term capital is about 450 trillion US dollars, so the potential market for Bitcoin is still large.
Bitcoin price target
Michael expects Bitcoin to gradually grow to 7% of global assets, which means the price of each Bitcoin will reach $13 million. This goal is expected to be achieved in 2045. He pointed out that Bitcoin's average annual growth rate in the past four years has been about 50%, but as the market expands and adoption increases, this growth rate will gradually slow down. He mentioned that the US dollar money supply has grown by about 7% per year in the past 100 years, so he believes that Bitcoin's growth will also maintain a similar trend in the next 20 to 30 years.
Comparison of Bitcoin to other assets
Michael further analyzed the comparison between Bitcoin and other asset classes. He believes that Bitcoin will surpass gold, real estate and certain stock indexes to become the main choice for the rich to store wealth. He predicts that the growth rate of Bitcoin will gradually approach the return rate of the S&P 500 index (about 10-12%), and as more and more companies begin to buy Bitcoin, the boundary between traditional capital and digital capital will become further blurred.
Volatility and investment opportunities
Michael mentioned that Bitcoin's volatility (about 55) is still high compared to the volatility of traditional markets (about 15-16). He believes that Bitcoin's trading volume and global tradability give it higher return potential. He also mentioned that customized financial forecasts can be made by downloading the "Bitcoin 24 Model" to simulate different macroeconomic factors and technical factors.
Advice for young investors
Michael's advice to young investors is that each Bitcoin purchased today could be worth $13 million in 21 years. If a person could acquire 5 Bitcoins, they would have $65 million in the next 21 years. Although future purchasing power may be affected by inflation, Bitcoin is still seen as an investment option that is superior to other assets.
Does Bitcoin make the rich richer? Or empower the poor?
Empowering Everyone
Bonnie asks Michael whether the impact of Bitcoin is to make the rich richer or to empower the poor.
Michael said that Bitcoin will give greater power to 8 billion people around the world, especially the working class, which is unmatched by any other financial asset. He emphasized that the uniqueness of Bitcoin is that anyone can participate in the investment of this asset at a low cost through a smartphone and obtain the same property rights as billionaires.
Bitcoin’s Equality
Michael pointed out that with Bitcoin, ordinary people have better property rights than even the richest people in the world (such as Jeff Bezos, Elon Musk or Bill Gates). Bitcoin's liquidity and tradability allow everyone to buy and sell at any time without being restricted by the traditional financial system.
The Rich and the Digital Economy
For the rich who refuse to accept Bitcoin and the crypto economy, Michael believes that they will face the risk of shrinking wealth. They may continue to rely on traditional investment returns (usually between 7% and 12%), while the rich who are willing to embrace the digital economy will become richer and help the working class and the poor share this opportunity for wealth growth.
Bitcoin’s impact on capital markets
Michael believes that Bitcoin will drive the digital transformation of the capital market. Any securities related to Bitcoin will bring better returns and performance to investors. He mentioned that indirectly, Bitcoin will also benefit pension funds, retirees, and people who hold Bitcoin-related assets. Currently, about 250 million people hold assets directly or indirectly related to Bitcoin, and this number is expected to expand to 1 billion people.
Want to make a lot of money
Creating Wealth with Bitcoin
When discussing how to make a lot of money, Michael proposed a radical strategy. He suggested that if you want to make a lot of money, you can position your podcast as a Bitcoin podcast and value it at $10 million. Then, you can sell 25% of the shares to venture investors who believe in Bitcoin and the digital future to get funds.
Invest in Bitcoin
Suppose you get $3 million in investment, you can invest all of it in Bitcoin. Michael believes that Bitcoin may double every three years, so if you have $6 million in three years, the valuation of the podcast may also rise to $15 million. Then, you can raise another $5 million and continue to invest in Bitcoin, which may eventually increase the value of assets to $30 million or $40 million in ten years.
Highly leveraged investments
Michael stressed that the key is "active leveraged investing." By investing company cash flow and capital in Bitcoin, a business's profits could potentially double or triple. He explained how wealth can be grown by increasing risk and taking advantage of Bitcoin's high return potential.
Comparison with real estate investment
He compared this strategy to real estate investing, noting that real estate generally takes longer to grow in value, while Bitcoin grows faster. By simply putting all of their capital into Bitcoin, rather than picking a specific property, investors can realize wealth growth faster.
Advice from ordinary people
For ordinary people, Michael recommends investing a portion of the capital that you want to hold for the long term in Bitcoin. He recommends taking the time to learn about Bitcoin and deciding the investment proportion based on your risk tolerance. He believes that smart investors should strive to shift their capital structure to Bitcoin in order to get higher returns.
Embrace volatility
Michael also emphasized that conventional financial wisdom often considers volatility to be risk, but he believes that volatility is actually vitality. By embracing Bitcoin's volatility, companies can attract more capital and achieve faster growth. He used MicroStrategy as an example of how to achieve huge corporate value growth by incorporating Bitcoin into the balance sheet.
Saving Taiwanese companies
Challenges facing Taiwan’s manufacturing industry
Bonnie mentioned that Taiwan’s economic base is made up of many small and medium-sized manufacturing companies, which face challenges in survival as manufacturing moves to other countries.
Michael said that many companies are in the state of "zombie companies". Although they are still profitable, they lack growth momentum and become boring and trapped.
Finding transformation opportunities
Michael suggested that if there was a discussion in the boardroom about how to save a company with $500 million in annual revenue and a growth rate of only 2% per year, he would propose a transformative acquisition. He envisioned finding a $2.5 million company with a 50% annual growth rate and believed that this company would grow 20% to 40% per year for the next 20 years. He believed that such a company would have a monopoly on the market and an unstoppable product.
Bitcoin as a solution
He further proposed that Bitcoin can be viewed as a "global technology company" that can be acquired at 1x revenue. Michael likened Bitcoin to a "universal merger partner" that can help companies go global, increase growth rates and stock attractiveness. He emphasized that the value of Bitcoin lies in its growth potential and accessibility to global markets.
Breaking the traditional thinking
Michael pointed out that many companies are often hesitant when faced with transformation, preferring to slowly die rather than take risks. He used the electricity revolution as a metaphor to encourage companies and individuals to be brave enough to accept new technologies, just like they accepted electricity back then. He believes that digital energy (Bitcoin) can be used to revitalize a company's business and products.
Michael's core message is that Taiwan's manufacturing companies need to rethink their business models, take risks, and embrace new technologies, such as Bitcoin, to achieve growth and transformation. By incorporating Bitcoin into their balance sheets, companies can not only achieve value growth, but also enhance their market competitiveness and avoid being eliminated by the times.
Chance
Revelation of Fire
Michael used the metaphor of fire to illustrate the importance of technology. He mentioned that when humans first discovered fire, not everyone immediately understood its many uses, but over time, people gradually learned how to use fire to improve their lives, such as cooking, clearing the land, making tools, etc. Ultimately, this technological advancement allowed humans to create great achievements such as skyscrapers.
Technology acceptance and learning
Michael emphasized that the progress of civilization depends on the acceptance and learning of new technologies. He encouraged people to face new technologies bravely instead of being afraid, no matter where they are (such as Taiwan, Africa or South America). Especially in the context of globalization, many countries cannot invest in high-tech or real estate like the United States, so it is crucial to find new opportunities.
Bitcoin Opportunities
He pointed out that Bitcoin provides an opportunity for those who cannot directly enter the US market. Bitcoin not only represents a way to enter the best market, but also may allow people to skip the traditional market and get access to better markets. Michael believes that Bitcoin is a universal solution to problems, especially for those who feel insecure and excluded.
Find people with needs
Michael mentioned that many wealthy and powerful people tend to turn a blind eye to their problems because they are too complacent and comfortable. He suggested looking for people who are aware of the problems they face and offering Bitcoin to them as a solution. For people living in economically unstable countries, such as Argentina or Nigeria, Bitcoin could be their way out.
