January 19, 2022 • 25 mins
Emily Chang speaks with MicroStrategy Chairman and CEO Michael Saylor about his company's rise and fall during the dot com boom, the decision to put bitcoin on MicroStrategy's balance sheet, future plans to buy more bitcoin, and expectations from pending regulation.
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Speaker 1 (00:00):
So, how's life in Miami. It's lovely here, all right,
you guys? Ready, okay, Hi everyone. I'm Emily Chang and
welcome to this edition of the Bloomberg Studio One Point podcast.
Today's guest is none other than one of the biggest
crypto bawls out there. He runs the company that owns
more bitcoin than any other company in the world, at
(00:22):
least as of the end. Also, he may well be
the longest running software CEO in history. Michael Sailor started
his career riding the dot com wave and saw that
bubble pop firsthand. Could crypto be another bubble waiting to burst?
Or is it the future? Joining me on this edition
of Bloomberg Studio at One Point, Oh, micro Strategy, Chairman
(00:44):
and CEO, Michael Sailor, micro Strategy. Holding all this bitcoin,
does it ever make you at all nervous? No, Actually,
it gives me great comfort. I don't really think we
could do anything better to position our company in an
(01:07):
inflationary environment than to convert our balance sheet to bitcoin,
because we basically built a balance sheet on a non
sovereign store of value that's not a currency derivative. Two
years ago, we were sitting on a bunch of cash,
and that cash was losing about ten percent of its
purchasing power a year. And then when COVID struck and
(01:27):
the FED took a more accommodated monetary policy, that cash
started losing of its purchasing power years. So my anxiety
was maximized around April May when we had the k
shape recovery and I realized that cash is trash. Everything's
about to get much more expensive, and we needed a strategy.
(01:51):
So we adopted a bitcoin strategy. It's driven up our
stock by a factor of five. You know, in my opinion,
it's saved the company from from a not very pleasant fate.
So I'm totally pleased with where we are today. Just Bitcoin,
none of those other thousands of cryptocurrencies. Look, bitcoin is
digital property. It's universally acknowledged as common property because that
(02:15):
at a fair distribution. No I c oh, no management team.
So Toshi disappeared. It's parap issue to a commodity, to land,
to gold, uh, and it's pretty important that that would
be deemed property. Um, the rest of the cryptos could
be securities. There's there's just a lot of of regulatory
(02:35):
overhanging question about whether their securities or not. And I
think that the great innovation is the creation of common
property in cyberspace. It took us thirteen years to get
to the point where that's universally acknowledged. So that makes
bitcoin the safe haven for a public investor or a
public company. Everything else feels more like either venture capital
(02:59):
or expect elation. Now you personally are and the Internet
can correct me if I'm wrong. The longest running software
CEO in history, you founded it in nine when you
were twenty four years old. What has this thirty two
year ride been like? You know, I learned a lot
of humility became public in so you know, now I've
(03:24):
been in public company CEO for many, many, many quarters.
I lived to see percent of my peers exit the business.
So I didn't really understand this at the time, but
now as I look back, what I realized is all
my peers exited the business because they're forced to grow
(03:44):
their top line in their cash flows at a frenetic rate,
and eventually they get undone by delutive acquisitions and then
they have to sell themselves. Micro strategy. We've been very fortunate,
We've been focused. We soldiered on and We've always had
a passion to make the best software we could and
uh and as our competitors disappeared, we found opportunities. You
(04:08):
grew up as an Air Force brat traveling around the world.
What kind of kid were you? Tell us about your
upbringing a young teenage, Michael, I read a lot of
science fiction. I read pretty much every science fiction book
by all the great science fiction writers. Probably two or
three times. I played Dungeons and Dragons. You know, before
we actually had these, UH, Wizard Warcraft and other games
(04:32):
on computers. We actually had to draw out the dragons,
and we had to write down what's in the dungeon,
and we had to construct our entire virtual world. So
so I think before computers, we used our imaginations to
create simulations and to exercise probability and distribution, and it
(04:52):
taught me a lot about practical statistics. My background led
me eventually to trip over a book by Robert heinel
and called Have Space Suit, Will Travel, where the protagonists
Gallivant's cross the universe, saves the human race from bug
eyed monsters, and for for his services to humanity, gets
a full tuition scholarship to m I T. And it's
(05:15):
stuck in my head that M I T was probably
a good place to go if you believed in engineering
and making the world a better place. You studied aeronautics,
I believe, and then you pivoted to tech and and
founded micro Strategy with one of your M I T
fraternity brothers. And the software basically provides business intelligence, helps
companies make sense of their data, so that, for example,
(05:37):
McDonald's could learn how many Big max it might sell
in a given night in Chicago. Is that right? Yeah.
The idea is to extract all of the data at
an atomic level, like every item sold, every every hour
of the day, and every store in the world, for
every McDonald's. What we discovered is the world's full of
(06:00):
companies that have billions of lines of data, and they're
trying to make sense of them. And they had to
extract those those sophisticated sets of data, compare them to
each other in order to make a decision about a
marketing campaign or a product launch, or even something as
simple as how many items should I have on each
store shelf. And it's worth a lot of money to
(06:21):
get it right, and if you get it wrong, you
find out that you don't have the products you need
when people want to buy those things, and it costs
you a lot of money. So we were in the
right place at the right time. There, you've witnessed some
serious roller coasters. You saw that dot com bubble blow
up and burst before your eyes. What lessons have you
taken away from that that informs your strategy today? I
(06:43):
would boil it down to this stoic observation. Right, you
can acquire a thing, but you know, can you maintain
the thing? And if you can maintain the thing, can
you enjoy the thing? And what I discovered is a
lot of people acquire things they can't maintain and a
lot of things people can maintain things, but they can't
(07:03):
ever enjoy. And so you want to boil it down
to another metaphor, it's laser focus. You have to figure
out what you are the best in the world at
and what you can continue to be the best at
the world at in the face of unrelenting, exponentially increasing competition.
And once you figure out what that is, focus on
(07:25):
it with all of your resolve. And if you do that,
then you can stay in business. Uh. You know that
That's the first thing I learned. That's why I have
laser eyes on Twitter. The whole point of laser eyes
is you've got to you've got a solution. Focus on
the solution. Don't get distracted by all of your good
(07:46):
ideas and allow it to dilute your focus on your
great idea. You're listening to the Bloomberg Studio At one
point o podcast with micro Strategies at Michael Sailor up
next about this crypto winter. Is he feeling the cold?
(08:09):
Sailor shares his predictions for where the bitcoin market or
roller coaster is going next. Stay with us. The decision
to bet on bitcoin to acquire the thing. Would you
(08:31):
say that's your phoenix moment? I would say it probably is.
I never said it like I thought about it like that,
but I feel like, uh, most of my life was
leading up to this point. And I understood the power
of dominant digital networks like Google and Facebook and Amazon
and Apple because I wrote that for a decade. I
(08:53):
also understood the detriment of not being that dominant network.
Micro strategy comp eats against Microsoft. We compete against companies
a hundred times as big as us. When we got
to what I saw was the winning strategy is digital
transformation a view of the dominant network. The losing strategy
(09:14):
is to continue to work, to work harder and exponentially
harder for a currency growing exponentially weaker. And I had
a sense of the consequences if we did nothing, because
I had seen the demise of of my competitors and
I could see where we were headed. If we stuck
with the status quo, we would have to either adopt
(09:36):
a bitcoin strategy or sell the company. And we uh,
and we elected to pursue bitcoin. What was the reaction
from from investors, from other CEO CFOs when you put
bitcoin on your balance sheet in such a big way
Compared to the way they're reacting now, you know, uh,
many people didn't really understand bitcoin very well. They haven't
(10:00):
taken the time to focus on it. Even today, I
would say that of the population hasn't spent ten hours
thinking hard about bitcoin, so so uh in the year,
I think most people are just ignoring it. Um they
really it wasn't really registering with them, maybe one per cent.
(10:22):
I think that when we talk to our investors, what
was interesting is privately, most investors were aware of bitcoin
and they thought it was a good idea publicly. Their
institutions that they're part of our have a three to
five year um time lag from the point at which
they can adopt new ideas. So about this possible winter,
(10:44):
are you really not feeling the cold? Um? Look, if
you're going to invest in bitcoin, a short time horizon
is four years, a midtime horizon is ten years. The
right time horizon is forever. You know, Warren Buffett said,
you know, if you wouldn't hold it for ten years,
you shouldn't hold it for ten minutes. So if you
(11:04):
look at the course of four years, no one's ever
lost money over four years holding bitcoin. And and if
you look at you know, our experience. We started buying
it at ten thousand dollars and now it's up by
a factor of four. So so given the right time horizon,
you're fine. So it's a blessing and a curse. The
blessing is it makes it the most exciting, interesting thing
(11:26):
in the financial universe everywhere in the world. And the
curses it can induce anxiety for people that have a
short attention span or or are focused on a narrow
time horizon. What do you think, then, is behind this
early crash. I think that UM. There's a lot of
dynamics here. If you look at the entire crypto ecosystem,
(11:50):
you have UM. You have a set of regulatory uncertainty,
especially regulatory uncertainty around stable coins and crypto tokens UH
and whether or not their securities, and that creates a
little bit of anxiety. You have a lot of leverage offshore,
right You have a lot of crypto exchanges that can
(12:10):
trade with up to twenty x leverage, and those crypto
exchanges have many many tokens that are cross collateralized, and
between them and the DeFi exchanges, you can get much
higher than twenty x leverage. So that's the second source
of volatility. The crypto markets are almost designed to encourage volatility,
(12:31):
and that creates kind of a love hate relationship between
the crypto ecosystem and the bitcoin hoddlers. The bitcoin hoddlers
are holding for you know, a decade, you know, and
and sometimes for a hundred years and sometimes for a
thousand years. And yet you've got fast money hedge funds
that have a tax incentive, a huge amount of leverage,
(12:54):
and massive volatility. But you have two totally different investment
mental at ease here and when they come together. The
result is you've got, in my opinion, the world's least
risky asset to hold over the next century called bitcoin,
and you've got the world's most volatile fast money market
(13:15):
you know, called crypto. And they're both conjoined, joined at
the hip for better for worse in the year. So
clearly our hold alert. But for the people who are terrified,
who have never been on this roller coaster before, shorter term,
what does the trajectory of bitcoin look like to you
this year? I feel like it's consolidated this level. This
(13:37):
is a great entry point for institutional investors I talked to.
I talked to high net worth individuals, family offices, public
company executives, private company owners, and they watch bitcoin run
up in one and there are a lot of people
that would be afraid to own it if it was
going up four percent a year, But if they're staring
(13:58):
at it and it's and off the all time high,
and it's consolidating, and they see that as being embraced
by people like Bill Miller, by very well respected investors.
It's being embraced by the regulators, it's being embraced by
senators and congressmen and public investors and public companies they're
looking at. This is like a good entry point I'd
(14:20):
ever miss, Emily not to make a more important point,
which is what's really going on here at the macro
level is inflation. The CPI headline inflation is seven percent.
Look at the Turkish lira, it's collapsing. The paco is collapsing.
So there's a volatility story. For a conventional investor in
(14:42):
Manhattan that's got a portfolio of equities, but the world
can't buy the SMP index there in Africa, Asia, South America,
and if they've got their assets and banks, they're going
to have them seized. I can't buy the equity. So
the real story here is digital property that solves a
(15:05):
problem that eight billion people face. The big question is
then are you going to buy more? Yes or no? Yeah,
we're gonna buy more. You know, we're buying more with
our cash flows. We've adopted a bitcoin standard, Emily. That
means that when we generate cash, we sweep it into bitcoin.
We've been generating you know, anywhere from seventy to a
(15:27):
hundred million dollars of cash flow. So we will also
buy bitcoin with debt. We bought bitcoin with one point
seven billion dollars worth a convertible debt. We bought bitcoin
with a five hundred million dollar senior secured note that
we pay six and an eight percent interest on. We
also issued a billion dollars worth of equity at the
(15:49):
market and we converted it all in the bitcoin. So
combinations of cash flow, equity, debt, potentially through other partnerships.
This is Bloomberg Studio. At one point, oh with micro
(16:09):
Strategy founder and CEO Michael Sailor, he promised to host
a yacht party when bitcoin hit one thousand dollars. When
does he think that will be? And what kind of
regulation is he planning for ahead? That's next. This is
Bloomberg Studio. At one point out you promised to host
(16:39):
a yacht party when bitcoin got to a hundred thousand.
When do you think that will be the hundred k party?
You know, when I did that interview, it was the
fall like of and I think bitcoin is training at
fifteen thousand and and uh, you know, John Vallez wrope
me and he said will you host the hunter k party?
(17:01):
And I said, well, sure I will. There was no
doubt in their mind the party is coming quite soon.
I was just amazed at the confidence of bitcoiners. Um,
I don't have a price target for when it's gonna happen.
What I learned is laser focus stuff takes time. I'm
comfortable with us working through this year over year. I
(17:23):
don't I don't need instant overnight success. What kind of
regulation are you anticipating? Which way do you think the
Washington winds are blowing. There's a profound shared appreciation that uh,
digital assets are the future of the financial industry in
the United States needs to lead and I've been pretty
(17:44):
impressed at the support in the Senate, in Congress, from
the administration, and from regulators all around the world for
this entire crypto economy and in the use case as
digital property. I think that the regulatory treatment is pretty clear.
If you sell it at a profit, you lower capital
games on it, just like if you sold any other property.
(18:06):
I think that with regard to the cryptocurrencies, the stable
coins like tether and circle, they're going to be regulated
as currencies. Clearly, the administration wants to see f d
i C approved and ensured banks issue them, so I
think that they we're gonna see the banking sector enter
into the stable coin market. UM. I think that many
(18:28):
other cryptos are deemed as securities and will be deemed
as securities, and they're gonna be regulated as securities. I
think that the marketplace is waiting to see what those
expectations will be. And I think it's pretty clear that, um,
the writing is on the wall with regard to crypto exchanges,
right the SEC wants them to be to abide by
the principles and the rules of national securities exchanges, and
(18:51):
they've said that in the spot et F denial letter
that they wrote and on several occasions. So I think
the regulation is coming to exchanges. I think regulation is
coming to security token, to the crypto security tokens. I
think it's I think that with regard to stable coins,
this is gonna be a good thing. Right now, the
(19:12):
stable coin market is maybe a hundred and seventy billion
dollars all in. It's grown dramatically, but the truth is
there's a demand for trillions of dollars of US dollar
stable coins, and the reason that that entire market hasn't
grown by an order of magnitude is because companies like
Amazon and Microsoft and government agencies aren't going to move
(19:35):
billions of dollars of stable coins around unless they feel
comfortable that Treasury and Administration endorses them. And when we
see f d i S approved banks, when you see
a JP Morgan issue a stable coin, you may see
a trillion dollars worth of that. And let me just
characterize the entire movement. This is a rotation from an
(19:56):
entrepreneurial driven industry to an institution to really driven industry.
And we're sitting at this point where we're crossing the chasm.
And the question is which and which entrepreneurs will be
institutionalized income public and and get the appropriate regulatory licenses,
Which existing institutions will choose to enter the market, Which
(20:19):
banks like the silver Gate banks of the world will
enter the market, and then um, there will be a shakeout.
And obviously crypto currencies are not going to be around
here in a decade. You're going to see many of
these things go away as the industry shakes out and
as it matures. All right, well, you let me write
to our lightning round. So I want to do some
(20:41):
rapid fire questions here, just looking for quick short answers.
Top three tips for people who want to get into
crypto but don't know where to start. You know, you
should educate yourself first and uh, and you shouldn't really
do anything. And until you have a firm conviction, then
do your dilage ends, be very thoughtful about which vendors
(21:03):
that you work with and and how you move forward.
And then third, take a long, a long time arizon.
Bitcoin is digital property, digital energy, or digital gold. You
have to pick one. Bitcoin is digital energy and it
is the future of the Internet Web two point oh
or three point oh? What do you think? I think?
(21:27):
You know? They're all marketing phrases. If you actually put
a layer of digital energy or in this case, wraps
stoss around your persona as you navigate through cyberspace, you
can completely eliminate all the things that plague us in
the Internet. The next Internet, the next version the Internet
is a layer of digital energy wrapped around digital information.
(21:50):
Quick one m favorite chess move? What is it? Um?
I guess the queen's gambit as an opening? Okay, um,
I hear you like routines. What is your daily routine?
I scan the news, I tweet, hopefully something inspirational and
(22:11):
constructive and cheerful to the entire bitcoin community. I hit
the gym, get in some daily exercise, and then I
take a round of meetings, either business meetings or podcast
or something, work through a bunch of business issues. When
(22:31):
do you look at the price? Is that the first
or second thing? Sometimes? Some days I don't look at
the price, some days I do. Mostly I just I
just look to see the mood so I so I
can read the room and figure out what's appropriate and
constructive to say in order to drive the narrative forward.
You mentioned Twitter, Your Twitter evolution is kind of epic,
(22:53):
and I've got a recent tweet. We've just got a
minute left I want to read back to you. Um.
Bitcoin is a swarm of cyber horn. It's serving the
Goddess of wisdom, feeding on the fire of truth, exponentially
growing ever, smarter, faster, and stronger behind a wall of
encrypted energy. What's the goal here with these tweets? Where
are you going with that? I tweeted that once I
(23:16):
fully grasp what's going on with bitcoin. Bitcoin is a descent.
Is a decentralized network, which means that there are hundred
million plus people out there that are supporters of bitcoin.
There are millions and millions of nodes. It is a
swarm creature right, It's a chain reaction in cyberspace. And
(23:37):
once you understand that that bitcoin is a chain reaction
in cyberspace, it changes your view of the asset and
your view of the world, in your view of the future.
So what does keep you up at night, Michael, I mean,
you have to think about the risks. What do you
worry about? It can't be bitcoin sunshine and rainbows in
(23:58):
Miami every day. The truth is, I'm much more comfortable
today than any point in my business career because I
feel like we have found the right strategy at micro Strategy, right,
the Bitcoin standard strategy. And you know, I'm I'm happier
going to bed every night than ever have been because
(24:19):
I have a mission and my mission is to educate
the world on bitcoin and I think I can do
a lot of good doing that and the world has
a need. So nothing really keeps me up at night.
I'm more motivated than ever. I think that's a great
place to end it. Michael Saylor, founder and CEO of
micro Strategy, Thank you for joining us. I'm so glad
(24:39):
we had some extended time today. I appreciate you taking
the time. Thank you. Emily Bloomberg Studio at One Point
I was produced and edited by Lauren Ellis and Matt Soto,
with special help Mallory Abelhausen, Tiffany Perez, and Margarite Gallerini.
(25:03):
I'm Emily Chang, your host and executive producer. We've got
a great year of shows coming up, so please subscribe
and leave us a review and check out some of
our recent episodes, including my chat with Alphabet and Google
CEO Sundar Pichai and YouTube CEO Susan Wijetski. And from
the crypto world Ethereum creator Vitalic Bututerin and coin Based
co founder fred Urson. Find it all in the Studio
(25:26):
one Point Oh Library
So, how's life in Miami. It's lovely here, all right,
you guys? Ready, okay, Hi everyone. I'm Emily Chang and
welcome to this edition of the Bloomberg Studio One Point podcast.
Today's guest is none other than one of the biggest
crypto bawls out there. He runs the company that owns
more bitcoin than any other company in the world, at
(00:22):
least as of the end. Also, he may well be
the longest running software CEO in history. Michael Sailor started
his career riding the dot com wave and saw that
bubble pop firsthand. Could crypto be another bubble waiting to burst?
Or is it the future? Joining me on this edition
of Bloomberg Studio at One Point, Oh, micro Strategy, Chairman
(00:44):
and CEO, Michael Sailor, micro Strategy. Holding all this bitcoin,
does it ever make you at all nervous? No, Actually,
it gives me great comfort. I don't really think we
could do anything better to position our company in an
(01:07):
inflationary environment than to convert our balance sheet to bitcoin,
because we basically built a balance sheet on a non
sovereign store of value that's not a currency derivative. Two
years ago, we were sitting on a bunch of cash,
and that cash was losing about ten percent of its
purchasing power a year. And then when COVID struck and
(01:27):
the FED took a more accommodated monetary policy, that cash
started losing of its purchasing power years. So my anxiety
was maximized around April May when we had the k
shape recovery and I realized that cash is trash. Everything's
about to get much more expensive, and we needed a strategy.
(01:51):
So we adopted a bitcoin strategy. It's driven up our
stock by a factor of five. You know, in my opinion,
it's saved the company from from a not very pleasant fate.
So I'm totally pleased with where we are today. Just Bitcoin,
none of those other thousands of cryptocurrencies. Look, bitcoin is
digital property. It's universally acknowledged as common property because that
(02:15):
at a fair distribution. No I c oh, no management team.
So Toshi disappeared. It's parap issue to a commodity, to land,
to gold, uh, and it's pretty important that that would
be deemed property. Um, the rest of the cryptos could
be securities. There's there's just a lot of of regulatory
(02:35):
overhanging question about whether their securities or not. And I
think that the great innovation is the creation of common
property in cyberspace. It took us thirteen years to get
to the point where that's universally acknowledged. So that makes
bitcoin the safe haven for a public investor or a
public company. Everything else feels more like either venture capital
(02:59):
or expect elation. Now you personally are and the Internet
can correct me if I'm wrong. The longest running software
CEO in history, you founded it in nine when you
were twenty four years old. What has this thirty two
year ride been like? You know, I learned a lot
of humility became public in so you know, now I've
(03:24):
been in public company CEO for many, many, many quarters.
I lived to see percent of my peers exit the business.
So I didn't really understand this at the time, but
now as I look back, what I realized is all
my peers exited the business because they're forced to grow
(03:44):
their top line in their cash flows at a frenetic rate,
and eventually they get undone by delutive acquisitions and then
they have to sell themselves. Micro strategy. We've been very fortunate,
We've been focused. We soldiered on and We've always had
a passion to make the best software we could and
uh and as our competitors disappeared, we found opportunities. You
(04:08):
grew up as an Air Force brat traveling around the world.
What kind of kid were you? Tell us about your
upbringing a young teenage, Michael, I read a lot of
science fiction. I read pretty much every science fiction book
by all the great science fiction writers. Probably two or
three times. I played Dungeons and Dragons. You know, before
we actually had these, UH, Wizard Warcraft and other games
(04:32):
on computers. We actually had to draw out the dragons,
and we had to write down what's in the dungeon,
and we had to construct our entire virtual world. So
so I think before computers, we used our imaginations to
create simulations and to exercise probability and distribution, and it
(04:52):
taught me a lot about practical statistics. My background led
me eventually to trip over a book by Robert heinel
and called Have Space Suit, Will Travel, where the protagonists
Gallivant's cross the universe, saves the human race from bug
eyed monsters, and for for his services to humanity, gets
a full tuition scholarship to m I T. And it's
(05:15):
stuck in my head that M I T was probably
a good place to go if you believed in engineering
and making the world a better place. You studied aeronautics,
I believe, and then you pivoted to tech and and
founded micro Strategy with one of your M I T
fraternity brothers. And the software basically provides business intelligence, helps
companies make sense of their data, so that, for example,
(05:37):
McDonald's could learn how many Big max it might sell
in a given night in Chicago. Is that right? Yeah.
The idea is to extract all of the data at
an atomic level, like every item sold, every every hour
of the day, and every store in the world, for
every McDonald's. What we discovered is the world's full of
(06:00):
companies that have billions of lines of data, and they're
trying to make sense of them. And they had to
extract those those sophisticated sets of data, compare them to
each other in order to make a decision about a
marketing campaign or a product launch, or even something as
simple as how many items should I have on each
store shelf. And it's worth a lot of money to
(06:21):
get it right, and if you get it wrong, you
find out that you don't have the products you need
when people want to buy those things, and it costs
you a lot of money. So we were in the
right place at the right time. There, you've witnessed some
serious roller coasters. You saw that dot com bubble blow
up and burst before your eyes. What lessons have you
taken away from that that informs your strategy today? I
(06:43):
would boil it down to this stoic observation. Right, you
can acquire a thing, but you know, can you maintain
the thing? And if you can maintain the thing, can
you enjoy the thing? And what I discovered is a
lot of people acquire things they can't maintain and a
lot of things people can maintain things, but they can't
(07:03):
ever enjoy. And so you want to boil it down
to another metaphor, it's laser focus. You have to figure
out what you are the best in the world at
and what you can continue to be the best at
the world at in the face of unrelenting, exponentially increasing competition.
And once you figure out what that is, focus on
(07:25):
it with all of your resolve. And if you do that,
then you can stay in business. Uh. You know that
That's the first thing I learned. That's why I have
laser eyes on Twitter. The whole point of laser eyes
is you've got to you've got a solution. Focus on
the solution. Don't get distracted by all of your good
(07:46):
ideas and allow it to dilute your focus on your
great idea. You're listening to the Bloomberg Studio At one
point o podcast with micro Strategies at Michael Sailor up
next about this crypto winter. Is he feeling the cold?
(08:09):
Sailor shares his predictions for where the bitcoin market or
roller coaster is going next. Stay with us. The decision
to bet on bitcoin to acquire the thing. Would you
(08:31):
say that's your phoenix moment? I would say it probably is.
I never said it like I thought about it like that,
but I feel like, uh, most of my life was
leading up to this point. And I understood the power
of dominant digital networks like Google and Facebook and Amazon
and Apple because I wrote that for a decade. I
(08:53):
also understood the detriment of not being that dominant network.
Micro strategy comp eats against Microsoft. We compete against companies
a hundred times as big as us. When we got
to what I saw was the winning strategy is digital
transformation a view of the dominant network. The losing strategy
(09:14):
is to continue to work, to work harder and exponentially
harder for a currency growing exponentially weaker. And I had
a sense of the consequences if we did nothing, because
I had seen the demise of of my competitors and
I could see where we were headed. If we stuck
with the status quo, we would have to either adopt
(09:36):
a bitcoin strategy or sell the company. And we uh,
and we elected to pursue bitcoin. What was the reaction
from from investors, from other CEO CFOs when you put
bitcoin on your balance sheet in such a big way
Compared to the way they're reacting now, you know, uh,
many people didn't really understand bitcoin very well. They haven't
(10:00):
taken the time to focus on it. Even today, I
would say that of the population hasn't spent ten hours
thinking hard about bitcoin, so so uh in the year,
I think most people are just ignoring it. Um they
really it wasn't really registering with them, maybe one per cent.
(10:22):
I think that when we talk to our investors, what
was interesting is privately, most investors were aware of bitcoin
and they thought it was a good idea publicly. Their
institutions that they're part of our have a three to
five year um time lag from the point at which
they can adopt new ideas. So about this possible winter,
(10:44):
are you really not feeling the cold? Um? Look, if
you're going to invest in bitcoin, a short time horizon
is four years, a midtime horizon is ten years. The
right time horizon is forever. You know, Warren Buffett said,
you know, if you wouldn't hold it for ten years,
you shouldn't hold it for ten minutes. So if you
(11:04):
look at the course of four years, no one's ever
lost money over four years holding bitcoin. And and if
you look at you know, our experience. We started buying
it at ten thousand dollars and now it's up by
a factor of four. So so given the right time horizon,
you're fine. So it's a blessing and a curse. The
blessing is it makes it the most exciting, interesting thing
(11:26):
in the financial universe everywhere in the world. And the
curses it can induce anxiety for people that have a
short attention span or or are focused on a narrow
time horizon. What do you think, then, is behind this
early crash. I think that UM. There's a lot of
dynamics here. If you look at the entire crypto ecosystem,
(11:50):
you have UM. You have a set of regulatory uncertainty,
especially regulatory uncertainty around stable coins and crypto tokens UH
and whether or not their securities, and that creates a
little bit of anxiety. You have a lot of leverage offshore,
right You have a lot of crypto exchanges that can
(12:10):
trade with up to twenty x leverage, and those crypto
exchanges have many many tokens that are cross collateralized, and
between them and the DeFi exchanges, you can get much
higher than twenty x leverage. So that's the second source
of volatility. The crypto markets are almost designed to encourage volatility,
(12:31):
and that creates kind of a love hate relationship between
the crypto ecosystem and the bitcoin hoddlers. The bitcoin hoddlers
are holding for you know, a decade, you know, and
and sometimes for a hundred years and sometimes for a
thousand years. And yet you've got fast money hedge funds
that have a tax incentive, a huge amount of leverage,
(12:54):
and massive volatility. But you have two totally different investment
mental at ease here and when they come together. The
result is you've got, in my opinion, the world's least
risky asset to hold over the next century called bitcoin,
and you've got the world's most volatile fast money market
(13:15):
you know, called crypto. And they're both conjoined, joined at
the hip for better for worse in the year. So
clearly our hold alert. But for the people who are terrified,
who have never been on this roller coaster before, shorter term,
what does the trajectory of bitcoin look like to you
this year? I feel like it's consolidated this level. This
(13:37):
is a great entry point for institutional investors I talked to.
I talked to high net worth individuals, family offices, public
company executives, private company owners, and they watch bitcoin run
up in one and there are a lot of people
that would be afraid to own it if it was
going up four percent a year, But if they're staring
(13:58):
at it and it's and off the all time high,
and it's consolidating, and they see that as being embraced
by people like Bill Miller, by very well respected investors.
It's being embraced by the regulators, it's being embraced by
senators and congressmen and public investors and public companies they're
looking at. This is like a good entry point I'd
(14:20):
ever miss, Emily not to make a more important point,
which is what's really going on here at the macro
level is inflation. The CPI headline inflation is seven percent.
Look at the Turkish lira, it's collapsing. The paco is collapsing.
So there's a volatility story. For a conventional investor in
(14:42):
Manhattan that's got a portfolio of equities, but the world
can't buy the SMP index there in Africa, Asia, South America,
and if they've got their assets and banks, they're going
to have them seized. I can't buy the equity. So
the real story here is digital property that solves a
(15:05):
problem that eight billion people face. The big question is
then are you going to buy more? Yes or no? Yeah,
we're gonna buy more. You know, we're buying more with
our cash flows. We've adopted a bitcoin standard, Emily. That
means that when we generate cash, we sweep it into bitcoin.
We've been generating you know, anywhere from seventy to a
(15:27):
hundred million dollars of cash flow. So we will also
buy bitcoin with debt. We bought bitcoin with one point
seven billion dollars worth a convertible debt. We bought bitcoin
with a five hundred million dollar senior secured note that
we pay six and an eight percent interest on. We
also issued a billion dollars worth of equity at the
(15:49):
market and we converted it all in the bitcoin. So
combinations of cash flow, equity, debt, potentially through other partnerships.
This is Bloomberg Studio. At one point, oh with micro
(16:09):
Strategy founder and CEO Michael Sailor, he promised to host
a yacht party when bitcoin hit one thousand dollars. When
does he think that will be? And what kind of
regulation is he planning for ahead? That's next. This is
Bloomberg Studio. At one point out you promised to host
(16:39):
a yacht party when bitcoin got to a hundred thousand.
When do you think that will be the hundred k party?
You know, when I did that interview, it was the
fall like of and I think bitcoin is training at
fifteen thousand and and uh, you know, John Vallez wrope
me and he said will you host the hunter k party?
(17:01):
And I said, well, sure I will. There was no
doubt in their mind the party is coming quite soon.
I was just amazed at the confidence of bitcoiners. Um,
I don't have a price target for when it's gonna happen.
What I learned is laser focus stuff takes time. I'm
comfortable with us working through this year over year. I
(17:23):
don't I don't need instant overnight success. What kind of
regulation are you anticipating? Which way do you think the
Washington winds are blowing. There's a profound shared appreciation that uh,
digital assets are the future of the financial industry in
the United States needs to lead and I've been pretty
(17:44):
impressed at the support in the Senate, in Congress, from
the administration, and from regulators all around the world for
this entire crypto economy and in the use case as
digital property. I think that the regulatory treatment is pretty clear.
If you sell it at a profit, you lower capital
games on it, just like if you sold any other property.
(18:06):
I think that with regard to the cryptocurrencies, the stable
coins like tether and circle, they're going to be regulated
as currencies. Clearly, the administration wants to see f d
i C approved and ensured banks issue them, so I
think that they we're gonna see the banking sector enter
into the stable coin market. UM. I think that many
(18:28):
other cryptos are deemed as securities and will be deemed
as securities, and they're gonna be regulated as securities. I
think that the marketplace is waiting to see what those
expectations will be. And I think it's pretty clear that, um,
the writing is on the wall with regard to crypto exchanges,
right the SEC wants them to be to abide by
the principles and the rules of national securities exchanges, and
(18:51):
they've said that in the spot et F denial letter
that they wrote and on several occasions. So I think
the regulation is coming to exchanges. I think regulation is
coming to security token, to the crypto security tokens. I
think it's I think that with regard to stable coins,
this is gonna be a good thing. Right now, the
(19:12):
stable coin market is maybe a hundred and seventy billion
dollars all in. It's grown dramatically, but the truth is
there's a demand for trillions of dollars of US dollar
stable coins, and the reason that that entire market hasn't
grown by an order of magnitude is because companies like
Amazon and Microsoft and government agencies aren't going to move
(19:35):
billions of dollars of stable coins around unless they feel
comfortable that Treasury and Administration endorses them. And when we
see f d i S approved banks, when you see
a JP Morgan issue a stable coin, you may see
a trillion dollars worth of that. And let me just
characterize the entire movement. This is a rotation from an
(19:56):
entrepreneurial driven industry to an institution to really driven industry.
And we're sitting at this point where we're crossing the chasm.
And the question is which and which entrepreneurs will be
institutionalized income public and and get the appropriate regulatory licenses,
Which existing institutions will choose to enter the market, Which
(20:19):
banks like the silver Gate banks of the world will
enter the market, and then um, there will be a shakeout.
And obviously crypto currencies are not going to be around
here in a decade. You're going to see many of
these things go away as the industry shakes out and
as it matures. All right, well, you let me write
to our lightning round. So I want to do some
(20:41):
rapid fire questions here, just looking for quick short answers.
Top three tips for people who want to get into
crypto but don't know where to start. You know, you
should educate yourself first and uh, and you shouldn't really
do anything. And until you have a firm conviction, then
do your dilage ends, be very thoughtful about which vendors
(21:03):
that you work with and and how you move forward.
And then third, take a long, a long time arizon.
Bitcoin is digital property, digital energy, or digital gold. You
have to pick one. Bitcoin is digital energy and it
is the future of the Internet Web two point oh
or three point oh? What do you think? I think?
(21:27):
You know? They're all marketing phrases. If you actually put
a layer of digital energy or in this case, wraps
stoss around your persona as you navigate through cyberspace, you
can completely eliminate all the things that plague us in
the Internet. The next Internet, the next version the Internet
is a layer of digital energy wrapped around digital information.
(21:50):
Quick one m favorite chess move? What is it? Um?
I guess the queen's gambit as an opening? Okay, um,
I hear you like routines. What is your daily routine?
I scan the news, I tweet, hopefully something inspirational and
(22:11):
constructive and cheerful to the entire bitcoin community. I hit
the gym, get in some daily exercise, and then I
take a round of meetings, either business meetings or podcast
or something, work through a bunch of business issues. When
(22:31):
do you look at the price? Is that the first
or second thing? Sometimes? Some days I don't look at
the price, some days I do. Mostly I just I
just look to see the mood so I so I
can read the room and figure out what's appropriate and
constructive to say in order to drive the narrative forward.
You mentioned Twitter, Your Twitter evolution is kind of epic,
(22:53):
and I've got a recent tweet. We've just got a
minute left I want to read back to you. Um.
Bitcoin is a swarm of cyber horn. It's serving the
Goddess of wisdom, feeding on the fire of truth, exponentially
growing ever, smarter, faster, and stronger behind a wall of
encrypted energy. What's the goal here with these tweets? Where
are you going with that? I tweeted that once I
(23:16):
fully grasp what's going on with bitcoin. Bitcoin is a descent.
Is a decentralized network, which means that there are hundred
million plus people out there that are supporters of bitcoin.
There are millions and millions of nodes. It is a
swarm creature right, It's a chain reaction in cyberspace. And
(23:37):
once you understand that that bitcoin is a chain reaction
in cyberspace, it changes your view of the asset and
your view of the world, in your view of the future.
So what does keep you up at night, Michael, I mean,
you have to think about the risks. What do you
worry about? It can't be bitcoin sunshine and rainbows in
(23:58):
Miami every day. The truth is, I'm much more comfortable
today than any point in my business career because I
feel like we have found the right strategy at micro Strategy, right,
the Bitcoin standard strategy. And you know, I'm I'm happier
going to bed every night than ever have been because
(24:19):
I have a mission and my mission is to educate
the world on bitcoin and I think I can do
a lot of good doing that and the world has
a need. So nothing really keeps me up at night.
I'm more motivated than ever. I think that's a great
place to end it. Michael Saylor, founder and CEO of
micro Strategy, Thank you for joining us. I'm so glad
(24:39):
we had some extended time today. I appreciate you taking
the time. Thank you. Emily Bloomberg Studio at One Point
I was produced and edited by Lauren Ellis and Matt Soto,
with special help Mallory Abelhausen, Tiffany Perez, and Margarite Gallerini.
(25:03):
I'm Emily Chang, your host and executive producer. We've got
a great year of shows coming up, so please subscribe
and leave us a review and check out some of
our recent episodes, including my chat with Alphabet and Google
CEO Sundar Pichai and YouTube CEO Susan Wijetski. And from
the crypto world Ethereum creator Vitalic Bututerin and coin Based
co founder fred Urson. Find it all in the Studio
(25:26):
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