Arrangement and compilation: TechFlow 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 to be 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 and became one of the best-performing companies in the US stock market in 2024. Below, we explore his path to success and his unique insights into businesses, individuals, and the future of Bitcoin.
childhood reading competition
Michael's upbringing
At the beginning of the podcast, Michael shares his childhood reading experiences. His father was in the Air Force, so he lived in various countries, including Japan and New Zealand, as well as several states in the United States. He recalled his love for comic books in first grade, even though he couldn't afford them at 25 cents each. To encourage him to read, his parents promised him a reward of 10 cents for every book he read.
Reading competition inspiration
Michael's teacher created a reading competition, which inspired his competitive spirit. He discovered that he could borrow seven books at a time, so he started borrowing science fiction books. Over the summer, he earned money to buy comic books by reading numerous books. Eventually, he not only completed the game, but also developed a real interest in reading, especially a love of science fiction literature, being exposed to authors such as Robert Heinlein, Arthur C. Clarke, and Isaac Asimov. work.
The impact of reading
Michael said 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 for reading remains.
spread risk
Microstrategy’s investment strategy
· Bonnie asked Michael about Microstrategy's investment strategy, specifically 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 noted that while traditional financial philosophy advocates diversification, in some cases it may be wiser to concentrate.
The logic of concentrated investment
· Michael explains his views on risk diversification. He believes that diversification is suitable for those situations where there are multiple choices and the risk is higher, but if only one of the choices faced is feasible, then concentrated investment is the better choice. He illustrates this point with the metaphor of a shipwreck and a lifeboat: if only one lifeboat is safe, it is not wise to spread everyone out to different boats. In an economy facing hyperinflation, choosing to diversify will only lead to greater risk.
Bitcoin’s Uniqueness
· Michael further elaborates 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 will cause the company to lose money, so it needs to find an investment that can provide a higher return. Bitcoin is considered the only truly scarce commodity in the world capable of outperforming the performance of the S&P 500 over the long term.
Bitcoin Investment Advantages
· He emphasized that not only is Bitcoin a unique digital commodity, it also has no issuer, which gives it regulatory advantages. For publicly traded companies, the limit of holding more than 40% of assets in securities makes Bitcoin an ideal investment option. Microstrategy turned around when faced with an existential situation, choosing to innovate and try new investment ideas.
I have to convince myself first
Challenges in the Persuasion Process
· Bonnie asked Michael if it was difficult to convince others to accept Bitcoin because at the time many people still thought Bitcoin was a scam.
· Michael shared his process of convincing himself in 2013. He was initially skeptical of Bitcoin, thinking 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 describes 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 convert into a trader and start trading Bitcoin. After about 100 hours of study, he began to view Bitcoin as an investment, thinking that it was like a "bank on the Internet" that could transfer funds without an intermediary.
Bitcoin investment philosophy
· After 1,000 hours of in-depth research, Michael considers himself an “extreme supporter of Bitcoin.” He believes that Bitcoin is not just an investment, but a tool that provides property rights to 8 billion people around the world. Compared to 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 working to enhance your wealth.
The ethical implications 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 stressed that this was the first time in human history that property rights could be passed on in a way that would not be easily taken away. This concept was profound and important to him.
Stay flexible with your options
Reasons to choose Bitcoin
· Bonnie expressed her views on Bitcoin, believing 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 recent news about a wallet that may have belonged to the U.S. government being hacked and $20 million stolen. This got her thinking about how Bitcoin is stored.
The best way to store Bitcoin
· Michael responded that there is no "best" way to store, especially given individual time spans and needs. The longer the time goes by, the more important it is to keep your options flexible, he noted. He gave several examples:
· Short-term investors: If you are 75 years old and have a stockbroker who you can call to buy Bitcoin for you, you may choose to buy Bitcoin in the form of an ETF through a company like Fidelity or Blackrock.
· Large Enterprises: If it is a large, regulated enterprise, it may be preferable to purchase 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, owning Bitcoin for self-custody may be a better option. In this case, Michael recommends trading through an offshore entity, or self-custody entirely.
Choose storage method according to 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 a war-torn area or a stable country). In addition, time span is also an important factor. For example, if you wish to leave your Bitcoins to your granddaughter, and she may live in another country, it would be best to choose a self-storage method that gives her full control.
The importance of staying flexible
· Keeping options flexible is key, Michael concludes. He believes that if you could sum up what you learn in business school in one sentence, it would be to “keep your options open.” Therefore, owning Bitcoin itself, and knowing how to self-custody, is the best way to maintain flexibility.
MicroStrategy as top-performing U.S. stock
Bitcoin vs. MicroStrategy
· Bonnie mentioned some impressive numbers: over the past year, Bitcoin is up 97%, TSMC is up 116%, Nvidia is up 222%, and MicroStrategy is up 455%. She asked how investors should view this discrepancy and why MicroStrategy's stock trades at a premium to 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 Bitcoin-related companies. He said the value of owning a barrel of oil is clear, but if an oil company also owns refineries that can produce a variety of petrochemicals, then the company is worth more than 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 its own right.
What makes MicroStrategy unique
· Michael noted that MicroStrategy is unique in that it securitizes Bitcoin. MicroStrategy has created a series of securities that appeal to capital markets investors who don’t want to hold Bitcoin directly. These investors prefer to choose investment instruments with higher performance instead of simple Bitcoin. MicroStrategy stock, for example, offers 1.5x the leverage of Bitcoin, meaning its volatility and returns 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 higher leverage for Bitcoin investments, such as MicroStrategy's derivatives (such as MSTU and MSTX), which offer 2x the leverage of MicroStrategy, effectively achieving 3x the Bitcoin investment. Additionally, MicroStrategy's options market has also shown significant open interest, exceeding $40 billion.
· MicroStrategy creates leverage by issuing convertible bonds, which provide investors with a relatively safe investment option. Investors receive principal protection as the bond matures while enjoying potential upside gains when the company's stock rises. Michael mentioned that a recent convertible bond trade performed extremely well, rising 45% in just four weeks.
Liquidity and Volatility
· Michael emphasized that MicroStrategy's high liquidity and high volatility allow it to borrow funds at low interest rates because lenders want access to that volatility. If MicroStrategy puts money into low-volatility Treasuries, it will undermine its value creation capabilities. He likens this fluctuation 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 asked Michael if he was nervous when the price of Bitcoin dropped.
· Michael responded that he was not nervous and pointed out the difference between volatility and risk. Volatility, he explained, refers to the ups and downs or drastic changes in things, while risk refers to your expectation that the value of an asset will drop to zero. Bitcoin is volatile, but this volatility does not mean it is high risk.
Bitcoin Liquidity and Leverage
· Michael further elaborates on Bitcoin’s liquidity and leverage characteristics. He mentioned that if you needed to sell $1 billion worth of Bitcoin on a Saturday night with 10x leverage, you would only need to put up $100 million in collateral to complete the transaction. In other asset markets, such as gold or real estate, this operation is not possible.
· Michael emphasized that the Bitcoin network provides extremely high liquidity and leverage, which makes it attractive despite market fluctuations.
Limitations of other assets
He noted that other assets, such as gold and real estate, lack liquidity and credit during times of market stress or panic, making them less useful. For example, in times of crisis, people may want to sell assets, but selling large amounts is not easy in these markets. In contrast, Bitcoin's volatility reflects its utility and flexibility as a financial instrument.
There is energy when there is fluctuation
· 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 operating, this is not scary because it is necessary to achieve the power required to fly from New York to Tokyo. Likewise, Bitcoin's volatility is a manifestation of its financial energy and is a key factor driving its superior performance.
· Michael’s point is that volatility does not equate to risk. Bitcoin’s high volatility is actually a reflection of its liquidity and leverage characteristics, allowing investors to trade more flexibly when market conditions change. This characteristic makes Bitcoin uniquely valuable and attractive in financial markets.
Ultimate financial operations
Characteristics of convertible bonds
· Bonnie asked about the situation of convertible bond holders. What will happen when the bonds mature and MicroStrategy begins to pay back the principal?
· Michael explained that when convertible bonds mature, holders will have the option to convert their bonds into MicroStrategy stock. He mentioned that the conversion price of the first bonds issued by MicroStrategy was about $39, and the stock price is now well above that price, and those who held these bonds received huge capital gains.
Bond conversion and corporate strategy
· Michael points out that most of the bonds currently issued have exceeded their conversion prices. He said it was unlikely that principal payments on the bonds would be made, but instead expected that the bonds would eventually be converted into shares. He listed the conversion prices of different bonds, emphasizing 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 is growing faster than this expectation. He explained that if assets grew at 21% a year, they would double in about three years. Therefore, the duration of the debt is approximately five years, allowing MicroStrategy to realize capital appreciation as the debt matures.
Leverage and Investment Strategies
· Michael emphasized that MicroStrategy aims to maintain moderate leverage in order to remain competitive in the market. He believes that if the company is not leveraged, it may face similar volatility to Bitcoin, and the company's investors are supporters of Bitcoin. He compared the company to a real estate company, noting that a strategy that uses low-interest borrowing to invest is more attractive than one that uses no leverage at all.
Goal to increase 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 capturing more Bitcoins in creative and value-added ways. He introduced the concept of “BTC yield”, which is a measure of the growth of Bitcoin per share.
Bitcoin rate of return calculation
· Michael explains how Bitcoin yield is calculated by dividing the number of Bitcoins held by the number of fully diluted shares to arrive at the growth rate of Bitcoin per share. He pointed out that if a company increases the number of Bitcoins in a given year and the Bitcoin yield is positive, shareholders will not be diluted but will benefit.
How much money will you have in 10 years?
Bitcoin’s long-term expectations
· Bonnie asked Michael about the future price and growth potential of Bitcoin.
· Michael stated that his basic expectation is that Bitcoin will continue to grow as digital capital and become a global long-term store of value. Currently, Bitcoin accounts for only 0.1% of global assets, which is approximately US$1.4 trillion, while total global assets are approximately US$900 trillion. He believes that the addressable market for global long-term capital is approximately US$450 trillion, so the potential market for Bitcoin is still large.
Bitcoin price target
· Michael predicts that Bitcoin will gradually grow to 7% of global assets, which means that the price of each Bitcoin will reach $13 million. This goal is expected to be achieved by 2045. He noted that Bitcoin has grown at an average annual rate of about 50% over the past four years, but that growth will gradually slow as the market expands and adoption increases. He mentioned that the U.S. dollar money supply has grown by about 7% per year over the past 100 years, so he believes that Bitcoin's growth will maintain a similar trend in the next 20 to 30 years.
How Bitcoin compares to other assets
· Michael further analyzes how Bitcoin compares to other asset classes. He believes that Bitcoin will surpass gold, real estate and certain stock indexes and become the main choice for wealthy people to store their wealth. He predicts that Bitcoin’s growth rate will gradually approach the S&P 500’s return (about 10-12%) and that as more companies begin to buy Bitcoin, the line between traditional capital and digital capital will be drawn. will be further blurred.
Volatility and investment opportunities
· Michael mentioned that Bitcoin’s volatility (around 55) is still high compared to traditional market volatility (around 15-16). He believes that Bitcoin’s transaction 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 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 viewed as an investment option over 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 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 investing in this asset at low cost through a smartphone and obtain the same property rights as billionaires.
Bitcoin Equality
· Michael points 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 the restrictions of the traditional financial system.
The rich and the digital economy
· For those wealthy people who refuse to accept Bitcoin and the crypto-economy, Michael believes that they will face the risk of shrinking their wealth. They will likely continue to rely on traditional investment returns (typically between 7% and 12%), while those who are willing to embrace the digital economy will become richer and be able to help the working class and poor share this wealth together. Opportunities for growth.
Bitcoin’s Impact on Capital Markets
· Michael believes that Bitcoin will drive the digital transformation of capital markets. Any security related to Bitcoin will bring better returns and performance to investors. Indirectly, he mentioned, Bitcoin will also benefit pension funds, retirees and people who hold Bitcoin-related assets. Currently, approximately 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
Create wealth with Bitcoin
· When discussing how to make a lot of money, Michael comes up with a radical strategy. He suggested that if you wanted to make a lot of money, you could position your podcast as a Bitcoin podcast and value it at $10 million. You can then get funding by selling 25% of your shares to venture capitalists who believe in Bitcoin and the digital future.
Invest in Bitcoin
· Suppose you receive an investment of $3 million, and you can invest all of this money 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 the asset to $30 million or $40 million within ten years.
Highly leveraged investments
· Michael emphasized that the key is "active leverage investing." By investing corporate cash flow and capital in Bitcoin, businesses could potentially double or triple their profits. He explains how to grow your wealth by increasing your risk and taking advantage of Bitcoin's high return potential.
Compare to real estate investing
· He compared this strategy to real estate investing, noting that real estate generally takes longer to increase in value, while Bitcoin grows faster. By simply putting all of their capital into Bitcoin, rather than choosing a specific property, investors can grow their wealth faster.
Advice from ordinary people
· For the average person, Michael recommends investing a portion of your capital that you wish to hold long-term in Bitcoin. He recommends taking the time to learn about Bitcoin and deciding how much to invest based on your own risk tolerance. He believes that smart investors should strive to shift their capital structure towards Bitcoin in order to obtain higher returns.
Embrace volatility
· Michael also emphasized that conventional financial wisdom often views volatility as risk, but he believes that volatility is actually energy. By embracing Bitcoin’s volatility, businesses can attract more capital and grow faster. He cited MicroStrategy as an example of how a massive increase in corporate value could be achieved by bringing Bitcoin onto the balance sheet.
Save Taiwanese companies
Challenges for Taiwan’s manufacturing industry
· Bonnie mentioned that Taiwan's economic base is composed of many small and medium-sized manufacturing companies. As manufacturing moves to other countries, these companies face survival challenges.
· Michael said in this regard that many companies are in a state of "zombie companies". Although they are still profitable, they lack growth momentum and become boring and trapped.
Looking for transformation opportunities
· Michael suggested that if the boardroom discussion was about how to save a company with $500 million in annual revenue and only 2% annual growth, he would propose a transformative acquisition. He envisioned finding a $2.5 million company that was growing at 50% annually and believed that the company would grow between 20% and 40% annually for the next 20 years. He believes that such a company has a monopoly on the market and has an unstoppable product.
Bitcoin as the solution
· He further proposed that Bitcoin can be regarded as a "global technology company" that can be acquired at 1x revenue. Michael likens Bitcoin to a "universal merger partner" that can help companies globalize, increase growth rates and stock attractiveness. He emphasized that Bitcoin’s value lies in its growth potential and accessibility to global markets.
Break traditional thinking
· Michael points out that many companies tend to be hesitant when faced with transformation, preferring to choose a slow death rather than take risks. He used the electric revolution as a metaphor to encourage companies and individuals to be brave enough to accept new technologies, just as they accepted electricity back then. He believes that digital energy (Bitcoin) can be used to revitalize the 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 like Bitcoin to achieve growth and transformation. By including Bitcoin on their balance sheets, companies can not only achieve growth in value, but also enhance their market competitiveness and avoid being eliminated by the times.
Chance
revelation of fire
· Michael uses the metaphor of fire to illustrate the importance of technology. He mentioned that when humans first discovered fire, not everyone could immediately understand its many uses, but over time, people gradually learned how to use fire to improve their lives, such as cooking, clearing land, and making tools. wait. 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 encourages people to face new technologies with courage, rather than fear, no matter where they are (such as Taiwan, Africa or South America). Especially in the context of globalization, many countries are unable to invest in high technology or real estate like the United States, so it is crucial to find new opportunities.
Bitcoin Opportunities
· He noted that Bitcoin provides an opportunity for those who do not have direct access to the U.S. market. Not only does Bitcoin represent access to the best markets, it may also allow people to skip traditional markets and gain access to better markets. Michael believes that Bitcoin is a universal solution to problems, especially for those who feel insecure and excluded.
Find people in need
· Michael mentioned that many wealthy and powerful people tend to turn a blind eye to their own problems because they are too complacent and comfortable. He recommends finding people who recognize the problems they face and offering Bitcoin as a solution to them. For people living in economically unstable countries, such as Argentina or Nigeria, Bitcoin may be the way out.
