Compiled and 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 businesses, individuals and Bitcoin.
Childhood Reading Competition
Michael's Growth Experience
At the beginning of the podcast, Michael shared his reading experiences from childhood. His father served in the Air Force, so he lived in different countries, including Japan and New Zealand, as well as several states in the United States. He recalled his love for comic books in the first grade, even though each comic book cost 25 cents, which he couldn't afford. To motivate him to read, his parents promised him a 10-cent reward for each book he finished.
Inspiration from the Reading Competition
Michael's teacher held a reading competition that sparked his competitive spirit. He discovered he could borrow seven books at a time, so he began borrowing science fiction books. Throughout the summer, he read a lot of books to earn money to buy comic books. In the end, he not only completed the competition but also developed a genuine interest in reading, particularly a love for science fiction, and was exposed to works by authors like Robert Heinlein, Arthur Clarke, and Isaac Asimov.
Impact of Reading
Michael stated that this experience accelerated his intellectual development and had a profound impact on his later life. Although he no longer reads comic books as he used to, his love for reading remains.
Diversification of Risks
MicroStrategy's Investment Strategy
· Bonnie asked Michael about MicroStrategy's investment strategy, especially its decision to concentrate its investments in Bitcoin.
· Michael confirmed that MicroStrategy currently holds 252,220 Bitcoins, and his personal Bitcoin holdings have slightly increased from the 17,730 he announced four years ago. He pointed out that although traditional financial ideas advocate for diversified investments, in some cases, concentrated investments may be wiser.
Logic of Concentrated Investment
· Michael explained his views on diversifying risks. He believes that diversification is suitable for situations with multiple high-risk options, but if only one option is viable, then concentrated investment is the better choice. He uses the metaphor of a sinking ship and lifeboats to illustrate this: if only one lifeboat is safe, it is unwise to spread everyone across different boats. In cases of extreme hyperinflation, choosing to diversify investments would only lead to greater risks.
Uniqueness of Bitcoin
· Michael further elaborated on why MicroStrategy chose Bitcoin as an investment. He pointed out that when a company has $500 million in cash, the interest generated is 0%, while the cost of capital is between 15% and 20%. In this case, holding cash leads to losses for the company, so a higher return investment must be sought. Bitcoin is regarded as the only truly scarce commodity in the world that can outperform the S&P 500 index over the long term.
Investment Advantages of Bitcoin
· He emphasized that Bitcoin is not only the only digital commodity but also has no issuer, giving it a regulatory advantage. For publicly traded companies, the restriction of holding more than 40% of assets in securities makes Bitcoin an ideal investment choice. MicroStrategy chose innovation and tried new investment ideas when facing life-and-death situations, achieving a turnaround.
I have to convince myself first
Challenges of the Persuasion Process
· Bonnie asked Michael if it was difficult to persuade others to accept Bitcoin, as there were still many people at the time who believed Bitcoin was a scam.
· Michael shared his process of convincing himself in 2013. Initially, he was skeptical about Bitcoin, believing it might fail. He mentioned that the value of Bitcoin often relies on whether people need it; many view it as a novelty when there is no pressing demand.
Evolution from Skepticism to Trust
· Michael described how he gradually changed his views. He believes everyone starts as a skeptic, and after several hours of thinking, may realize that Bitcoin is an asset, then transition into a trader and start trading Bitcoin. After about 100 hours of learning, he began to view Bitcoin as an investment, considering it like a 'bank in the network', enabling fund transfers without intermediaries.
Investment Philosophy of Bitcoin
· After 1000 hours of in-depth study, Michael considers himself an 'extreme supporter of Bitcoin'. He believes that Bitcoin is not just an investment but a tool providing property rights for 8 billion people worldwide. Compared to traditional assets, Bitcoin grants everyone the same property rights, regardless of their location. He emphasized that buying Bitcoin means participating in a global network where participants are all working to enhance your wealth.
Ethical Implications of Bitcoin
· Michael believes that Bitcoin is not only an economic tool but also a means of economic empowerment, providing opportunities for everyone, every country, and every institution. He emphasized that this is the first time in human history that property rights can be transmitted in a way that is not easily deprived. This idea is profound and important to him.
Flexibility in Choices
Reasons for Choosing Bitcoin
· Bonnie expressed her view on Bitcoin, believing that if one wants to purchase an asset that can be passed down for generations, they should choose an asset that the government cannot arbitrarily inflate, such as Bitcoin. She mentioned recent news about a wallet that possibly belonged to the US government being hacked and $20 million stolen. This led her to think about Bitcoin's storage methods.
Best Ways to Store Bitcoin
· Michael replied that there is no 'best' storage method, especially considering individual time horizons and needs. He pointed out that the longer the time, the more important it is to maintain flexibility in choices. He gave several examples:
· Short-term Investors: If you are 75 years old, have a stockbroker, and can call him to help you buy Bitcoin, you might choose to buy Bitcoin in the form of an ETF through companies like Fidelity or Blackrock.
· Large Enterprises: If it is a large company, regulated enterprises may be more inclined to buy Bitcoin directly rather than an ETF and choose a compliant custodian.
· Individuals in Unstable Countries: If you live in a country with currency collapse or government instability, self-custody of Bitcoin may be a better option. In this case, Michael suggests trading through overseas entities or fully self-custodying.
Choosing Storage Methods Based on 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). Additionally, the time horizon is also an important factor. For example, if you wish to leave Bitcoin to your granddaughter, and she may live in other countries, it’s better to choose a self-custody method that allows her to have full control.
Importance of Staying Flexible
· Michael summarized that maintaining flexibility in choices is key. He believes that if he were to summarize the learnings from business school in one sentence, it would be 'keep your options open.' Therefore, owning Bitcoin itself and understanding how to self-custody is the best way to maintain flexibility.
MicroStrategy as the Best Performing US Stock
Comparison of Bitcoin and MicroStrategy
· Bonnie mentioned some impressive numbers: over the past year, Bitcoin rose by 97%, TSMC rose by 116%, Nvidia rose by 222%, and MicroStrategy rose by 455%. She asked how investors should view this difference and why MicroStrategy’s stock trades at a premium above its underlying assets.
Multiple Values of Holding Coins
· Michael used oil as an example to explain the difference between investing in Bitcoin and investing in companies related to Bitcoin. He stated that the value of owning a barrel of oil is clear, but if an oil company also owns a refinery that produces multiple petrochemical products, then the company's value is not just based on its oil reserves. As a Bitcoin reserve company, MicroStrategy holds $17 billion worth of Bitcoin, giving it substantial value.
What Makes MicroStrategy Unique
· Michael pointed out that MicroStrategy's uniqueness lies in its securitization of Bitcoin. MicroStrategy has created a series of securities that attract capital market investors who do not want to hold Bitcoin directly. These investors prefer to choose higher-performing investment tools rather than simple Bitcoin. For example, MicroStrategy's stock offers 1.5 times leverage on Bitcoin, meaning its volatility and return rate are higher than Bitcoin itself.
High-Leverage Investment Choices
· Michael further explained that there are investors in the market with different demands. Some investors want higher leverage Bitcoin investments, such as MicroStrategy’s derivatives (like MSTU and MSTX), which offer 2 times the leverage of MicroStrategy, effectively achieving 3 times the Bitcoin investment. Additionally, MicroStrategy's options market also shows immense open interest, exceeding $40 billion.
· MicroStrategy creates leverage by issuing convertible bonds, which provide investors with a relatively safe investment option. Investors can receive principal protection at maturity while enjoying potential upside when the company’s stock rises. Michael mentioned that a recent convertible bond deal performed exceptionally well, increasing by 45% in just four weeks.
Liquidity and Volatility
· Michael emphasized that MicroStrategy's high liquidity and volatility allow it to borrow funds at low interest rates because lenders seek this volatility. If MicroStrategy invests in low-volatility government bonds, it would undermine its value-creating ability. He compared this volatility to the temperature of a car engine, suggesting that in order to drive fast, the engine must remain at a high temperature.
Volatility and Risk Are Not the Same
Definitions of Volatility and Risk
· Bonnie asked Michael if he felt nervous when Bitcoin’s price fell.
· Michael replied that he did not feel nervous and pointed out the distinction between volatility and risk. He explained that volatility refers to the fluctuations or drastic changes of things, while risk refers to the expectation that an asset's value will drop to zero. Bitcoin is volatile, but this volatility does not mean it is high-risk.
Liquidity and Leverage of Bitcoin
· Michael further elaborated on Bitcoin's liquidity and leverage characteristics. He mentioned that if you need to sell $1 billion worth of Bitcoin with 10 times leverage on a Saturday night, you only need to provide $100 million in collateral to complete the transaction. In other asset markets, such as gold or real estate, this operation is impossible.
· Michael emphasized that the Bitcoin network provides extremely high liquidity and leverage, making it attractive even during market volatility.
Limitations of Other Assets
He pointed out that other assets (like gold and real estate) lack liquidity and credit during market stress or panic, making them less useful. For example, during a crisis, people may want to sell assets, but selling large assets in these markets is not easy. In contrast, Bitcoin's volatility reflects its practical utility and flexibility as a financial tool.
Where There is Volatility, There is Energy
· Michael compared Bitcoin's volatility to the heat in a jet engine, emphasizing that this volatility is the energy driving the performance of the financial system. He stated that while a jet engine makes a lot of noise and releases hot air when operating, it is not frightening because it is the necessary power to fly from New York to Tokyo. Similarly, Bitcoin's volatility is a manifestation of its financial energy, which is a key factor driving its superior performance.
· Michael’s view is that volatility does not equate to risk. The high volatility of Bitcoin actually reflects its liquidity and leverage characteristics, allowing investors to trade more flexibly when market conditions change. This characteristic gives Bitcoin unique value and appeal in the financial market.
Extreme Financial Operations
Characteristics of Convertible Bonds
· Bonnie asked about the situation for holders of convertible bonds when the bonds mature, and MicroStrategy starts to repay the principal, what will happen?
· Michael explained that when convertible bonds mature, holders can choose to convert their bonds into MicroStrategy’s stock. He mentioned that the conversion price for the first batch of bonds issued by MicroStrategy was around $39, while the current stock price has far exceeded that price, resulting in substantial capital gains for those holding these bonds.
Conversion of Bonds and Corporate Strategy
· Michael pointed out that currently, most issued bonds have exceeded their conversion price. He stated that it is unlikely that the principal of these bonds will be paid, but it is expected that these bonds will ultimately convert into stocks. He listed the conversion prices of different bonds, emphasizing that as Bitcoin's price rises, conversions of bonds will become more common.
Growth Expectations for Bitcoin
· Michael predicts that Bitcoin's long-term forecast is an average annual growth of 29%. He mentioned that even in the current market environment, Bitcoin's growth rate exceeds this expectation. He explained that if an asset grows by 21% annually, it would double in about three years. Therefore, the duration of debt is about five years, allowing MicroStrategy to realize capital appreciation when the debt matures.
Leverage and Investment Strategies
· Michael emphasized that MicroStrategy's goal is to maintain moderate leverage to stay competitive in the market. He believes that if a company has no leverage, it may face volatility similar to Bitcoin, while the company's investors are all supporters of Bitcoin. He compared the company to a real estate company, noting that the strategy of investing with low-interest loans is more attractive than having no leverage at all.
Goals for Increasing Bitcoin Holdings
· Bonnie summarized that MicroStrategy's ultimate goal is to increase the number of Bitcoins per share.
· Michael confirmed this and stated that the company focuses on acquiring more Bitcoins in a creative and value-adding manner. He introduced the concept of 'Bitcoin Yield' (BTC yield), which measures the growth of Bitcoins per share.
Calculation of Bitcoin Yield
· Michael explained the calculation method for Bitcoin yield, which is to divide the number of Bitcoins held by the fully diluted shares, yielding the growth rate per share of Bitcoin. He noted that if the company increases its Bitcoin holdings in a given year and the Bitcoin yield is positive, then shareholders will not be diluted but instead benefit.
How Much Money Will You Have in 10 Years?
Long-Term Expectations for Bitcoin
· Bonnie asked Michael about the future price and growth potential of Bitcoin.
· Michael stated that his fundamental expectation is that Bitcoin will continue to grow as digital capital and become a tool for long-term value storage globally. Currently, Bitcoin accounts for only 0.1% of global assets, approximately $1.4 trillion, while the total value of global assets is about $900 trillion. He believes the addressable market for global long-term capital is about $450 trillion, so the potential market for Bitcoin remains substantial.
Target Price for Bitcoin
· Michael expects Bitcoin to gradually grow to 7% of global assets, which means each Bitcoin's price will reach $13 million. This goal is expected to be achieved by 2045. He noted that the average annual growth rate of Bitcoin over the past four years has been about 50%, but as the market expands and adoption increases, this growth rate will gradually slow. He mentioned that the money supply of the dollar has grown by about 7% annually over the past 100 years, so he believes Bitcoin's growth will also maintain a similar trend over the next 20 to 30 years.
Comparison of Bitcoin with Other Assets
· Michael further analyzed the comparison between Bitcoin and other asset classes. He believes Bitcoin will surpass gold, real estate, and certain stock indices to become the primary choice for the rich to store wealth. He predicts that Bitcoin's growth rate will gradually approach the return rate of the S&P 500 index (around 10-12%), and as more companies begin to buy Bitcoin, the boundaries between traditional capital and digital capital will further blur.
Volatility and Investment Opportunities
· Michael mentioned that the volatility of Bitcoin (around 55) is still higher compared to traditional markets (around 15-16). He believes that the trading volume and global tradability of Bitcoin provide it with greater return potential. He also mentioned the ability to download the 'Bitcoin 24 Model' for customized financial forecasts to simulate based on different macroeconomic and technical factors.
Advice for Young Investors
· Michael's advice to young investors is that every Bitcoin purchased today may be worth $13 million in 21 years. If a person can obtain 5 Bitcoins, then in 21 years they will have $65 million. Although future purchasing power may be affected by inflation, Bitcoin is still seen as a superior investment choice compared to other assets.
Does Bitcoin Make the Rich Richer? Or Empower the Poor?
Empower Everyone
· Bonnie asked Michael whether the impact of Bitcoin is to make the rich richer or empower the poor.
· Michael stated that Bitcoin will empower 8 billion people globally, especially the working class, in a way that no other financial asset can. He emphasized that Bitcoin's uniqueness lies in the fact that anyone can participate in this asset investment at low cost through a smartphone, gaining the same property rights as billionaires.
Equality of Bitcoin
· Michael pointed out that with Bitcoin, ordinary people have property rights that are even better than those of the richest individuals in the world (like Jeff Bezos, Elon Musk, or Bill Gates). The liquidity and tradability of Bitcoin allow everyone to buy and sell at any time, without being constrained by the traditional financial system.
The Rich and the Digital Economy
· For the wealthy who refuse to accept Bitcoin and the crypto economy, Michael believes they will face the risk of wealth shrinkage. They may continue to rely on traditional investment returns (typically between 7% and 12%), while those wealthy individuals willing to embrace the digital economy will become even richer and be able to help the working class and the poor share in this wealth growth opportunity.
Impact of Bitcoin on Capital Markets
· Michael believes Bitcoin will drive the digital transformation of capital markets. Any securities related to Bitcoin will bring better returns and performance for investors. He mentioned that indirectly, Bitcoin will also benefit pension funds, retirees, and those holding assets related to Bitcoin. Currently, about 250 million people hold assets directly or indirectly related to Bitcoin, and this number is expected to expand to 1 billion.
Want to Make a Lot of Money
Creating Wealth with Bitcoin
· When discussing how to make a lot of money, Michael proposed an aggressive strategy. He suggested that if you want to make a lot of money, you could position your podcast as a Bitcoin podcast and value it at $10 million. Then, you could sell 25% of the stake to venture capitalists who believe in Bitcoin and the digital future to raise funds.
Investing in Bitcoin
· Suppose you received a $3 million investment, you could invest all of it in Bitcoin. Michael believes Bitcoin could double every three years, so if you have $6 million in three years, the podcast's valuation may also rise to $15 million. Then, you could refinance $5 million and continue investing in Bitcoin, potentially increasing your assets to $30 million or $40 million in ten years.
High-Leverage Investments
· Michael emphasized that the key lies in 'actively leveraging investments.' By putting the company's cash flow and capital investments into Bitcoin, the company's profits could double or triple. He explained how wealth growth can be achieved by increasing risk and leveraging Bitcoin's high return potential.
Comparison with Real Estate Investment
· He compared this strategy to real estate investment, pointing out that real estate usually takes longer to appreciate, while Bitcoin grows faster. By simply putting all capital into Bitcoin instead of choosing specific real estate, investors can achieve faster wealth growth.
Advice for Ordinary People
· For ordinary people, Michael recommends investing part of the capital they hope to hold long-term in Bitcoin. He suggests taking the time to learn about Bitcoin and deciding the investment proportion based on their risk tolerance. He believes that smart investors should strive to shift their capital structure towards Bitcoin to achieve higher returns.
Embrace Volatility
· Michael also emphasized that traditional financial wisdom often views volatility as risk, but he believes volatility is actually vitality. By embracing Bitcoin's volatility, companies can attract more capital and achieve faster growth. He used MicroStrategy as an example to illustrate how significant corporate value growth can be achieved by incorporating Bitcoin into the balance sheet.
Saving Taiwanese Companies
Challenges for Taiwan's Manufacturing Industry
· Bonnie mentioned that Taiwan's economic foundation consists of numerous small and medium-sized manufacturing companies, which face survival challenges as manufacturing shifts to other countries.
· Michael stated that many companies are in a 'zombie company' state, where they are still profitable but lack growth momentum, becoming dull and trapped.
Seek Transformation Opportunities
· Michael suggested that if a board discusses how to save a company with an annual revenue of $500 million and an annual growth rate of only 2%, he would propose a transformative acquisition. He envisioned finding a company worth $2.5 million with a growth rate of 50% annually and believed this company would grow 20% to 40% annually over the next 20 years. He considers such a company to have a monopoly in the market with unbeatable products.
Bitcoin as a Solution
· He further proposed that Bitcoin could be seen as a 'global technology company' that can be acquired at 1 times its revenue. Michael likened Bitcoin to a 'universal merger partner' that can help companies globalize, enhance growth rates, and improve stock attractiveness. He emphasized that the value of Bitcoin lies in its growth potential and accessibility to global markets.
Breaking Traditional Thinking
· Michael pointed out that many companies often hesitate during transformation, preferring to choose slow death rather than take risks. He used the electric power revolution as a metaphor, encouraging companies and individuals to boldly accept new technologies, just as they did when accepting electricity. He believes that digital energy (Bitcoin) can be used to revitalize companies' businesses and products.
· Michael's core message is that manufacturing companies in Taiwan need to rethink their business models, dare to take risks, and embrace new technologies like Bitcoin to achieve growth and transformation. By incorporating Bitcoin into the balance sheet, businesses can not only achieve value growth but also enhance their market competitiveness, avoiding being eliminated by the times.
Opportunities
Inspiration from Fire
· Michael used fire as a metaphor to illustrate the importance of technology. He mentioned that when humanity first discovered fire, not everyone immediately understood its multiple uses, but over time, people gradually learned how to use fire to improve life, such as cooking, clearing land, and making tools. Ultimately, this technological advancement allowed humanity to create great achievements like skyscrapers.
Acceptance and Learning of Technology
· Michael emphasized that the advancement of civilization relies on the acceptance and learning of new technologies. He encourages people, regardless of where they are (like Taiwan, Africa, or South America), to face new technologies boldly rather than feel fear. Especially in the context of globalization, many countries cannot invest in high-tech or real estate like the US, so seeking new opportunities is crucial.
Opportunities in Bitcoin
· He noted that Bitcoin provides an opportunity for those who cannot directly enter the US market. Bitcoin not only represents a gateway to the best markets but may also allow people to bypass traditional markets and access better markets. Michael believes Bitcoin is a universal solution to problems, especially for those who feel insecure and excluded.
Finding Demand-Driven People
· Michael mentioned that many wealthy and powerful people often ignore their problems because they are too complacent and comfortable. He suggests looking for those who are aware of their issues and offering Bitcoin as a solution. For people living in economically unstable countries like Argentina or Nigeria, Bitcoin may be their way out.
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