Organizer, Compiler: Deep Tide TechFlow

Guest: Michael Saylor, Founder of MicroStrategy

Host: Bonnie

Podcast Source: Bonnie Blockchain

Original Title: Bitcoin Jesus Michael: The Turning Point of This Generation! All You Need to Do Is This!

Release Date: November 16, 2024

Background Information

Michael, known as the "Bitcoin Jesus," along with his U.S.-based publicly traded company MicroStrategy, is considered one of the world's most visionary Bitcoin corporate issuers. With his bold investment strategy and unwavering Bitcoin belief, he led the company through a transformation from a traditional software business to one of the top-performing U.S. stocks in 2024. Below, we will explore his path to success and his unique insights on the future of enterprise, individuals, and Bitcoin.

Childhood Reading Competition

Michael's Growth Story

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 U.S. He recalled his love for comic books in first grade, even though he couldn't afford the 25-cent price per comic book. To motivate his reading, his parents promised him a 10-cent reward for every book he finished.

Inspiration from a Reading Contest

Michael's teacher held a reading contest that sparked his competitive spirit. He found 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, he not only completed the contest but also developed a genuine interest in reading, especially a love for science fiction literature, exposing him to works by 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 comic books as he used to, his love for reading still exists.

Diversifying Risk

Microstrategy's Investment Strategy

· Bonnie asked Michael about Microstrategy's investment strategy, especially its decision to heavily invest in Bitcoin.

· Michael confirmed that Microstrategy currently holds 252,220 bitcoins, and his personal bitcoin holdings have slightly increased from the 17,730 announced four years ago. He pointed out that although traditional financial wisdom advocates for diversified investments, in certain situations, concentrated investments may be wiser.

The Logic of Concentrated Investments

· Michael explained his view on risk diversification. He believes that diversified investments are suitable for situations with multiple high-risk options, but if only one option is viable, then concentrated investment is the better choice. He used the analogy of a sinking ship and lifeboats to illustrate this: if only one lifeboat is safe, spreading everyone across different boats is not a wise decision. In the face of hyperinflation, choosing diversified investments only leads to greater risk.

The Uniqueness of Bitcoin

· Michael further elaborated on why Microstrategy chose Bitcoin as an investment. He pointed out that when a company holds $500 million in cash, the interest generated is 0%, while the cost of capital ranges from 15% to 20%. In this scenario, holding cash actually results in a loss for the company, so it needs to find an investment that can bring higher returns. Bitcoin is considered the only truly scarce commodity in the world, capable of outperforming the S&P 500 index in the long run.

The Investment Advantage of Bitcoin

· He emphasized that Bitcoin is not only a unique digital commodity but also has no issuer, giving it a regulatory advantage. For publicly traded companies, holding more than 40% of assets in securities is restricted, making Bitcoin an ideal investment choice. In a do-or-die situation, Microstrategy chose to innovate and explore new investment ideas, leading to a turning point.

I Have to Convince Myself First

The Challenge of Convincing

· Bonnie asked Michael if it was difficult to convince others to accept Bitcoin, as many people still thought of Bitcoin as 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 see it as a peculiar thing when there is no urgent need for it.

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 thinking, they may realize that Bitcoin is an asset, then transition to a trader, starting to trade Bitcoin. After about 100 hours of study, he began to see Bitcoin as an investment, viewing it as a "bank in the network" that can transfer funds without intermediaries.

The Investment Philosophy of Bitcoin

· After over 1000 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 to provide property rights to the global population of 8 billion. Compared to traditional assets, Bitcoin grants equal property rights to everyone, regardless of their location. He emphasizes that buying Bitcoin means you are participating in a global network, and the participants in this network are working to increase your wealth.

The Ethical Significance of Bitcoin

· Michael believes that Bitcoin is not just an economic tool but also a means of economic empowerment that can provide opportunities for everyone, every country, and every institution. He emphasizes that this is the first time in human history that property rights can be transmitted in a way that is not easily deprived. This idea is profound and significant to him.

Keeping Flexible Choices

Reasons for Choosing Bitcoin

· Bonnie expressed her view on Bitcoin, stating that if someone wants to buy an asset that can be passed on for generations, they should choose an asset that the government cannot arbitrarily inflate, such as Bitcoin. She mentioned recent news about a wallet possibly belonging to the U.S. government being hacked, resulting in the theft of $20 million. This prompted her to consider the way Bitcoin is stored.

Optimal Ways to Store Bitcoin

· Michael responded that there is no one "best" storage method, especially considering an individual's time horizon and needs. He pointed out that the longer the time frame, the more important it is to maintain flexibility in your choice. He gave several examples:

· Short-Term Investor: If you are 75 years old, have a stockbroker, and can have him help you buy Bitcoin over the phone, you might opt to purchase Bitcoin in ETF form through companies like Fidelity or Blackrock.

· Large Corporation: If you are a large company, a regulated entity may be more inclined to directly purchase Bitcoin rather than an ETF and choose a compliant custodian.

· Individual in an Unstable Country: If you live in a country with a currency collapse or government instability, self-custody of Bitcoin may be the better choice. In this case, Michael suggests transacting through an overseas entity or entirely self-custodying.

Choosing a Storage Method Based on Circumstances

· 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 you are in (such as a war-torn region or a stable country). Moreover, the time horizon is also a significant factor. For example, if you wish to leave Bitcoin to your granddaughter, and she might live in another country, it is best to choose a self-custody method that she can have full control over.

The Importance of Maintaining Flexibility

· Michael concluded that maintaining flexibility in your choices is key. He believes that if he were to summarize what he learned in business school in one sentence, it would be "keeping your options open." Therefore, owning Bitcoin itself and understanding how to self-custody it is the best way to maintain flexibility.

MicroStrategy as the Top-Performing US Stock

Comparison Between Bitcoin and MicroStrategy

· Bonnie mentioned some impressive numbers: in the past year, Bitcoin has risen by 97%, TSMC by 116%, NVIDIA by 222%, and MicroStrategy by 455%. She asked how investors should view this difference and why MicroStrategy's stock trades at a premium to its underlying asset.

The Multifaceted Value of Holding

· Using oil as an example, Michael explained 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 an oil company also has refineries that can produce various petrochemical products, then the company's value is not just the value of its oil reserves. As a Bitcoin reserve company, MicroStrategy, with $17 billion worth of Bitcoin, inherently possesses considerable value.

The Unique Aspect of MicroStrategy

· Michael points out that the unique aspect of MicroStrategy is its tokenization of Bitcoin. MicroStrategy has created a series of securities to attract capital market investors who are not keen on holding Bitcoin directly. These investors prefer to opt for investment instruments with higher performance rather than plain Bitcoin. For example, MicroStrategy's stock offers 1.5 times leverage on Bitcoin, meaning its volatility and returns are higher than Bitcoin itself.

High-Leverage Investment Options

· Michael further explains that there are investors in the market with varied demands. Some investors seek higher leverage in their Bitcoin investments, such as MicroStrategy's derivatives (like MSTU and MSTX), which provide 2 times the leverage of MicroStrategy, essentially achieving a 3 times leverage on Bitcoin. Additionally, MicroStrategy's options market has also shown significant open interest, exceeding $40 billion.

· MicroStrategy creates leverage by issuing convertible bonds, providing investors with a relatively secure investment option. Investors can benefit from principal protection upon bond maturity while enjoying potential upside gains as the company's stock rises. Michael mentions that the recent performance of a convertible bond transaction has been outstanding, rising by 45% in just four weeks.

Liquidity and Volatility

· Michael emphasizes that MicroStrategy's high liquidity and volatility allow it to borrow funds at low rates as lenders seek this volatility. If MicroStrategy were to invest funds in low-volatility government bonds, it would diminish its value-creation ability. He likens this volatility to the temperature of a car engine, believing that to drive fast, the engine must be kept hot.

Volatility Is Not the Same as Risk

Definition of Volatility and Risk

· Bonnie asks Michael if he feels nervous when the price of Bitcoin drops.

· Michael responds that he does not feel nervous and highlights the difference between volatility and risk. He explains that volatility refers to the fluctuation or dramatic change 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 necessarily mean it is high-risk.

Bitcoin Liquidity and Leverage

· Michael further explained the liquidity and leverage characteristics of Bitcoin. He mentioned that if on a Saturday night you need to sell $1 billion worth of Bitcoin with 10x leverage, you only need to provide $100 million as collateral to complete the transaction. In other asset markets such as gold or real estate, this operation would be impossible.

· Michael emphasized that the Bitcoin network provides high liquidity and leverage, making it still attractive during market fluctuations.

Limitations of Other Assets

He pointed out that other assets (such as gold and real estate) lack liquidity and trust in times of market stress or panic, making them less useful. For example, during a crisis, people might want to sell assets, but selling large assets in these markets is not easy. In contrast, Bitcoin's volatility reflects its utility and flexibility as a financial tool.

Energy in Volatility

· Michael likened 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 although a jet engine produces significant noise and releases hot air while in operation, it is not feared because it is the necessary power to make a flight from New York to Tokyo. Similarly, Bitcoin's volatility is a manifestation of its financial energy, a key factor driving its superior performance.

· Michael's view is that volatility is not equivalent to risk. Bitcoin's high volatility is actually a manifestation of its liquidity and leverage, allowing investors to trade more flexibly in changing market conditions. This characteristic gives Bitcoin a unique value and attractiveness in the financial market.

The Ultimate Financial Operation

Characteristics of Convertible Bonds

· Bonnie asked about the situation of convertible bond holders when the bond matures and MicroStrategy starts to repay the principal, what happens?

· Michael explained that when a convertible bond matures, holders can choose to convert their bonds into MicroStrategy's stock. He mentioned that the conversion price of the first batch of bonds issued by MicroStrategy was around $39, and now the stock price has far exceeded that price, resulting in substantial capital gains for the bond holders.

Bond Conversion and Corporate Strategy

· Michael pointed out that currently, most issued bonds have already exceeded their conversion prices. He stated that it is unlikely to pay off the principal of these bonds and instead expects these bonds to eventually convert to stock. He listed the conversion prices of different bonds, emphasizing that as the price of Bitcoin rises, bond conversion will become more common.

Bitcoin 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 by 21% per year, it will double in value in approximately three years. Therefore, the duration of the debt is around five years, allowing MicroStrategy to increase its capital value when the debt matures.

Leverage and Investment Strategy

· Michael emphasized that MicroStrategy's goal is to maintain moderate leverage to remain competitive in the market. He believes that without leverage, the company may face volatility similar to that of Bitcoin, and the company's investors are all supporters of Bitcoin. He likened the company to a real estate firm, noting that an investment strategy using low-interest borrowing is more attractive than a strategy with no leverage at all.

Goal of Increasing Bitcoin Holdings

· Bonnie concluded that MicroStrategy's ultimate goal is to increase the amount of Bitcoin per share.

· Michael affirmed this, stating that the company is focused on acquiring more Bitcoin in a creative and value-enhancing manner. He introduced the concept of "BTC yield," which measures the growth of Bitcoin per share.

Calculation of Bitcoin Yield

· Michael explained the calculation method of Bitcoin yield, which is to divide the amount of Bitcoin held by the fully diluted shares to determine the growth rate of Bitcoin per share. He pointed out that if the company increases its Bitcoin holdings in a year and the Bitcoin yield is positive, shareholders will not be diluted but will instead benefit.

How Much Money Will You Have in 10 Years

Bitcoin's Long-Term Expectations

· Bonnie asked Michael about the future price of Bitcoin and its growth potential.

· Michael stated that his basic expectation is for Bitcoin to continue to serve as digital capital growth and become a tool for global long-term value storage. Currently, Bitcoin only accounts for 0.1% of global assets, approximately $1.4 trillion, while the total global assets amount to around $900 trillion. He believes that the addressable market for global long-term capital is approximately $450 trillion, so Bitcoin's potential market is still significant.

Bitcoin's Target Price

· Michael expects Bitcoin to gradually grow to represent 7% of global assets, meaning the price of each Bitcoin would reach $13 million. This target is projected to be achieved by 2045. He pointed out that Bitcoin's average annual growth rate over the past four years has been around 50%, but as the market expands and adoption rates increase, this growth rate will gradually slow down. He mentioned that the U.S. dollar money supply has grown by about 7% annually over the past 100 years, so he believes Bitcoin's growth will also maintain a similar trend over the next 20 to 30 years.

Comparison of Bitcoin with Other Assets

· Michael further analyzed the comparison of Bitcoin with other asset classes. He believes that Bitcoin will surpass gold, real estate, and certain stock indices to become the primary choice for storing wealth for the affluent. He predicts that Bitcoin's growth rate will gradually approach the returns of the S&P 500 index (around 10-12%), and as more companies start purchasing Bitcoin, the boundary between traditional capital and digital capital will blur further.

Volatility and Investment Opportunities

· Michael mentioned that Bitcoin's volatility (around 55) is still relatively high compared to the volatility of traditional markets (around 15-16). He believes that Bitcoin's trading volume and global tradability give it a higher potential for returns. He also mentioned that one can conduct custom financial forecasts 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 someone can acquire 5 Bitcoins, then in the next 21 years, they would have $65 million. Although the future purchasing power may be affected by inflation, Bitcoin is still seen as a better investment option compared to other assets.

Does Bitcoin make the rich richer? Or empower the poor?

Empowering Everyone

· Bonnie asked Michael whether the impact of Bitcoin was to make the rich richer or to empower the poor.

· Michael responded that Bitcoin would empower all 8 billion people globally, especially the working class, with greater power that is unmatched by any other financial asset. He emphasized that the uniqueness of Bitcoin lies in the fact that anyone can participate in this asset investment through a smartphone at a low cost, gaining the same property rights as a billionaire.

Equality with Bitcoin

· Michael pointed out that with Bitcoin, the property rights of ordinary people are even better than those of the world's richest individuals (such as Jeff Bezos, Elon Musk, or Bill Gates). The liquidity and tradability of Bitcoin allow everyone to buy and sell at any time, unrestricted by the traditional financial system.

Wealthy Individuals and the Digital Economy

· For wealthy individuals who refuse to accept Bitcoin and the crypto economy, Michael believes they will face the risk of wealth erosion. They may continue to rely on traditional investment returns (usually between 7% to 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 opportunity for this wealth growth.

Bitcoin's Impact on the Capital Market

· Michael believes that Bitcoin will drive the digital transformation of the capital market. Any security associated with Bitcoin will bring better returns and performance to investors. He mentioned that indirectly, Bitcoin will also benefit pension funds, retirees, and people holding Bitcoin-related assets. Currently, about 250 million people hold assets directly or indirectly related to Bitcoin, a number expected to expand to 1 billion.

Want to Make a Lot of Money

Creating Wealth with Bitcoin

· 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 25% of the equity to venture capitalists who believe in Bitcoin and the digital future to raise funds.

Investing in Bitcoin

· Assuming you receive a $3 million investment, you can invest all of that money in Bitcoin. Michael believes that Bitcoin could double every three years, so if you have $6 million in three years, the podcast's valuation could also rise to $15 million. Then, you can raise another $5 million in funding, continue to invest in Bitcoin, and potentially appreciate your assets to $30-40 million within ten years.

Leveraged Investment

· Michael emphasized the key to "aggressive leveraged investment." By allocating a company's cash flow and capital into Bitcoin, a company's profits could potentially double or triple. He explained how wealth growth could be achieved by increasing risk and leveraging Bitcoin's high return potential.

Comparison to Real Estate Investment

· He compared this strategy to real estate investment, noting that real estate typically takes longer to appreciate, whereas Bitcoin experiences faster growth. By simply allocating all capital into Bitcoin instead of choosing specific real estate investments, investors can achieve wealth growth more rapidly.

Advice for the Average Person

· For the average person, Michael suggested allocating a portion of capital meant for long-term holding into Bitcoin. He recommended taking the time to learn about Bitcoin and deciding on an investment ratio based on personal risk tolerance. He believed that savvy investors should strive to shift their capital structure towards Bitcoin to gain higher returns.

Embracing Volatility

· Michael also emphasized that traditional financial wisdom often views volatility as a risk, but he believed that volatility is actually vitality. By embracing Bitcoin's volatility, companies can attract more capital and achieve faster growth. He used MicroStrategy as an example to illustrate how incorporating Bitcoin into the balance sheet led to substantial enterprise value growth.

Rescuing a Taiwanese Company

Challenges in the Taiwanese Manufacturing Industry

· Bonnie mentioned that Taiwan's economic foundation is made up of numerous small and medium-sized manufacturing companies, which are facing survival challenges as manufacturing relocates to other countries.

· Michael noted that many companies are in a "zombie company" state, still profitable but lacking growth momentum, becoming dull and stagnant.

Seeking Transformation Opportunities

· Michael suggested that if discussing how to rescue a $500 million annual revenue company with a 2% growth rate at a board meeting, he would propose a transformative acquisition. He envisioned finding a $2.5 million company with a 50% growth rate and believed this company could grow by 20% to 40% annually over the next 20 years. He believed such a company would be market-dominant with unstoppable products.

Bitcoin as a Solution

· He further suggested that Bitcoin could be seen as a "global tech company" that could be acquired at a 1x revenue multiple. Michael likened Bitcoin to a "universal merger partner" that could help companies globalize, increase growth rates, and enhance stock attractiveness. He emphasized that the value of Bitcoin lies in its growth potential and the accessibility of the global market.

Breaking Traditional Thinking

· Michael pointed out that many companies often hesitate when facing transformation, preferring a slow death over taking risks. He used the electricity revolution as a metaphor, encouraging companies and individuals to embrace new technology as they did with electricity years ago. He believed that digital energy (Bitcoin) could be used to revitalize a company's business and products.

· Michael's key message was that Taiwan's manufacturing companies need to rethink their business models, take risks, embrace new technologies like Bitcoin to achieve growth and transformation. By incorporating Bitcoin into the balance sheet, companies can not only achieve value growth but also enhance their market competitiveness and avoid obsolescence in the ever-changing times.

Opportunity

The Revelation of Fire

· Michael used the metaphor of fire to illustrate the importance of technology. He mentioned that initially, not everyone could immediately understand the various uses of fire when humans first discovered it, but over time, people learned how to use fire to improve their lives, such as for cooking, land clearing, tool making, etc. Eventually, the advancement of this technology allowed humans to create great achievements like skyscrapers.

Acceptance and Learning of Technology

· Michael emphasized that the progress of civilization relies on the acceptance and learning of new technology. He encouraged people everywhere (such as in Taiwan, Africa, or South America) to bravely face new technology instead of feeling fearful. 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.

Opportunities with Bitcoin

· He pointed out that Bitcoin provides an opportunity for those who cannot directly enter the American market. Bitcoin not only represents a pathway to enter the best market but may also allow people to bypass traditional markets and access better ones. Michael believed that Bitcoin is a universal solution to problems, especially suitable for those who feel insecure and excluded.

Targeting the Underserved Audience

· Michael mentioned that many wealthy and powerful individuals often turn a blind eye to their problems because they are too complacent and comfortable. He suggested seeking out those who are aware of their issues and offering Bitcoin as a solution to them. For people living in economically unstable countries like Argentina or Nigeria, Bitcoin may be their way out.

Original Source

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