Organized & Compiled: TechFlow
Guest: Michael Saylor, Founder of MicroStrategy
Host: Bonnie
Podcast Source: Bonnie Blockchain
Original Title: Bitcoin Jesus Michael: The Opportunity of This Generation! This is what you need to do!
Release Date: November 16, 2024
Background Information
Michael, known as the "Bitcoin Jesus", and the US-listed company MicroStrategy he founded, are considered one of the most visionary Bitcoin securities issuers globally. With his bold investment strategy and unwavering belief in Bitcoin, he has led the company's transformation from a traditional software business to become one of the best-performing companies on the US stock market in 2024. Below, we will explore his path to success and his unique insights on businesses, individuals, and the future of Bitcoin.
Childhood Reading Competition
Michael's Upbringing
At the beginning of the podcast, Michael shared his childhood reading experiences. His father served in the Air Force, so he lived in different countries, including Japan, New Zealand, and various states in the US. He recalled his love for comic books in first grade, even though each comic book cost 25 cents, which he couldn't afford. To motivate him to read, his parents promised him 10 cents for every book he finished.
Inspiration from the Reading Competition
Michael's teacher organized a reading competition, which sparked his competitive spirit. He discovered that he could borrow seven books at a time, so he started borrowing science fiction books. Throughout the summer, he earned money to buy comic books by reading a large number of books. In the end, not only did he complete the competition, but he also developed a genuine interest in reading, especially a passion for science fiction, and was exposed to the works of authors like Robert Heinlein, Arthur C. Clarke, and Isaac Asimov.
The 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 as many comic books as he used to, his love for reading remains.
Diversifying Risk
MicroStrategy's Investment Strategy
Bonnie asked Michael about MicroStrategy's investment strategy, particularly its decision to concentrate its investments in Bitcoin.
Michael confirmed that MicroStrategy currently holds 252,220 BTC, and his personal BTC holdings have slightly increased from the 17,730 BTC he announced four years ago. He pointed out that while traditional financial wisdom advocates for diversified investments, in certain cases, concentrated investment may be wiser.
The Logic of Concentrated Investment
Michael explained his perspective on diversifying risk. He believes that diversification is appropriate when there are multiple viable options with high risk, but if there is only one viable choice, then concentrated investment is the better option. He used the analogy of a sinking ship and lifeboats to illustrate this point: if there is only one safe lifeboat, it would not be wise to distribute people across different boats. In the face of hyperinflation, diversifying investments would only lead to greater risk.
The Uniqueness of Bitcoin
Michael further elaborated on why MicroStrategy chose Bitcoin as an investment. He noted that when the company had $500 million in cash, the interest earned was 0%, while the cost of capital was between 15% and 20%. In this situation, holding cash would actually result in losses for the company, so they needed to find an investment that could generate higher returns. Bitcoin was seen as the only truly scarce commodity in the world, capable of outperforming the S&P 500 index in the long run.
The Investment Advantages of Bitcoin
He emphasized that Bitcoin is not only the only digital commodity, but it also has no issuer, which gives it regulatory advantages. For publicly traded companies, the restriction of holding more than 40% of their assets in securities makes Bitcoin an ideal investment choice. MicroStrategy, facing a life-or-death situation, chose to innovate and try new investment ideas, which ultimately led to its turnaround.
I Had to Convince Myself First
Challenges in the Convincing Process
Bonnie asked Michael if it was difficult to convince others to accept Bitcoin, as many people still believed it was a scam at the time.
Michael shared his process of convincing himself in 2013. He was initially skeptical about Bitcoin, thinking it might fail. He mentioned that the value of Bitcoin often lies in whether people need it, and many people viewed it as a peculiar thing without an urgent need.
The Evolution from Skepticism to Trust
Michael described how he gradually changed his perspective. He believes that everyone starts as a skeptic, and after a few hours of contemplation, they may realize that Bitcoin is an asset, then transition to becoming a trader and start trading Bitcoin. After about 100 hours of learning, he began to see Bitcoin as an investment, viewing it as a "bank in the network" that can facilitate fund transfers without intermediaries.
The Investment Philosophy of Bitcoin
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 globally. Compared to traditional assets, Bitcoin grants equal property rights to everyone, regardless of their location. He emphasized that buying Bitcoin means participating in a global network where everyone is working to enhance your wealth.
The Ethical Significance of Bitcoin
Michael believes that Bitcoin is not only an economic tool but also a means of economic empowerment, providing opportunities for every person, country, and institution. He stressed that this is the first time in human history that a way to transfer property rights has been created, and these rights are not easily taken away. This concept is profoundly important to him.
Maintaining Flexibility in Choices
Reasons for Choosing Bitcoin
Bonnie expressed her views on Bitcoin, stating that if one wants to purchase an asset that can be passed down for generations, it should be an asset that the government cannot arbitrarily print, such as Bitcoin. She mentioned a recent news story about a wallet that may belong to the US government being hacked and $20 million stolen, which led her to consider the best way to store Bitcoin.
The Best Way to Store Bitcoin
Michael responded that there is no "best" storage method, especially considering individual time horizons and needs. He pointed out that the longer the time horizon, the more important it is to maintain flexibility in choices. He provided a few examples:
Short-term Investors: If you are 75 years old and have a stockbroker who can help you purchase Bitcoin over the phone, you may choose to buy Bitcoin through a company like Fidelity or Blackrock in the form of an ETF.
Large Corporations: If you are a large company, a regulated enterprise may prefer 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, self-custody of Bitcoin may be a better choice. In this case, Michael suggests transacting through an offshore entity or fully self-custodying.
Choosing the right storage method based on the situation
Michael emphasized that the key to choosing the right storage method lies in the type of entity (individual, family, church, union, city, or bank, etc.) and the environment it is in (such as a war-torn area or a stable country). In addition, the time span is also an important factor. For example, if you want to leave your bitcoins to your granddaughter, and she may live in another country, it is best to choose a self-custody method that allows her to have full control.
The importance of maintaining flexibility
Michael summarized that maintaining flexibility in the choice is key. He believes that if he had to sum up what he learned in business school in one sentence, it would be "maintain openness in choices." Therefore, owning bitcoins themselves and understanding how to self-custody is the best way to maintain flexibility.
MicroStrategy as the best-performing US stock
Comparison between Bitcoin and MicroStrategy
Bonnie mentioned some impressive numbers: over the past year, Bitcoin has risen 97%, Taiwan Semiconductor has risen 116%, Nvidia has risen 222%, while MicroStrategy has risen 455%. She asked how investors should view this difference, and why MicroStrategy's stock is trading at a premium to its underlying asset.
The multiple values of holding bitcoins
Michael used oil as an example to explain the difference between investing in Bitcoin and investing in Bitcoin-related companies. He stated that the value of owning a barrel of oil is clear, but if the oil company also owns a refinery that can produce a variety of petrochemical products, then the value of that company is not just the value of its oil reserves. As a Bitcoin reserve company, MicroStrategy has $17 billion worth of Bitcoin, which gives it considerable value in itself.
The uniqueness of MicroStrategy
Michael pointed out that the uniqueness of MicroStrategy lies in its securitization of 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 just plain Bitcoin. For example, MicroStrategy's stock offers 1.5 times the leverage of Bitcoin, meaning its volatility and returns are higher than Bitcoin itself.
High-leverage investment options
Michael further explained that there are different types of investors with different needs in the market. 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. In addition, MicroStrategy's options market also shows huge open interest, exceeding $40 billion.
MicroStrategy has created leverage by issuing convertible bonds, which provide investors with a relatively safe investment choice. Investors can get principal protection when the bonds mature, while enjoying potential upside gains on the company's stock. 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 allow it to borrow funds at low interest rates, as lenders want to benefit from this volatility. If MicroStrategy were to invest its funds in low-volatility government bonds, it would undermine its value-creating ability. He compared this volatility to the temperature of a car engine, saying that to drive fast, the engine must be kept at a high temperature.
Volatility and risk are not the same
Definitions of volatility and risk
Bonnie asked Michael if he feels anxious when Bitcoin prices drop.
Michael replied that he does not feel anxious, and he pointed out the difference between volatility and risk. He explained that volatility refers to the fluctuations or dramatic changes in something, while risk refers to the 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's liquidity and leverage
Michael further elaborated on Bitcoin's liquidity and leverage characteristics. He mentioned that if you need to sell $1 billion worth of Bitcoin on a Saturday night with 10x leverage, you only need to provide $100 million in collateral to complete the transaction. In other asset markets, such as gold or real estate, such an operation would be impossible.
Michael emphasized that the Bitcoin network provides extremely high liquidity and leverage, which makes it attractive even during market volatility.
Limitations of other assets
He pointed out that other assets (such as gold and real estate) lack liquidity and credit in times of market stress or panic, making them less useful. For example, during a crisis, people may want to sell assets, but in these markets, selling large amounts of assets is not easy. In contrast, Bitcoin's volatility reflects its utility and flexibility as a financial instrument.
Volatility means 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 stated that while jet engines make a lot of noise and release hot air when running, this is not something to be feared, as it is the power needed to fly from New York to Tokyo. Similarly, Bitcoin's volatility is a manifestation of its financial energy, and is a key factor in driving its superior performance.
Michael's view is that volatility is not synonymous with 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 feature makes Bitcoin uniquely valuable and attractive in the financial market.
The ultimate financial operation
Characteristics of convertible bonds
Bonnie asked about the situation of convertible bond holders, and what will happen when the bonds mature and MicroStrategy starts to repay the principal.
Michael explained that when the convertible bonds mature, the holders can choose to convert them into MicroStrategy's stock. He mentioned that the conversion price of MicroStrategy's first batch of bonds was around $39, and the current stock price has far exceeded this price, allowing the holders of these bonds to reap huge capital gains.
Bond conversion and company strategy
Michael pointed out that most of the issued bonds have already exceeded their conversion price. He stated that it is unlikely that these bonds will be paid off in cash, and it is expected that they will ultimately be converted into stock. He listed the conversion prices of different bonds, emphasizing that as Bitcoin's price rises, the conversion of bonds will become more prevalent.
Bitcoin's growth expectations
Michael's long-term forecast for Bitcoin is an average annual growth of 29%. He mentioned that even in the current market environment, Bitcoin's growth rate has exceeded this expectation. He explained that if an asset grows 21% per year, it will double in about three years. Therefore, the duration of the debt is around five years, which allows MicroStrategy to achieve capital appreciation when the debt matures.
Leverage and investment strategy
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 had no leverage, it might face volatility similar to Bitcoin, and the company's investors are all Bitcoin supporters. He compared the company to a real estate company, stating that the strategy of using low-interest borrowing for investment is more attractive than a completely unleveraged strategy.
The goal of increasing Bitcoin holdings
Bonnie summarized 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 Bitcoins in a creative and value-adding way. He introduced the concept of "Bitcoin yield", which is a metric for measuring the growth of Bitcoins per share.
Calculating Bitcoin Yields
Michael explained the method for calculating Bitcoin yields, which is to divide the number of Bitcoins held by the fully diluted share count to arrive at the growth rate per Bitcoin. He pointed out that if the company increased its Bitcoin holdings in a given year, and the Bitcoin yield was positive, then shareholders would not be diluted but would instead benefit.
How Much Money Will You Have in 10 Years
Long-Term Expectations for Bitcoin
Bonnie asked Michael about Bitcoin's future price and growth potential.
Michael stated that his basic expectation is for Bitcoin to continue growing as digital capital and become a tool for long-term global value storage. Currently, Bitcoin accounts for only 0.1% of global assets, around $1.4 trillion, while the total global asset amount is around $900 trillion. He believes the addressable market for long-term global capital is around $450 trillion, so Bitcoin's potential market is still very large.
Bitcoin's Target Price
Michael forecasts that Bitcoin will gradually grow to 7% of global assets, meaning each Bitcoin will reach a price of $13 million. This target is expected to be achieved by 2045. He noted that Bitcoin's average annual growth rate over the past four years has been around 50%, but as the market expands and adoption increases, this growth rate will gradually slow down. He mentioned that the US money supply has grown by about 7% per year 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 and Other Assets
Michael further analyzed the comparison between Bitcoin and other asset classes. He believes that Bitcoin will surpass gold, real estate, and some stock indices to become the primary choice for the wealthy to store their 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 purchase Bitcoin, the boundary between traditional capital and digital capital will become further blurred.
Volatility and Investment Opportunities
Michael mentioned that Bitcoin's volatility (around 55) is still higher compared to traditional markets (around 15-16). However, he believes that Bitcoin's trading volume and global tradability give it higher return potential. He also mentioned that the "Bitcoin 24 Model" can be downloaded to perform customized financial forecasts, allowing for simulation based on different macroeconomic and technical factors.
Advice for Young Investors
Michael's advice for young investors is that every Bitcoin purchased today could be worth $13 million in 21 years. If someone can acquire 5 Bitcoins, they will have $65 million in the future 21 years. 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?
Empowering Everyone
Bonnie asked Michael whether Bitcoin's impact is to make the rich richer or to empower the poor.
Michael responded that Bitcoin will empower the global 8 billion people, especially the working class, in a way that no other financial asset can match. He emphasized that the unique aspect of Bitcoin is that anyone can participate in this asset's investment through a smartphone at low cost, gaining the same property rights as billionaires.
Bitcoin's Equality
Michael pointed out that with Bitcoin, ordinary people have even better property rights than the world's wealthiest individuals (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 constraints of the traditional financial system.
The Wealthy and the Digital Economy
For those wealthy individuals 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 (usually between 7% and 12%), while those willing to embrace the digital economy will become even wealthier and be able to help the working class and the poor share in the opportunities for wealth growth.
Bitcoin's Impact on the Capital Market
Michael believes that Bitcoin will drive the digital transformation of the capital market. 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.
Wanting to Make a Lot of Money
Using Bitcoin to Create Wealth
When discussing how to earn a large amount of wealth, 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 a 25% stake to risk-taking venture capitalists who believe in Bitcoin and the digital future to raise funds.
Investing in Bitcoin
Assuming you obtain $3 million in investment, you can invest the entire amount in Bitcoin. Michael believes that Bitcoin may double in value every three years, so if you have $6 million in three years, the podcast's valuation may also rise to $15 million. Then, you can raise another $5 million in funding and continue investing in Bitcoin, potentially increasing your assets to $30 million or $40 million within ten years.
Leveraged Investments
Michael emphasized the importance of "aggressive leveraged investing." By allocating a company's cash flow and capital to Bitcoin, the profits can potentially double or triple. He explained how to achieve wealth growth by increasing risk and leveraging Bitcoin's high return potential.
Comparison to Real Estate Investments
He compared this strategy to real estate investments, noting that real estate typically takes longer to appreciate in value, while Bitcoin's growth is faster. By simply investing all capital in Bitcoin, rather than selecting specific real estate, investors can achieve wealth growth more quickly.
Advice for Ordinary People
For ordinary people, Michael recommends allocating a portion of their long-term capital to Bitcoin. He suggests taking the time to learn about Bitcoin and deciding on the investment proportion based on one's risk tolerance. He believes that savvy investors should strive to shift their capital structure towards Bitcoin to achieve higher returns.
Embracing 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, demonstrating how incorporating Bitcoin into the balance sheet can lead to significant corporate value growth.
Saving Taiwanese Companies
Bonnie mentioned that Taiwan's economic foundation is composed of numerous small and medium-sized manufacturing companies, and as manufacturing shifts to other countries, these companies are facing survival challenges.
Michael stated that many companies are in a "zombie company" state, where they are still profitable but lack growth momentum, becoming stagnant and trapped. 'TechFlow' must be translated into 'TechFlow'. 'Block' must be translated into 'Block'. 'Amp' must be translated into 'Amp'. 'BTC' must be translated into 'BTC'. 'CRO' must be translated into 'CRO'. 'HT' must be translated into 'HT'. 'STX' must be translated into 'STX'. 'AMP' must be translated into 'AMP'.
Seeking Transformation Opportunities
Michael suggests that if discussing how to save a company with $500 million in annual revenue and only 2% annual growth at the board meeting, he would propose a transformative acquisition. He envisions finding a $2.5 million company with a 50% annual growth rate and believes this company will grow 20% to 40% annually for the next 20 years. He believes such a company has a monopoly on the market and an unstoppable product.
BTC as a Solution
He further proposes that BTC can be viewed as a "global tech company" that can be acquired for 1x revenue. Michael compares BTC to a "universal merger partner" that can help companies globalize, increase growth rates, and attract stock. He emphasizes that the value of BTC lies in its growth potential and accessibility to global markets.
Breaking Traditional Mindsets
Michael points out that many companies facing transformation often hesitate, preferring a slow death over taking risks. He uses the electricity revolution as an analogy, encouraging companies and individuals to boldly embrace new technologies, just as they did with electricity. He believes that digital energy (BTC) can be used to revitalize companies' businesses and products.
Michael's core message is that Taiwanese manufacturing companies need to rethink their business models, dare to take risks, and embrace new technologies like BTC to achieve growth and transformation. By incorporating BTC into their balance sheets, companies can not only achieve value growth but also enhance their market competitiveness and avoid being left behind by the times.
Opportunities
The Lesson of Fire
Michael uses the analogy of fire to illustrate the importance of technology. He mentions that when humans first discovered fire, not everyone immediately understood its multiple uses, but over time, people learned how to use fire to improve their lives, such as for cooking, clearing land, and making tools. Ultimately, this technological progress enabled humans to create great achievements like skyscrapers.
Accepting and Learning New Technologies
Michael emphasizes that the progress of civilization depends on the acceptance and learning of new technologies. He encourages people, regardless of their location (such as Taiwan, Africa, or South America), to boldly face new technologies instead of feeling afraid. Especially in the context of globalization, many countries cannot invest in high-tech or real estate like the United States, so finding new opportunities is crucial.
The Opportunity of BTC
He points out that BTC provides an opportunity for those who cannot directly enter the US market. BTC not only represents a path to the best market, but it may also allow people to leapfrog traditional markets and access better ones. Michael believes that BTC is a universal solution to problems, particularly for those who feel uneasy and excluded.
Identifying Underserved Populations
Michael mentions that many wealthy and powerful people often overlook their own problems because they are too complacent and comfortable. He suggests finding people who are aware of their problems and offering BTC as a solution. For people living in economically unstable countries like Argentina or Nigeria, BTC may be their way out.
