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00:00So how's life in Miami. It's lovely here. All right you guys ready. OK. He runs the company that owns more bitcoin than any other company in the world. As of the end of 2021 Michael Saylor one of the crypto currencies biggest evangelists 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 1.0 MicroStrategy founder and CEO Michael Saylor. 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 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 10 percent of its purchasing power a year. And then when Covid struck and the Fed took a more accommodative monetary policy that cash started losing 25 percent of its purchasing power. So my anxiety was maximized around April May of 2020 when we had NIKKEI shape recovery and I realized that cash is trash. Everything's about to get much more expensive and we needed a strategy. So we adopted a bitcoin strategy and it's driven up our stock by a factor of five. You know in my opinion it 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 crypto currencies like Bitcoin is digital property. It's universally acknowledged as common property because that is a fair distribution. No IFCO no management team. Satoshi disappeared its para pursue to a commodity to land to gold and it's pretty important that that it be deemed property. The rest of the cryptos could be securities. There's just a lot of of regulatory overhang in question about whether they're securities or not. And I think that the the great innovation is the creation of common property in cyberspace. It took us 13 years to get to the point where that is 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 or speculation. 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 1989 when you were 24 years old. What has this 32 year ride been like. You know I learned a lot of humility. We came public in 1998. So now I've been a public company CEO for many many many quarters. I live to see ninety nine 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 realize is all my peers exited the business because they're forced to grow their top line and their cash flows at a frenetic rate and eventually they get undone by dilutive acquisitions and then they have to sell themself. MicroStrategy. 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 and as our competitors disappeared we found opportunities. You grew up as an Air Force brat traveling around the world. What kind of kid were you. Tell us about your upbringing. A young teen age 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 before we actually had these Wizards War Warcraft and other games 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 worlds. So I think before computers we used our imaginations to create simulations and to exercise probability and distribution. It taught me a lot about practical statistics. My background led me eventually to trip over a book by Robert Heinlein called Have Spacesuit Will Travel where the protagonist gallivanting across the universe saves the human race from bug eyed monsters and for it for his services to humanity gets a full tuition scholarship to M.I.T. and is 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 McDonald's could learn how many Big Macs 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 in every store in the world for every McDonald's. What we discovered is the world's full of 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 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 cost you a lot of money. So we're in the right place at the right time there. You've witnessed some serious roller coasters who saw the dot.com bubble blow up and burst before your eyes. What lessons have you taken away from that that informs your strategy today. I 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 thing. People can maintain things but they can't 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. That and what you can continue to be the best in the world. And in the face of unrelenting exponentially increasing competition. And once you figure out what that is. Focus on it with all of your resolve. And if you do that then you can stay in business. You know that's the first thing I learned. That's why I have laser ISE on Twitter. The whole point of laser ISE is you've got to you've got a solution. Focus on the solution. Don't get distracted by all of your good ideas and allow it to dilute your focus on your great idea. So about this possible winter. Are you really not feeling the cold. You know if you wouldn't hold it for 10 years you shouldn't hold it for 10 minutes. The decision to bet on Bitcoin to acquire the thing would you 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 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 rode that for a decade. I also understood the detriment of not being that dominant network. Micro strategy competes against Microsoft. We compete against companies 100 times as big as us. When we got to 2020 what I saw was the winning strategy is digital transformation. If you have the dominant network the losing strategy 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 ninety nine percent of my competitors and I could see where we were headed if we stuck with the status quo. We would have to either adopt a bitcoin strategy or sell the company. And we and we elected to pursue bitcoin. What was the reaction from from investors from other CEOs CFO OES. When you put bitcoin on your balance sheet in such a big way compared to the way they're reacting now you know many people didn't really understand bitcoin very well. They haven't taken the time to focus on it. Even today I would say that 98 percent of the population hasn't spent 10 hours thinking hard about bitcoin. So. So in the year 2020 I think most people are just ignoring it. And they really it wasn't really registering with them. Maybe 1 percent. 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 there institutions that they're part of are have a three to five year time lag from the point at which they can adopt new ideas. So about this possible winter. Are you really not feeling the cold. Look if you're going to invest in Bitcoin a short time horizon is four years. Meantime time horizon it's 10 years. The right time horizon is forever. You know Warren Buffett said you know if you wouldn't hold it for 10 years you shouldn't hold it for 10 minutes. So if you look at the course of four years no one's ever lost money over four years holding Bitcoin. 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 as it makes it the most exciting interesting thing in the financial universe. Everywhere in the world. And and the curses it can induce anxiety for people that have a short attention span or are focused on a narrow time horizon. What do you think that is behind this early 20 22 crash. I think that there's a lot of dynamics here. If you look at the entire crypto eco system you have you have a set of regulatory uncertainty especially regulatory uncertainty around stable coins and crypto tokens and whether or not they're securities. And that creates a little bit of an anxiety. You have a lot of leverage off shore. You right. You have a lot of crypto exchanges that can trade with up to 20 x leverage. And those crypto exchanges have many many tokens that are cross collateralized. And between them and the D defy exchanges you can get much higher than 20 X leverage. So that's a second source of volatility. The crypto markets are almost designed to encourage volatility and that creates kind of a love hate relationship between the crypto ecosystem and the bitcoin hollers. The bitcoin modelers are holding for you know a decade you know and sometimes for 100 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 and massive volatility. But you have two totally different investment mentalities 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 you know called crypto. And they're both conjoined joined at the hip for better or for worse in the year 2022. So clearly our hotel there. 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 consolidating this love. There's 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 and 20 2021. And there are a lot of people that would be afraid to own it if it was going up 400 percent a year. But if they're staring at it and it's 40 percent 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 as like a good entry point. I'd be remiss Emily not to make a more important point which is what's really going on here on a macro level is inflation. The CPI headline inflation is 7 percent. Look at the Turkish lira. It's collapsing. The peso is collapsing. So there is a volatility story for a conventional investor in Manhattan that's got a portfolio of equities. But 75 percent of the world can't buy the S & P index. They're in Africa Asia South America. And if they've got their assets in banks they're going to have them seized. They can't buy the equity. So the real story here is digital property that solves a problem that 8 billion people face. The big question is then are you going to buy more. Yes or no. Yeah. We're gonna buy more art 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 70 to 100 million dollars a cash flow. So we will also buy Bitcoin with debt. We bought Bitcoin with one point seven billion dollars worth of convertible debt. We bought Bitcoin with a 500 million dollar senior secured note that we pay 6 and an 8 percent interest on. We also issued a billion dollars worth of equity at the market and we converted it all in the bitcoin. So combinations of cash flow equity debt potentially through other partnerships. You promised to host a yacht party when bitcoin got to 100000 thousand. When do you think that will be. You promised to host a yacht party when Bitcoin got to 100000 thousand. When do you think that will be. The 100 K Party. You know when I did that interview it was the fall like of 20 20. And I think they acquired trading at fifteen thousand. And and you know John Valleys wrote me and he said well you hosted 100K party. And I said Well sure I will. There was no doubt in their mind the party's coming quite soon. I was just amazed that the confidence of bitcoins. I don't have a price target for when it's going to happen. What I learned is laser focus stuff takes time. I'm comfortable with us working through this year over a year. I 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 digital assets are the future of the financial industry in the United States needs to lead. And I've been pretty impressed at the support in the Senate and 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 gains on it just like if you sold any other property. I think that with regard to the crypto currencies the stable coins like tether and circle they're going to be regulated as currency. Clearly the administration wants to see FDIC approved and insured banks issue them. So I think that we're going to see the banking sector enter into the stable coin market. I think that many other cryptos are deemed as securities and won't be deemed as securities and they're going to be regulated as securities. I think the marketplace is waiting to see what those expectations will be. And I think it's pretty clear that the writing is on the wall with regard to crypto exchanges. Right. The FCC wants them to be to abide by the principles and the rules of national securities exchanges. And they've said that in the spot ETF denial letter that they wrote and on several occasions. So I think the regulation is coming to the exchanges. I think regulation is coming to security toke 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 the stable coin market is maybe one hundred and seventy billion dollars all in. It's grown dramatically. But the truth is there's a demand for trillions of dollars of U.S. 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 billions of dollars of stable coins around unless they feel comfortable that Treasury and the administration endorses them. And when we see FDIC 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 the entire movement. This is a rotation from an entrepreneurial driven industry to an institutionally 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 and come public and and get the appropriate regulatory licenses which existing institutions will choose to enter the market which banks like the silver gate banks of the world will enter the market. And then there will be a shakeout. And obviously 60 500 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 why did do some 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 and you shouldn't really do anything. And till you have a firm conviction. Then do your diligence. Be very thoughtful about which vendors that you work with and and how you move forward. And then third take a long a long time horizon. 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 2.0 or 3.0. What do you think. I think you know they're all marketing phrases. If you actually put a layer of digital energy or in this case wrap Cito she's 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. Click one favorite chess move. I guess the queen's gambit has an opening. Okay I hear you like routines. What is your daily routine. I scan the news. I tweet hopefully something inspirational and 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 podcasts or something. Work through a bunch of business issues. When do you look at the prices 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. And I've got a recent tweet. We've just got a minute left. I want to read back to you. Bitcoin is a swarm of cyber hornets 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 fully grasp what's going on Bitcoin. Bitcoin is a decent it 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 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 Miami every day. The truth is I'm much more comfortable today than any point my business career because I feel like we have found the right strategy at MicroStrategy right. The Bitcoin standard strategy. And you know I'm happier going to bed every night than I ever have been because 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 MicroStrategy thank you for joining us. I'm so glad we had some extended time today. I appreciate you taking the time. Thank you Emily.

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Bloomberg Studio 1.0: MicroStrategy CEO Michael Saylor

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. (Source: Bloomberg)