Note: The Bitcoin2024 conference held in Nashville, Tennessee, USA not long ago received great attention from the crypto community, especially the speeches of Trump and Snowden. However, according to feedback from participants, MicroStrategy CEO Michael Saylor's speech was also very exciting, but it was ignored by the Chinese crypto community. In order to fill in the information gaps in the Chinese crypto community, Golden Finance 0xjs specially compiled Michael Saylo's speech. The following is the full text:
What an awesome gathering of Bitcoin enthusiasts. I am so happy to be in Nashville, a city known for its music and freedom. I am honored to speak after Senator Hagerty.
I decided to use slides today, and those of you who have seen my talks know that some of them have slides and some don't. I've received a lot of good comments about my use of slides, so I thought the best way to improve this talk was to use more slides.
Bitcoin Revolution: Rebuilding the Global Economy with Digital Capital
I want to talk about the Bitcoin revolution, and I also want to talk about rebuilding our global economy with digital capital.
The world we know is based on 20th century ideas and technology. Stock trading runs from 9.30am to 4pm. There is no trading on bank holidays or weekends. Everything is slow and everything is expensive.
If we want to prosper in the 21st century, we need new ideas and new approaches based on new technologies.
You've seen this chart before, $900 trillion in global wealth. It's spread out in physical assets and financial assets, all 20th century ideas and technologies.
There's a little orange dot in the upper left corner, that's the orange asset we call Bitcoin, it's $1 trillion, which seems like a lot if you're starting from zero, but when you put it in the larger context of the world, it's only 0.1%.
Here's another way to look at the same chart. It's not $900 trillion in assets, it's a bunch of assets that are used as utility value and a bunch of long-term capital assets that are a store of value.
When I buy a house, I want to live in it; but when I buy a bond, I just put my money there because I don't know where to put it.
When you start looking at the world as one giant pool of long-term capital, over $450 trillion or more of capital, and you start thinking about how we store that capital, you see the engines of revolution.
The global economy struggles because we rely on imperfect assets and systems to store this capital, and it is undermining our ability to preserve capital.
How can we design a better system?
The Physics of Money
This is Tesla. He once said, "If you want to understand the universe, think in terms of energy, frequency and vibration."
I translate it as "the physics of money."
Energy is currency or capital or wealth. You can use them interchangeably in this speech.
Frequency is about duration or life cycle, how long? A minute, an hour, a year, a century.
Whenever we trade with each other or transfer from one place to another or convert one property into another, we vibrate money.
This is an important equation, useful life equals the value of an asset divided by the cost of maintaining that asset.
If you are looking for ways to maintain a financial asset, then the way to calculate its useful life is to ask how much money do I need to spend each year to keep the asset in good condition. How much do I need to spend to avoid the asset depreciating or decaying? This useful life is very close to what we know in the Bitcoin community as the stock-to-flow ratio, which is very similar in terms of years.
Many individuals and most companies use financial assets to preserve capital. This is the source of our challenge.
Financial assets
Let's talk about financial assets. I want to keep my money for the long term, starting with $1 billion.
Put it in Argentine Peso and within two years the money will be worthless, 98% inflation will rob you of your economic energy or capital, it is not a good long term asset.
Turkish Lira, your capital will last three years.
The dollar might last 14 years under the traditional monetary inflation of the past century, but it's not like you have 14 years and the life force gets sucked out of those years linearly.
Putting money in a hedge fund with a 2% annual management fee and then a 20% increase is about a 4% annual cost. If you invest in ordinary assets, that means it's a 25-year asset.
Treasuries, you'll get a yield, but a 3.5% after-tax yield vs. 7% monetary inflation, and your money might last 30 years.
Investing in a mutual fund, you'll pay 1% in fees, which is the best you can get. If you buy a diversified portfolio for 10 basis points, the counterparty risk will cost you 1%.
These are your financial assets, and we run the world on 20th century ideas and technology, and financial assets, on average, last 30 years.
We all know that inflation dilutes the value of financial assets, but inflation is just the tip of the iceberg.
You are also diluted by tariffs, tolls, lawsuits, and transfer taxes, we have all kinds of taxes: income taxes, capital gains taxes, every time you vibrate and move money, you are destroyed by taxes.
If taxes don't bring you down and lawsuits don't bring you down, you have weather, competition, obsolescence, and political disasters that can dilute the value of your capital.
If you want to preserve economic energy, you have to fight these frictions. Most people realize that this is a frustrating task, a task that cannot be won, so they abandon financial assets and start turning to physical assets to preserve capital.
Physical assets
The Ferrari of physical assets, is not a good way to keep your money long term because after 5 years you will have spent as much on insurance and maintenance as it has depreciated.
A yacht is not much better than a Ferrari, and if you spend 10% a year operating it you will still be hit by depreciation, don't store your money in a yacht.
A house in Miami Beach, if you buy a $10 million house, you better be able to come up with $10 million to maintain the house for 17 years, and then you have no money left.
Silver, 22 years;
warehouse, 40 years;
gold bars, 62 years;
A painting, 72 years;
Land, the average property tax in the US is 1.1%, which means your money will last you 91 years, unless the government reassesses the value of your property, then it will be less than 91 years.
The oldest family owned farm in the US is King Ranch, they have lasted 173 years. Every other family owned farm in the US has failed.
The longest held property was the Crown Estate in England for 958 years. You could say the English Crown has held it since 1066, but on the other hand it passed from the Plantagenets to the Stuarts, through Lancaster and York, and eventually to the House of Hanover. So there were probably seven different families that divided it up, with no one family holding it in its entirety.
So physical assets you might think could last a thousand years, but in reality about 50 to 75 years is the best you can do.
Entropy is diluting the value of your physical assets, it is sucking the capital energy out of them.
There is a reason it is called Earth and not Heaven, because the politicians are so creative, they have city taxes, county taxes, state taxes, federal taxes, transfer taxes, property use taxes, and if those don't knock you out, there is rent control, price controls, or culture shock.
Then there's competition, you can get discriminated against, there's recession, currency collapse, tenants don't pay, someone slips on the front sidewalk and sues you, there's weather, war, crime, and disasters. If energy prices go through the roof, it's hard to stay afloat.
Physical capital is not an easy solution.
Digital Capital: Bitcoin
The three laws of thermodynamics I learned at MIT are: you can't beat it, you can't break it, and you can't quit it.
You can stop here and feel a little frustrated, but we don’t want to lose, so you start thinking, if we find a way out of the game then we can tie, then you can win.
Satoshi Nakamoto found a way and he created Bitcoin.
Bitcoin is digital capital, that's what he created.
Bitcoin is immortal, immutable and immaterial capital.
I use it here in the sense that it has an infinite lifespan, it is immune to the attacks of weather, entropy, and inflation. It is immaterial because it is not in the physical world and is not subject to all those terrible problems of finance and physical assets.
It is the solution to our economic woes, the process of moving from financial and physical assets to digital assets solves the problems we face.
How long will Bitcoin last?
Putting your Bitcoin with an institutional grade custodian and paying 10 basis points in fees means your asset will last a thousand years. The custodian may not last a thousand years, but that doesn't matter because you can move your Bitcoin every year or every decade and you can stay one step ahead. You can't teleport a building, you can't teleport King Ranch, so Bitcoin is an asset you can move.
You can custody your Bitcoin yourself for a cost of one basis point per year, and assuming you buy a good hardware wallet and signing device and spend a day tracking it each year, you now have a ten thousand year asset.
If you give Bitcoin to an AI or a computer program that can maintain those private keys at the cost of electricity, you have a 100,000-year asset. The AI will want Bitcoin. If they have a choice between owning Bitcoin, owning a ranch in Texas, owning a gold bar, or owning an Argentinian peso, it's obvious what they're going to choose.
You can see why they would want Bitcoin.
Digital assets are a unique category when it comes to capital preservation. When you compare them to all other assets used for capital preservation, they are extraordinary.
The lifespan of other assets is 30, 40, or 50 years, while the lifespan of digital assets is 1,000 to 100,000 years.
This is a breakthrough in capital preservation, which makes it a revolution in economics.
The greatest deals in history
If you want to be rich, trade smartly.
It's a very simple principle:
Exchange something temporary for something permanent. Exchange your (soon-to-melt) ice cream for pesos, pesos for dollars, dollars for land, and land for bitcoin.
exchange money for capital;
Replace fragile things with resilient ones;
Replace the local with the global;
Replace physical things with digital things;
exchanging securities for commodities;
Exchange commodities for scarce assets.
Go in this direction and you won't go wrong.
Now let's talk about some of the great deals in history, some of the trillion-dollar deals.
The Dutch understood naval power, they understood ships, they had thousands of them. They bought the best port in the New World (New York) for a few hundred dollars of plastic and textile trinkets.
Now the port is worth $2.5 trillion. It is an investment that has grown at a 6% rate of return for 398 consecutive years, a return of 1.05 billion times.
If you think about it, you ask, why would anyone trade the best American port for a bunch of textiles and plastics and glass? The people who sold Manhattan didn't understand the importance of naval power.
If you don’t understand the reason for owning a certain property, you won’t value it.
Napoleon wanted to travel around the Old World, while Jefferson wanted to expand in the New World. So France sold Louisiana to the United States in 1803 for $15 million.
The $15 million might have been enough to sustain the French army for a few months, and then it was gone. Jefferson got 27% of the United States.
This is a trade with an 800,000x return, now worth $12 trillion or more, and its value will continue to grow.
Jefferson had the foresight to buy Alaska for $7 million two years after the Civil War, as did Seward.
At the time, Rockefeller was starting an oil company. Now there is trillions of dollars worth of oil under the ground in Alaska. This is a huge return on a contract.
Bitcoin Total Value Prediction
What is the value of digital capital?
Assuming global wealth of $450 trillion, multiplying it by 3% inflation costs, that means $1.35 trillion is needed each year to combat all these financial problems.
If you value it like a corporation or a long-term bond and give it a 20 times earnings multiple, it's worth $270 trillion.
So the annual return value of digital capital is between $10 and $15 trillion, and the total value is hundreds of trillions of dollars.
In fact, digital capital has had an annual return of 55% over the past four years, while financial capital (the best capital in the world) is bonds, which has an annual return of -5%.
Imagine capitalizing your company or country with a -5% return instead of +55%, clearly digital capital is working.
Now going back to my "Global Wealth" chart, we can look at it like this, and we can see the little Bitcoin in the upper left corner. What's going on?
Bitcoin Price Prediction
This is my Bitcoin prediction for the price of Bitcoin from 21 to 2045.
What is my prediction? I think the annual return will gradually decline from 55% to 50%, 45%, 40%, 35%, 30%, 25%, 20%, and finally stabilize at about 20%, about twice as fast as the S&P index.
At this rate, by 2045, the price of Bitcoin will reach $13 million per coin in the baseline scenario, at which time Bitcoin will account for 7% of global assets. The bear case forecast may be $3 million, and the bull case forecast may be $49 million.
So what about other assets? I actually think AI and technology is going to revolutionize the tech industry. There weren't trillion dollar companies before, and then we have some trillion dollar companies. You're going to see more of that because there will be companies with 100,000 AIs and no employees, and they're going to do the work that used to take 100,000 employees. You're going to see mega companies develop, like robot transportation, self-driving cars, and a company that can give a billion people their own personal doctor without having a doctor on staff. So obviously equity is going to grow really fast, gold is going to be demonetized, and land is going to be less demonetized.
But the future won’t look that revolutionary in 2045, it will look pretty much the same as it does today. It’s just that Bitcoin becomes visible on the chart. When Bitcoin becomes visible, that will be the baseline scenario.
Your Personal Bitcoin Strategy
Let’s talk about personal Bitcoin strategy.
What should you do?
Use Bitcoin as your primary reserve asset.
Convert your surplus into Bitcoin,
Take advantage of low-interest loans, if the government will lend you money, borrow money to buy Bitcoin,
Find a tax-efficient way to invest in Bitcoin.
What should you not do?
Don't quit your day job.
Don’t lose focus on Bitcoin.
Don't use margin loans and leveraged trading, otherwise you may be liquidated while you sleep on a Saturday night, which is not good. A 30-year government-backed 3% loan is good, but 10 times leverage overnight is not good.
What about a typical person? We modeled a person.
Assume you have a net worth of $750,000, earn $200,000 per year that grows 5% per year, and have a savings rate of 25%, which allows you to invest $50,000 per year.
There are many strategies:
You can be an average person, adopting a diversified portfolio strategy;
You can be a 10% investor and put 10% of your assets into Bitcoin;
You can be a Bitcoin maximalist and put 80% of your assets and income into Bitcoin;
You can be a double maximalist, in which case you actually mortgage your house and borrow an additional $250,000;
The triple maximalist would finance the purchase of Bitcoin with a house, convert all assets into Bitcoin, and then move to a low-tax area to invest an additional $50,000 in Bitcoin, such as Singapore or the UAE.
What was the result? Here is the result:
The average person will have $7 million in 21 years, 10% will have more than double that, a Bitcoin maximalist will have $100 million, a double maximalist will have $150 million, and a triple maximalist will have $214 million.
You can see the power of leverage, the choice is in your hands. You can also see that it takes 15.9 Bitcoins to become a triple maximalist. 6.25 Bitcoins will make you wealthy.
The company’s Bitcoin strategy
Let’s talk about what companies can do:
Convert your capital into Bitcoin,
Convert your cash flow into Bitcoin,
When stock prices are overvalued, issue stocks to buy Bitcoin,
When debt interest rates are low, issue debt to buy Bitcoin.
Don't deplete your capital with taxable dividends.
Don't give away your capital with stock buybacks.
Don't dilute your shareholders through high-risk, high-valuation M&A activity.
Let's take a typical company example with $100 million in cash flow, a $1 billion enterprise value, and a stock price of $100.
What is your strategy? Normal, Bitcoin Maximal, Double Maximal, or Triple Maximal?
The vanilla strategy would get you a $1,200 share price, but a mere 10% allocation would double that, the Bitcoin maximalist strategy would nearly 8x that, the double maximalist strategy would get you to a $177,000 share price, and the triple maximalist strategy would get you to a $28,000 share price.
What type of business do you want to run?
This is a reality check.
This is MicroStrategy, currently implementing the Triple Maximism strategy. August 10, 2024 will mark 48 months since we started on this path.
In corporate management, if you think you can run like Microsoft, Apple, and Google, then congratulations, you can achieve an annual return of 20% to 25%. If you want to emulate Nvidia, you will surpass everyone. But I think that right now in the boards of Microsoft, Apple, Google, and Tesla, they are anxious about emulating Nvidia.
Ironically, it wouldn't be difficult to replicate MicroStrategy's strategy, and I've given you a playbook that would achieve 1,300% growth in four years.
The bottom line: Build a strong capital structure and avoid dilutive financial practices.
Institutional Bitcoin Strategies
If you own a nonprofit organization like a church, charity, endowment, or Harvard University, what should you do?
Amend the Articles of Incorporation to Allow Investment in Bitcoin
Reallocate short-term assets to long-term assets. Don’t invest in (soon-to-melt) ice cream or pesos. Don’t hold financial instruments for 20 years or physical land for 50 years.
Buy millennial assets and use Bitcoin as the cost of capital instead of the S&P index. The S&P index has an annual return of 133%, while Bitcoin has 55%
Using Smart Leverage
Assuming you have a $1 billion portfolio, would you rather be a regular, a Bitcoin maximalist, or a triple maximalist? A double maximalist would put 100% of their money into Bitcoin, while a triple maximalist would use 10% leverage.
What is the end result?
If you use the normal strategy, you will have $4 billion in 21 years.
If you were a triple Bitcoin maximalist, you would have $300 billion. A triple extremist would have 100x that.
The country’s Bitcoin strategy
Now let's discuss the wealth of nations, which is an interesting topic.
What are the “dos and don’ts” of the country’s Bitcoin strategy?
Treasury should be reallocated from gold and bonds (which are short-term assets) to a 10,000-year asset (Bitcoin),
Issue currency to buy Bitcoin,
Issue debt to buy Bitcoin,
Encourage Bitcoin ownership through favorable laws
Protecting personal and corporate self-hosting,
and supports integration with national banking systems.
These are the things that should be done.
What you shouldn’t do is: Don’t adopt policies that are hostile to Bitcoin and its holders. This isn’t complicated.
Debtor country
Now let's say you're a country that's in debt, you're actually in debt, you're running a deficit, I could name a few of these countries, but I won't, I'll just say they owe a lot of money and they're struggling, interest rates are high, and they don't know what to do.
So what is your strategy? Regular strategist, 10% strategist, maximalist strategist, double maximalist strategist, or triple maximalist strategist?
The maximalist strategy is to invest 35% of the finances; the double maximalist strategy is 65%; and the triple maximalist strategy is to invest all of the finances and start issuing debt.
The subtext, for those who can truly understand, is this: the first country to buy Bitcoin by issuing its own currency will win.
It's easy, you print money. You know, two years after the American Civil War, the country is bankrupt, millions of people are dead, the South is broken, the North is angry. This guy named Seward comes up with an idea - buy a lot of frozen tundra from a bunch of Russians who want paper money.
So, even in worse situations, people have done things like this.
You can see that the average strategist is owing $3 trillion and you will get nothing out of it; the maximalist strategist pays off the debt; the double maximalist strategist makes you rich; and the triple maximalist strategist makes you very rich.
Why? Because you are buying an asset that everyone will fight over a hundred years from now. Buying Bitcoin now is like buying Alaska in 1867, when there was no Standard Oil Company, no gasoline, no cars, no diesel locomotives, nothing. We later invented all these things.
Common sense tells us that if I can buy an asset the size of a country for a few dollars, why not grab it?
Rich countries
Now let’s talk about the Bitcoin strategies of the rich countries.
Suppose you have a lot of money, say you are Saudi Arabia or Norway, you make a lot of money and have a net fiscal surplus of $350 billion.
So what is your strategy? Do you want to be a regular strategist, a maximalist strategist, a double maximalist strategist, or a triple maximalist strategist?
Maximalists put 25% of their money into Bitcoin; Triple Maximalists convert 75% of their money into Bitcoin and the remainder into Bitcoin.
What is the result? The triple maximalists will become extremely wealthy, $58 trillion.
Not only that, but it also enhances your national security because you will have $50 trillion or more of digital capital that no one can take away from you. If other countries bomb your country and invade your borders, they can't get their Bitcoin. So it's good for both your financial security and your national security.
But note that if you are Saudi Arabia or Norway and you adopt a triple maximalist strategy, which is very easy to do, you will end up with 4.2 million Bitcoins. This means that at the national level, there are not many triple maximalists, maybe only one or two.
This is an opportunity for radical action. You can have a lot of triple maximalist strategists in households and companies, but not a lot of triple maximalists at the national level.
The United States’ Bitcoin Strategy
Let’s look at the United States. The United States is a special case.
The rules are still the same: buy Bitcoin, sell paper money, get rid of gold, and hold for the long term. The things you shouldn’t do are still: don’t harass Bitcoin holders, don’t move industries overseas, and don’t move capital overseas.
But our base case is as above. $36 trillion in debt, 3.5% interest rates. We think AI and new technologies will drive growth. I'm going to assume that the U.S. will be led by capable executives who will leverage technology, and we'll really leverage AI, create robot cars and robots, build billion-person websites that provide free accounting, legal, and medical advice, and that will make our revenues grow faster than our expenses, and we'll eventually get to a point where interest rates are lower.
So, what is the Bitcoin strategy for the United States? We can be a regular strategist; we can be a 10% strategist, buying 500,000 Bitcoins; we can be a maximalist, buying 1 million Bitcoins; a double maximalist strategist, buying 2 million Bitcoins; a triple maximalist strategist, buying 4 million Bitcoins. Then start converting the country's surplus into Bitcoin.
What is the upshot? If you are an average strategist, even if you have huge productivity gains and superior technology, and robots do all the work for us, you will still be in debt, you just won’t be any worse off.
If you are a maximalist strategist, you will pay off half of the debt. If you are a doubly maximalist strategist, you will have a surplus. If you are a triple maximalist strategist, not only will the country not owe $30 trillion, it will have $30 trillion.
Bitcoin is not the solution to all our problems, but it is a solution to half of them. Importantly, the other half is very complex and requires the energy and effort of many people, while this half is simple. It is a very simple solution to half of our problems.
Bitcoin is the Manhattan of the Internet
So, Bitcoin is the Manhattan of the Internet. Trillions of dollars of capital will flow here. We will demonetize the Russian frozen earth, Chinese real estate, everything in Africa, and all those dilapidated buildings that no one needs but bought.
You buy a Bitcoin building, a street, or an entire neighborhood. There are only 276 cubed coins, as you can see in the picture above.
It is necessary to buy some Bitcoin
Finally, I would like to quote a sentence.
Satoshi launched the Bitcoin network on January 3, 2009, and on January 17, 2009, Satoshi said, “It might be worth buying some in case it becomes popular. If enough people think so, it will become a self-fulfilling prophecy.” That was 16 months before Pizza Day, when Bitcoin was worth nothing and would not be worth much in the next year. Wiser words have never been spoken.
You see Bitcoin is now worth $1 trillion, which proves Satoshi’s foresight. But there is still a thousand times growth in the future. You have more information at hand, and the future is bound to happen (the writing is on the wall).
Bitcoin is the future of capital and the future of currency.
It might be worth buying some Bitcoin now that it's become popular.
