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Organized & Compiled by: Deep Tide TechFlow

Guest: Michael Saylor, Founder of MicroStrategy

Host: Bonnie

Podcast Source: Bonnie Blockchain

Original Title: Bitcoin Jesus Michael: The Opportunity for This Generation! You Just Need to Do This!

Broadcast Date: November 16, 2024

Background Information

Michael, known as the "Bitcoin Jesus," and his publicly traded company MicroStrategy are considered one of the most visionary Bitcoin securities issuers in the world. With bold investment strategies and a firm belief in Bitcoin, he has led the company to transform from a traditional software business into one of the best-performing companies in the U.S. stock market in 2024. Below, we will explore his path to success and his unique insights on the future of businesses, individuals, and 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 and New Zealand, as well as several states in the U.S. He recalled his love for comic books in the first grade, even though each comic book cost 25 cents, which he could not afford. To encourage him to read, his parents promised him a 10-cent reward for each book he finished.

Inspiration from the Reading Competition

• Michael's teacher held a reading competition that sparked his competitive spirit. He discovered he could borrow seven books at a time, so he began borrowing science fiction books. Throughout the summer, he read extensively to earn money to buy comic books. Ultimately, he not only completed the competition but also developed a genuine interest in reading, particularly a love for science fiction literature, encountering 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 did before, his love for reading remains.

Diversifying Risks

MicroStrategy's Investment Strategy

• Bonnie asked Michael about MicroStrategy's investment strategy, particularly its decision to concentrate investments in Bitcoin.

• Michael confirmed that MicroStrategy currently holds 252,220 Bitcoins, and his personal Bitcoin holdings have slightly increased from the 17,730 he announced four years ago. He pointed out that while traditional financial wisdom advocates for diversified investments, in certain cases, concentrated investments may be wiser.

The Logic of Concentrated Investment

• Michael explained his view on diversifying risks. He believes that diversification is suitable for situations with multiple options and higher risks, but if there is only one viable option, then concentrated investment is the better choice. He used the metaphor of a sinking ship and lifeboats to illustrate this: if only one lifeboat is safe, it is not wise to spread everyone across different boats. In the face of hyperinflation, choosing to diversify investments would only lead to greater risks.

The Uniqueness of Bitcoin

• Michael further elaborated on why MicroStrategy chose Bitcoin as an investment. He noted that when a company has $500 million in cash, the interest generated is 0%, while the cost of capital is between 15% and 20%. In this case, holding cash leads to losses for the company, necessitating the search for an investment that can yield higher returns. Bitcoin is considered the only truly scarce commodity in the world, capable of outperforming the S&P 500 in the long term.

The Investment Advantages of Bitcoin

• He emphasized that Bitcoin is not only the only digital commodity but also has no issuer, giving it a regulatory advantage. For publicly traded companies, the restriction of holding more than 40% of assets in securities makes Bitcoin an ideal investment choice. MicroStrategy chose to innovate and try new investment ideas in the face of life and death, achieving a turnaround.

I Have to Convince Myself First

The Challenge of Persuasion

• Bonnie asked Michael if it was difficult to persuade others to accept Bitcoin, as many still viewed it as a scam at the time.

• Michael shared his process of convincing himself in 2013. Initially skeptical about Bitcoin, he thought it might fail. He mentioned that the value of Bitcoin often depends on whether people need it; many see it as a curiosity when there is no urgent need.

The Evolution from Doubt to Trust

• Michael described how he gradually changed his perspective. He believes everyone starts as a skeptic, and after several hours of contemplation, they may realize that Bitcoin is an asset, then transition to being a trader and start trading Bitcoin. After about 100 hours of study, he began to view Bitcoin as an investment, seeing it as a "bank in the network" that allows for 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 Bitcoin is not just an investment but a tool that provides property rights to 8 billion people globally. Compared to traditional assets, Bitcoin grants everyone the same property rights, regardless of their location. He emphasized that buying Bitcoin means participating in a global network where all participants are working to enhance your wealth.

The Ethical Significance of Bitcoin

• Michael believes Bitcoin is not only an economic tool but also a means of economic empowerment, providing opportunities for everyone, every country, and every institution. He emphasized that this is the first time in human history that property rights can be transmitted in a way that is not easily stripped away. This concept is profound and important to him.

Maintaining Flexible Choices

Reasons for Choosing Bitcoin

• Bonnie expressed her views on Bitcoin, suggesting that if one wants to purchase an asset that can be passed down through 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 and $20 million stolen, prompting her to think about Bitcoin's storage methods.

The Best Way to Store Bitcoin

• Michael responded that there is no "best" storage method, especially considering individual time spans and needs. He pointed out that the longer the time frame, the more important it is to maintain flexibility in choices. He provided several examples:

  • Short-term investors: If you are 75 years old and have a stockbroker who can help you buy Bitcoin over the phone, you might choose to purchase Bitcoin in ETF form through companies like Fidelity or Blackrock.

  • Large enterprises: If it is a large company, regulated enterprises may prefer to buy Bitcoin directly rather than through an ETF and choose a compliant custodian.

  • Individuals in unstable countries: If you live in a country with currency collapse or government instability, self-custody of Bitcoin may be a better choice. In this case, Michael suggests trading through overseas entities or fully self-custody.

Choosing Storage Methods 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) and the environment (such as war-torn areas or stable countries). Additionally, the time span is an important factor. For example, if you want to leave Bitcoin to your granddaughter, who may live in another country, it is best to choose a self-custody method that allows her to have complete control.

The Importance of Maintaining Flexibility

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

MicroStrategy as the Best Performing U.S. Stock

Comparing Bitcoin and MicroStrategy

• Bonnie mentioned some impressive numbers: over 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 disparity and why MicroStrategy's stock trades at a premium above its underlying assets.

The Multiple Values of Holding Coins

• Michael used oil as an example to explain the difference between investing in Bitcoin and investing in Bitcoin-related companies. He stated that the value of owning a barrel of oil is clear, but if an oil company also owns a refinery that can produce various petrochemical products, then the company's value is not just based on its oil reserves. As a Bitcoin reserve company, MicroStrategy holds $17 billion worth of Bitcoin, which gives it substantial intrinsic value.

The Uniqueness of MicroStrategy

• Michael pointed out that MicroStrategy's uniqueness lies in its ability to securitize Bitcoin. MicroStrategy has created a series of securities that attract capital market investors who do not want to hold Bitcoin directly. These investors prefer investment tools with higher performance rather than simple Bitcoin. For example, MicroStrategy's stock offers 1.5 times leverage on Bitcoin, meaning its volatility and return rates are higher than Bitcoin itself.

High-Leverage Investment Choices

• Michael further explained that there are different types of investors in the market. Some investors seek higher leveraged Bitcoin investments, such as MicroStrategy's derivatives (like MSTU and MSTX), which offer 2x leverage on MicroStrategy, effectively achieving 3x Bitcoin investment. Additionally, MicroStrategy's options market shows significant open interest, exceeding $40 billion.

• MicroStrategy creates leverage by issuing convertible bonds, which provide investors with a relatively safe investment option. Investors can receive principal protection at the bond's maturity while enjoying potential upside gains when the company's stock rises. Michael mentioned that a recent convertible bond trade performed exceptionally well, rising 45% in just four weeks.

Liquidity and Volatility

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

Volatility is Not the Same as Risk

Definitions of Volatility and Risk

• Bonnie asked Michael if he felt nervous when Bitcoin prices fell.

• Michael replied that he does not feel nervous and pointed out the distinction between volatility and risk. He explained that volatility refers to fluctuations or dramatic changes, while risk refers to the expectation that an asset's value will drop to zero. Bitcoin is volatile, but this volatility does not mean it is high risk.

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 with 10x leverage on a Saturday night, you only need to provide $100 million in collateral to complete the transaction. Such operations are impossible in other asset markets, like gold or real estate.

• Michael emphasized that the Bitcoin network offers extremely high liquidity and leverage, making it attractive even during market fluctuations.

Limitations of Other Assets

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

Energy from Volatility

• Michael compared Bitcoin's volatility to the heat in a jet engine, emphasizing that this volatility is the energy driving the performance of the financial system. He stated that while a jet engine produces loud noise and releases hot air during operation, it is not frightening because it is the necessary power to fly from New York to Tokyo. Similarly, Bitcoin's volatility is a manifestation of its financial energy and is a key factor driving its superior performance.

• Michael's view is that volatility does not equate to risk. Bitcoin's high volatility is actually a reflection of its liquidity and leverage characteristics, allowing investors to trade more flexibly when market conditions change. This characteristic gives Bitcoin unique value and appeal in financial markets.

Extreme Financial Operations

Characteristics of Convertible Bonds

• Bonnie asked about the situation for holders of convertible bonds when the bonds mature and MicroStrategy begins to repay the principal.

• Michael explained that when convertible bonds mature, holders can choose to convert their bonds into MicroStrategy stock. He mentioned that the conversion price for the first batch of bonds issued by MicroStrategy was around $39, while the current stock price has far exceeded this price, resulting in substantial capital gains for those holding these bonds.

Conversion of Bonds and Company Strategy

• Michael pointed out that most of the bonds currently issued have already exceeded their conversion price. He stated that it is unlikely they will pay back the principal on these bonds, but rather, it is expected that these bonds will ultimately convert into stock. He listed the conversion prices of different bonds, emphasizing that as Bitcoin prices rise, conversions of bonds will become more common.

Growth Expectations for Bitcoin

• Michael predicts that Bitcoin will grow at an average rate of 29% per year in the long term. He mentioned that even in the current market environment, Bitcoin's growth rate exceeds this expectation. He explained that if an asset grows by 21% per year, it will double in about three years. Therefore, the duration of the debt is around five years, allowing MicroStrategy to achieve capital appreciation by the time the debt matures.

Leverage and Investment Strategy

• Michael emphasized that MicroStrategy aims to maintain moderate leverage 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 supporters of Bitcoin. He likened the company to a real estate firm, noting that the strategy of investing using low-interest loans is more attractive than a strategy with no leverage at all.

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 focuses on acquiring more Bitcoin in a creative and value-adding manner. He introduced the concept of "Bitcoin yield" (BTC yield), which measures the growth of Bitcoin per share.

Calculation of Bitcoin Yield

• Michael explained how to calculate Bitcoin yield, which is the number of Bitcoins held divided by the fully diluted share count, resulting in the growth rate of Bitcoin per share. He pointed out that if the company increases its Bitcoin holdings in a given year and the Bitcoin yield is positive, shareholders will not be diluted but will benefit instead.

How Much Will You Have in 10 Years?

Long-Term Expectations for Bitcoin

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

• Michael stated that his basic expectation is that Bitcoin will continue to grow as digital capital and become a tool for long-term value storage globally. Currently, Bitcoin accounts for only 0.1% of global assets, approximately $1.4 trillion, while the total global asset value is around $900 trillion. He believes the addressable market for long-term global capital is about $450 trillion, indicating that Bitcoin's potential market remains vast.

Target Price for Bitcoin

• Michael anticipates that Bitcoin will gradually grow to 7% of global assets, which means each Bitcoin's price will reach $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 about 50%, but as the market expands and adoption increases, this growth rate will gradually slow. He mentioned that the 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 Bitcoin will surpass gold, real estate, and certain 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 (around 10-12%), and as more companies begin to purchase Bitcoin, the boundaries between traditional capital and digital capital will further blur.

Volatility and Investment Opportunities

• Michael mentioned that Bitcoin's volatility (around 55) is still higher compared to traditional market volatility (around 15-16). He believes that Bitcoin's trading volume and global tradability provide it with higher return potential. He also noted that one can download the "Bitcoin 24 Model" for customized financial forecasting to simulate based on different macroeconomic and technical factors.

Advice for Young Investors

• Michael advised young investors that every Bitcoin purchased today could be worth $13 million in 21 years. If a person can acquire 5 Bitcoins, they will have $65 million in 21 years. Although future purchasing power may be affected by inflation, Bitcoin is still viewed 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 empower the poor.

• Michael stated that Bitcoin will empower 8 billion people globally, especially the working class, in a way that no other financial asset can. He emphasized that the uniqueness of Bitcoin lies in the fact that anyone can participate in this asset's investment at a low cost through a smartphone, gaining the same property rights as billionaires.

The Equality of Bitcoin

• Michael pointed out that with Bitcoin, the property rights of ordinary people are even better than those of the world's wealthiest individuals (like Jeff Bezos, Elon Musk, or Bill Gates). The liquidity and tradability of Bitcoin allow everyone to buy and sell at any time, free from the constraints of the traditional financial system.

The Rich 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 erosion. They may continue to rely on traditional investment returns (typically between 7% and 12%), while those wealthy individuals willing to embrace the digital economy will become even richer and be able to help the working class and the poor share in this wealth growth opportunity.

The Impact of Bitcoin on Capital Markets

• Michael believes that Bitcoin will drive the digital transformation of capital markets. Any securities related to Bitcoin will provide better returns and performance for investors. He mentioned that indirectly, Bitcoin will also benefit pension funds, retirees, and those holding Bitcoin-related assets. Currently, about 250 million people hold assets directly or indirectly related to Bitcoin, and this number is expected to expand to 1 billion.

Want to Make a Lot of Money

Creating Wealth with Bitcoin

• When discussing how to generate significant wealth, Michael proposed a radical strategy. He suggested that if you want to make a lot of money, you could position your podcast as a Bitcoin podcast and value it at $10 million. Then, you could sell 25% of the shares to venture capitalists who believe in Bitcoin and the digital future to raise funds.

Investing in Bitcoin

• Assuming you secure a $3 million investment, you could invest all of it in Bitcoin. Michael believes that Bitcoin could double every three years, so if you have $6 million after three years, the podcast's valuation might also rise to $15 million. Then, you could refinance for $5 million and continue investing in Bitcoin, potentially increasing your assets to $30 million or $40 million within ten years.

High-Leverage Investment

• Michael emphasized that the key is "actively leveraging investments." By allocating the company's cash flow and capital into Bitcoin, the company's profits could double or triple. He explained how to achieve wealth growth by increasing risk and leveraging Bitcoin's high return potential.

Comparison with Real Estate Investment

• He compared this strategy to real estate investment, pointing out that real estate typically takes longer to appreciate, while Bitcoin grows faster. By simply putting all capital into Bitcoin instead of selecting specific real estate, investors can achieve wealth growth more quickly.

Advice for Ordinary People

• For ordinary people, Michael advised investing a portion of their long-term capital in Bitcoin. He suggested taking the time to learn about Bitcoin and determining the investment ratio based on their risk tolerance. He believes that smart 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 to illustrate how incorporating Bitcoin into the balance sheet can lead to significant corporate value growth.

Saving Taiwanese Companies

Challenges in Taiwan's Manufacturing Industry

• Bonnie mentioned that Taiwan's economic foundation consists of numerous small and medium-sized manufacturing companies, which face survival challenges as manufacturing shifts to other countries.

• Michael responded that many companies are in a "zombie company" state, where they are still profitable but lack growth momentum, becoming stagnant and trapped.

Seeking Transformation Opportunities

• Michael suggested that if the board were discussing how to save a company with $500 million in annual revenue and only a 2% growth rate, he would propose a transformative acquisition. He envisioned finding a company valued at $2.5 million with a 50% growth rate and believed that this company would grow by 20% to 40% annually over the next 20 years. He considered such companies to have a monopolistic market with unstoppable products.

Bitcoin as a Solution

• He further proposed that Bitcoin could be viewed as a "global technology company" that can be acquired at 1x revenue. Michael likened Bitcoin to a "universal merger partner" that can help companies globalize, increase growth rates, and enhance stock attractiveness. He emphasized that Bitcoin's value lies in its growth potential and accessibility to global markets.

Breaking Traditional Thinking

• Michael pointed out that many companies often hesitate when facing transformation, preferring to choose slow death over taking risks. He used the electricity revolution as a metaphor, encouraging companies and individuals to embrace new technologies, just as they accepted electricity in the past. He believes that digital energy (Bitcoin) can be used to revitalize a company's business 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 Bitcoin to achieve growth and transformation. By incorporating Bitcoin 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 Insight of Fire

• Michael used the metaphor of fire to illustrate the importance of technology. He mentioned that when humanity first discovered fire, not everyone immediately understood its various uses, but over time, people learned how to use fire to improve their lives, such as cooking, clearing land, and making tools. Ultimately, this technological advancement enabled humanity 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 technologies. He encouraged people, regardless of where they are (such as Taiwan, Africa, or South America), to face new technologies boldly rather than feeling fearful. Especially in the context of globalization, many countries cannot invest in high-tech or real estate like the United States, making it crucial to seek new opportunities.

Opportunities with Bitcoin

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

Finding Demand-Driven Groups

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

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