Bitcoin as an Economic Bedrock with Michael Saylor of MicroStrategy

Jeremy Allaire: Hello, and welcome to The Money Movement. I am here with Michael Saylor, the chairman and CEO of MicroStrategy. Michael, it's awesome to have you on The Money Movement.

Michael Saylor: Yes, thanks for having me.

Jeremy: Yes, absolutely. Lots to explore today. This podcast is trying to Chronicle the broader movement that's going on around this transformation with money and literally the way that money moves, but at the foundation of that, it really is the inspiration that came from that kernel of Bitcoin which came into our world over 10 years ago and certainly inspired me as a tech entrepreneur. I think like you, I spent most of my career for the prior 20 years building internet software and tech-related businesses then got bit by the crypto bug as it were about 10 years ago.

It was really this very profound set of ideas on what was going to become possible in the world with an invention like Bitcoin, but maybe just to start with that framing, Michael, I'd love to just hear you speak for a couple of minutes about your coming into this space, the fundamental aha moments for yourself, and maybe also just given your background and having been through multiple technology revolutions in software connecting what you've seen historically in tech and software and how that has influenced your thinking about Bitcoin.

Michael: Yes, I think I was catalyzed, propelled into this space by the crisis of 2020, the pandemic. In March of 2020, I think everybody started questioning a lot of values and I think my conclusion is conventional treasury strategy is broken. There's no point in making money anymore if you're going to keep it and so the idea of cash being trash was something that was drummed into my head March of 2020, when I realized I had $500 million of cash and it was going to be deemed worthless by, it was already deemed worthless by the investing public.

At one point, our stock in essence traded at 50% more than the cash level that we had in the balance sheet. The conclusion was it was hopeless. When I concluded that saving and cash was hopeless, you have nothing to lose. This has become mainstream view now, right? Dalio says cash is trash. I think people are saying the 60-40 bond portfolio equity bond allocation is a broken model. Inflation is here. Hyperinflation is the rest of the world. It's not going away.

The federal reserve said there is no inflation and interest rates will be zero forever. Now the federal reserve says, "Well, if we could just keep inflation from increasing beyond 8% forever, we'll declare victory." That was an impedance. When you're trying something and it's not working for year after year, and you're facing a mortality event is either a slow death or a fast death, or do something then you have to do something or you got to sell yourself, or just commit economic suicide.

That's why we did what we did. I think my background in technology is digital transformation and I watched how the digital transformation of music or maps or documents or relationships or communications created Amazon and Apple and Google and Facebook, and trillion-dollar entities. It was pretty clear to me that if you can digitally transform something, it wouldn't be just as good as the thing that you had. It would be a hundred times better, maybe a thousand times better and that's pretty obvious today.

Who remembers Kodak? What's Kodak's market cap? What is Xerox's market cap? Companies like the document companies, the photo companies, Instagram, Facebook, all of these companies have just outstripped their 20th-century analogs. People figured that out in 2020, but the paradigm shift is when you're in the business, you can't contemplate the digital transformation obsoleting you, or it's such a horrifying thought that you don't want to embrace it. That's the paradigm shift.

Jeremy: Like you said, in a lot of those cases, where you had these 100X better products, they were both 100X better products and they completely transformed the unit economics and even the fundamental pricing models of those products. We have ubiquitous free communications that we're not paying a per minute charge. That's just one example, or we have infinite storage and transmission of photos.

We don't pay for film or go pay someone to process it or have storage that we have to worry about. The fundamental unit economics shift as well, I think that gets in the way too, of incumbents, obviously. They have a business that has a structure and a market structure and a pricing structure and unit economics and it's just hard to get out of the way of that.

Michael: Yes, can you go from digitizing the Rand McNally Atlas to self-driving cars because the implication was the map is going to plug into your car and drive you where you want to go, and maybe even the map is going to tell you, "Don't go there, it's closed. People hate it." That's what makes Google a trillion-dollar company and that's why Rand McNally is not with us. If you understand that, then I guess March 2020, the first thing that happened was getting slugged in the head with a two-by-four.

You're failing, your money's going to zero and the second observation was, oh my, there's actually been a digital transformation of property, currency, and energy. I didn't quite appreciate just how profound it was. I just knew I needed a solution so I started looking for digital gold. I wanted a non-sovereign store of value asset so it literally was a question of, do I buy $500 million worth of gold? Or in this case, it was $250 million of gold, or do I buy $250 million of crypto gold and if it's crypto gold, I think engineered synthetic gold is better than gold. Now, I just had to parse through all of the hundreds of options that conclude the Bitcoin was synthetic gold.

That was enough to solve my problem in the near term, you got a mortality situation, you actually have to find synthetic gold. I find it and that was Bitcoin. Now what happened next was that the exploding appreciation that there is a profound demand for two things in this world. One thing is digital property and I classify Bitcoin as digital property. Not just gold. Gold is a start but if you go beyond gold and say a non-sovereign store of value, you might as well convert a second investment home. You get an Airbnb and you might as well convert land and buildings and any other store value asset.

Jeremy: Cryptographic, tokenized forms of assets.

Michael: That's the first observation. The second observation is there's a profound demand for digital currency, and that's your business. There are 8 billion people on the planet and in the near term, they want a high-velocity money. We'll call currency, a medium of exchange. They can use to pay for things day by day, tax free in a compliant fashion so that 8 billion people can trade with a hundred million companies cross borders using a computer, so that's a need.

Then the other need is those 8 billion people, if you look out more than four years, if you've got money, you want to store it for 4 years, 8 years, 12 years, 40 years, a lifetime, they want property and buying a building in Africa, buying a bar of gold, buying a security, it's either not practical, it's not safe, or it's not efficient. When you buy property, you have to buy scarce, desirable property with a low maintenance cost that's portable, that has no counterparty risk.

What you have is a real, huge demand for digital currency and digital property, and once you understand that, then you realize that this is the digital transformation of currency, property, and of course, I'm an engineer so if it's a conservative thing, so it's digital energy. We never had in the first wave, the mobile wave, we never had digital energy, digital property, digital currency and it's such a profound paradigm shift that everybody in the world using this stuff can't imagine what it means to be digitally transformed.

You've got this little turbulence shock wave where some people immediately get it, right? Some people got it 10 years ago. You got in the business early. Some people get it when they have a war. Wars cause you to get it. The war in Ukraine, the Russian sanctions, the pandemic, the war on COVID, the war on fill in the blank. Finally, that caused you to get it. Then there are people that will watch it and it'll evolve and they'll become like the next layer of adopters. Then the late adopters then everybody gets it.

Jeremy: Jeffrey Moore technology adoption, life cycle curve, whatever metaphor you want on that. Yes. I agree. It's interesting. Look, I'd love to drill into a few things. I think it's very easy, and as you noted, I've been engaged in this for about 10 years and have been through a lot of different cycles of this. I'm focused on the broader implications of this technology for application in a lot of areas including the digitization of Fiat, as well as my own deeply held conviction about the long-term role that Bitcoin can play in the world which I think is potentially extraordinary.

I'm looking at it through a few different lenses, but I think it's very easy during a period of risk-off or liquidity issues or other things that are happening right now. It's very easy for people to start throwing up the straw man and punching at it, and effectively, making yet another pronouncement of the death of Bitcoin or what have you, which I don't want to get into that because I don't believe it. I think the more interesting thing though is taking that long view.

I think sometimes I'm asked, "What do I think Bitcoin will be worth 10 years from now?" Or whatever that is. Yes. "And what does that arc look like?" I remember really well because we were in the midst of it. There was the sort of ideological wars in the crypto community that happened around block size and around the Bitcoin block size. What it really had to do was there was a group of people and firms that were interested in how do we scale this to do transactions for the masses and how do we enable the Bitcoin itself to potentially do more? Host more code or execute computation.

Then there was another camp which was-- No, no, no, no, Bitcoin is Bitcoin. We got to keep it at what it is. It's not meant to be a high throughput smart contract platform. It's not meant to be a high throughput transactional platform. In any case, the digital narrative really took hold at that point when Bitcoin core stayed focused in a sense. I think one could argue that was really smart, that focus has proven itself out to be really valuable.

There are other technologies that are being built, you can discuss whether you believe them or not, but fundamentally, that kind of a difficult piece was there. The view, at least from I think some of the smartest long-term thinkers on Bitcoin at the time, which is again, putting this back in like the 2015, 2016 timeframe were the view that the digital gold era of Bitcoin meaning where it's fundamentally utilized as a store of value could take another--

The monetary base that could come into that as a savings vehicle might last 30 years, or it might last 40 years. It might last some very long period of time before it was viable as a unit of account basically, before it was viable as a complete substitution for sovereign money. I'm interested in your view on where is that crossover point? Is that a 5-year, a 10-year or 15-year, a 30-year journey, just at a high level how do you think about that? Then there's a whole set of implications that come from that, which I want to talk about as well.

Michael: Yes. Well, my thoughts on all those subjects is the big blockers were profoundly wrong, and it's pretty obvious they're wrong because Bitcoin cash has lost 99.5% of its value in five years against Bitcoin. The market's trying to tell you, it doesn't like that idea, but the idea was wrong on the surface because if you're changing the protocol economically, it's an ethical lapse.

When you monkey with the block size, you're screwing with the economics for the minors. When you're messing up the economics for the minors, you're undermining the integrity of transaction fees. When you do that, you're undermining the integrity of the security of the network. Generally, I think my view at this point is any kind of software upgrade that materially changes the protocol for any reason other than to cure a fatal security bug is probably an ethical lapse, right? You need to be very, very conservative on those things, like extremely conservative because you're changing the economics for all the actors.

That's why the right answer is don't hard fork the thing, don't change it. Literally, just don't change it. Engineers want to change things but if your solution to improving a crypto is write code, it's probably an ethical lapse because the integrity from Bitcoin comes from work. You want to improve the security of Bitcoin, you spend billions of dollars buying Bitcoin mining equipment and turn it on. Then you spend billions on energy and turn it on. Or you want to improve Bitcoin, you buy billion dollars of Bitcoin and you put it in cold storage.

That's expensive.

You want to tweak a line of code because it makes you feel better, that's cheap but it's a real moral hazard. I think that the Bitcoiners that fought that block size war and won it, they were on the right side of ethics, and technology. I think if you look out in the future, the assets that win in the next a hundred years are the ones that are technically sound, ethically sound, and economically sound, right? If you're monkeying with hyper complicated software, such that your network gets hacked or it crashes, or it goes down, it's not technically sound.

Every time you push a hard fork, you ought to say to yourself, "In about a decade, I'll know whether I introduced a fatal bug." That's how risky it is. Five to ten years, probably ten years later, you can say, "Well, I think the code might be technically sound." That's just how sensitive that is with regard to something like a layer one base layer. I think with regard to economics, you can't change the economics of the network.

So when you destroy the minor's economics, you destroy the integrity of the network. When you advantage one constituency over another constituency, you undermine the integrity of the network, and then nobody trusts it and you have to be able to extrapolate out a hundred years in order to trust it. I think that conservatism of the base layer is important. As for what I think will happen over the next 30 years.

I have a model, which is multi-layered. I mean, this simple model, which is okay, there's a Layer 1, and it does everything. That's just too simplistic and monolithic. I just think it's wrong. It's intellectually bankrupt and wrong. That's one of the problems with the thousands of cryptos that think that they have to build Layer 1s to do transactions. It's just the wrong idea.

The universe doesn't work with one element and it doesn't work at one frequency. A better idea is there's a monetary network. That's the property base, and that's Bitcoin. That's like granite or schist in Manhattan. The speed with which you can move a million tons of schist in Manhattan is very slow. By that standard, if I told you I could move all of Central Park every 130 milliseconds, you would think I was magical, but Central Park hasn't moved in a hundred years, maybe in a thousand years.

The bedrock under Manhattan is 200 million years old. You don't need to move the foundation of the world every millisecond in order to build the world, then you need to build things on top of it. The stuff on top of it are buildings. They last a hundred years and the things in the buildings are businesses, they last five years. The people that are patronizing the business are consumers, they're in there for three hours.

When you see the world moving at a hundred million year frequency, a hundred year frequency, a five year frequency and a three hour frequency, that's life. Trying to make everything move at the same frequency is wrong and trying to use the same elements is wrong. I want to build a building on schist. Well, how do I see through the window of a schist building? That makes no sense. Okay, so like most of these proof of steak networks, it's like building a glass house on a beach.

It's a beautiful view. It lasts for a few years. A hurricane comes along, wipes it all out and is there a place for a glass house on a beach? I don't know how stable is the beach?

Is it in a hurricane tunnel? A logical building is, I have granite, I'm on schist, I have glass and I have steel, right? There's four elements, right? It's common sense. Walk through Manhattan and look at the building, steel, granite on bedrock, looking through glass. Okay, which of those elements do I take away? None of them. You need them all.

Okay, so how's the world going to evolve? Well, the foundation is a very high integrity, highly secure stable Layer 1. The most stable one is Bitcoin. It's proof of work. It needs to be a commodity. It can't be a security. It can't have an issuer. Seven transactions a second is fine. Doesn't need to do any more than that. If I could move all of San Francisco, every 135 milliseconds, it'd be too fast. It's fast enough. I just want to build something on San Francisco.

You could put a hundred trillion dollars of monetary energy into the base layer. You could put 500 trillion of monetary energy into the base layer. Doesn't need any more functionality. We just need for no one to break it. That's why I say we don't really want well-meaning engineers meddling with the base layer. Just don't break it, leave it alone. Now, what's above it. Well, what makes Bitcoin ethical is the fact that it's open and permissionless without an issuer.

The Layer 2 would be lightning, which is an open permissionless transaction protocol, not moving or storing $500 billion of value, but storing $50,000 of value. If I reduce the amount of value at risk, by a factor of a million, I can increase the speed by a factor of a million. The functionality I can decrease the cost of transactions by a factor of a million. I think that it's clear, the world wants one open permissionless, an open-source protocol for transactions. It wants one for money.

In theory, the monetary layer is a winner take all. We're going to collapse to that. That's Bitcoin. Could you have a competitor to lightning? Yes, in theory, right? You can create a competitor to lightning. The thing that makes lightning ethical is that it runs on the Bitcoin token. If you run a crypto asset with a different token is probably a security which makes it not ethical. I think that you can create other open-source protocols. Linux is an open-source protocol, right? Lots of them. Then moving to the last issue, I don't think the world wants currency.

Understanding that money is composed of property and currency in the current environment. The currency is high velocity money and the property is low velocity money. The reason that currencies will continue to exist like the US dollar and the Euro and the yen is because nation states will continue to exist. Until the European union crashes and the Japanese government crashes and the US government is gone, there will be a currency that's mandated as a medium of exchange by that nation state.

If you look out over the next 30 years, I'm not forecasting the fall of all nation states. I think that there'll be CNY-USD-Euro. I think there'll be shuffling a balance of power.

I think that the killer app is a mobile wallet sitting on a phone delivered by Apple or Google or someone, ideally Apple. Apple creates a mobile wallet, builds in a secure element that's like a hardware wallet as an authentication device, implements multifactor authentication, gives you the ability to hold digital euros, digital yen, digital pesos, digital dollars, and allows you to hold digital property like Bitcoin.

Everybody on earth wants it. As long as we have culture and nation states, you're going to have all those things. The trend over the next 30 years is that the strongest digital property ALA Bitcoin is going to eat into $500 trillion worth of property, gold, precious metals, real estate, bonds, equity, indexes, collectibles, however you store your money for the rest of your life. Then the strongest digital currency is going to eat into the economic value of the other currencies.

Right now there's probably $200 trillion stored in currencies, currency derivatives, and the like, and the war is between the USD and the CNY with one Western faction, one Eastern faction. Then the business opportunity is companies that can deliver a digital currency in a compliant fashion, like your firm, like Circle, and then companies that can help deliver and manage digital property in a compliant fashion. Then there'll be all sorts of variations on that country by country in every different industry. I think those two trends are the trends of our lifetime and they're going to continue.

Jeremy: Yes, I buy that at a high level for sure. I think one of the things that's been an interesting question for me, even since I founded Circle nine years ago is does the world return to essentially commodity-backed Fiat pegged currency models versus entirely government debt money?

Michael: You mean, will a country decide to back their currency with a gold or a Bitcoin? Is that what you mean or some other commodity asset?

Jeremy: Yes, so a mixture of things. I think one of the technical things that becomes possible with crypto is the ability to have synthetic expressions of cryptographic value. You could have a synthetic currency that is composed of an allocation of Bitcoin and an allocation of government debt money, and an attempt to have a ratio of that, not unlike the gold standard as it existed in the post world war II era, and certainly in prior eras, in different parts of the world. That power law curve and as you noted, right, there's this ultimate crowding out effect especially in a digitized currency world that takes place because of the extraordinary network effects that come from digitization.

Do those come together in a sense? Does digital property in the form of Bitcoin and digital currency in the form of the predominant government debt monies, Does the world ultimately decide we want have something on the Fiat side that is more sound, not just based on government debt and liability, but actually is built on a building up of reserves and even treaties that exist amongst some group of nations around ratios of reserves or things like that, that gradually returns the world towards a more sound money basis, but acknowledges the fact that you still have people who live in nations and there's treasuries and there's taxes and there's all this good stuff?

Michael: Well, I think the constructive way to think about this is that the digital economy has six layers. The base layer, the Layer 1 is Bitcoin, it's the property layer, the monetary foundation. The Layer 2 is lightning and open transaction protocol or a competitor to it. Layer 3 is an application like Cash App or PayPal that moves it around.

Layer 4 is a derivative. MicroStrategy is a Bitcoin derivative. GBTC is a Bitcoin derivative. Beto is a Bitcoin derivative. Any company that issues a security backed by Bitcoin has created a derivative.

Another form of derivative is any country that issues a currency that is backed by Bitcoin also becomes a Bitcoin derivative. Currency is just like the stock of a country and then Layer 5 is Bitcoin products like Opendime. When you embed some asset into the hardware device and Layer 6 is a service like insurance or any kind of other offering that has Bitcoin or some of that embedded in it. A digital asset.

If we come back to your question, which is, will countries do it? The countries were on a gold standard till 1914 and everybody gets off the gold standard. The Treaty of Genoa in '22, I guess is a gold reserve standard. Then we eventually have a Bretton Woods, another gold reserve standard, but we were never one-to-one backed. We had a small ratio of gold, and maybe the ratio was 100% in 1914 and maybe it was 40% or 30% at Bretton Woods or 20%.

It was probably 5% by 1971 when we threw it all away. I think that if we look at this, it's really a question of how solid is the economy of the country. Probably you'll see sovereign wealth funds go first, like Norway or Middle Eastern sovereign wealth funds. It would be much easier for them to move first into digital assets in a strong Bitcoin position. Then at some point, does it make sense? It makes total sense. For example, it's probably worth a trillion dollars to the Saudis to do this.

If you're holding $500 billion worth of sovereign debt, reasonably speaking, you're losing 10% to 15% of your value a year, so it's a $75 billion a year cost to use a currency instrument or a currency derivative as your treasury asset. If you flip the Bitcoin, it would probably be like an effective $25 billion to $50 billion a year of benefit. You're talking about $100 billion a year over 10 years or a trillion dollars just to flip your treasury asset. I think that we're still early such that the immaturity of the crypto industry in general, with regard to regulatory clarity and the like, keeps a lot of the really big money from entering the space.

If you establish compliance securities, if you fix the accounting, if you establish banking guidelines for how banks can custody this stuff, when that happens, I think you'll see bigger institutional investors go into the asset. I think the governments are normally conservative, but the ones that are most likely to go are the ones that have the biggest upside, the biggest benefit and they're not in fear. There is a political element, which is, like the Gaddafi element. If you look like you're organizing a different currency maybe your regime will disappear.

Jeremy: Right. That makes sense. I think I'm always interested in--

Michael: I'm not holding my breath for the countries that do it, is the summary of that nor do they need to.

Jeremy: Yes. It's--

Michael: The next step is families and companies to establish it as a treasury asset.

Jeremy: I see the treasury asset growth as being the predominant theme over the next 10 years or so, or what have you, but I think we're also I think going to see rapid growth in the utility of Fiat digital currency models like USDC, et cetera that will just continue to have greater regulatory certainty, greater velocity, will create a little bit of a digital currency arms race that is happening and has internet scale and reaches eventually billions of people. I wonder if that combined with the treasury asset development that you're talking about might drive towards that synthetic model sooner rather than later because people will determine that that's actually safer. That it's a safer model--

Michael: It's rational-

Jeremy: Yes. It's rational--

Michael: We just don't know how long it takes and how many people adopt a rational thing.

Jeremy: Yes, no, it's fascinating. It's literally something I've thought about for a very long time and look at. In some ways, the last nine years for me at least is like, "Wow, that's nine years. It's a long time." It's gone really fast on the other hand, but just given where we are on the adoption curve and it seems to be accelerating the next nine years will be pretty dramatic.

Michael: What I think, Jeremy when I look at the digital currency areas. In your business, you've got tether, you've got your offering, you had UST and so one of the currencies was not backed by anything. The other currency is maybe backed by something, and your offering is the most transparent. Back to this issue of, is it technically sound, ethically sound, and economically sound? Well, yours is the most technically and ethically sound and the question was with interest rates at 0%, if you store all your $50 billion at 0%, where's the economic model?

Luckily for you, I'm staring at the swap curve and right now the one year swap is 344 basis points. Believe it or not, the 30-year-swap on the US dollar is 287 basis points.

The yield curve is inverted, but now there's a reasonable ability to get to a one-year risk-free yield of three and a half percent, which means that now you look at a conservative responsibly constructed digital currency and you say, "There's an economic model for that."

You don't really need to reach for yield by playing with DeFi and screwing with all these other mental gymnastics that are either ethically not sound or economically not sound or technically, you're going to get yourself hacked in some random protocol. That leads me to my next observation, which it seems like the next stop is $50 billion in Circle becomes $500 billion in Circle. The real dynamic here, which is not controversial. Everybody, every nation, state adopting Bitcoin as its treasury reserve asset is controversial and that's a heavy lift. What's not controversial is verybody in South America, everybody in Africa, everybody in Asia, everybody in the rest of the world wants [crosstalk].

Jeremy: Emerging markets global demand for digital currency dollars. Yes, it's huge.

Michael: Look at my tweet this morning, the dollar is strengthened against the Australian currency 10% in a year, against the pound 16%, against the euro 17%, against the Japanese yen 24%, and against the Turkish lira 102%. The totally non-controversial observation is-- In an inflationary environment, I ought to just swap my local currency for dollars on my smartphone, I can't trust the bank. They're going to be cap--

Jeremy: Have economic freedom alongside it, have transactional freedom alongside it, vote with your smartphone what economic system you're going to participate in.

Michael: Why shouldn't that expand by an order of magnitude in a hurry? It probably should. The short-term--

Jeremy: I think, we're of the view that we could get to a trillion USDC in circulation. We don't put a specific date on that, but our view is--

Michael: [crosstalk]

Jeremy: It also carries with it that we're in registration to become a public--

Michael: Don't mess it up.

Jeremy: Yes, don't mess it up.

Michael: Yes. You want be public, you want to be transparent, you want to lock down all of your controls-

Jeremy: Totally. Yes. I think-

Michael: -and disclosures.

Jeremy: -continue with that transparency and disclosure and regulatory clarity. I think also there's technological things too. Which is continuing to ensure that this can work economically for people everywhere. That they can with a piece of mobile software be able to transact for pennies on the dollar so to speak. That it becomes super, super, capital efficient and that can scale and other things.

By the way, we're quite excited about Lightning. We're quite excited about Terra, other innovations that are happening in Layer 2 on Bitcoin, leveraging Bitcoin's fundamental soundness and security, and what that could mean for things like USDC as well. I think we're paying really close attention to these overall layered architectures and how that can translate as well.

Michael: I think what the world wants is a public, transparent, trustworthy entity to issue digital dollars that run on lightning rails to 8 billion smartphones at the speed of light for free.

Jeremy: Totally.

Michael: Then they want lots of different ways to get at that. The real digital transformation is 8 billion people manipulating digital property and digital currency on their smartphone as a store value, a medium of exchange, a unit of account. Think globally, right. The US dollar is going to become the unit of account in South America. Before Bitcoin becomes the unit of account everywhere. The US dollar is going to be the unit of account and that's going to be the dominant trend of the next decade, and they all work together.

What the world doesn't want is it doesn't want an opaque company poorly capitalized, non-transparent that's issuing an unregistered security that may or may not be deemed non-compliant, and they don't want some random dude that lives on some island somewhere to monkey with the protocol. There's a lot of stuff that just isn't industrial strength. You'll know that we've reached the next stage when Amazon clears billions of dollars to buy a digital currency for global remittance.

Jeremy: Absolutely.

Michael: When a legitimate nation states, when they buy a billion dollars of Bitcoin to store. When they're moving a billion dollars of Circle and moving a billion dollars of Bitcoin. Then you know you're good. The question you got to ask yourself is what does it take for that to happen? The answer is obvious, they have to trust it. The trust comes with regulatory clarity, understanding integrity, security. It’s like, who do you trust?

Public companies. If I must trust a company, United States based public companies are at the top of the food chain because of all of the legal and cultural expectations about performance of a public company. If you haven't been a public company officer, you don't really understand, "This is just all a headache. Why do I have to go through the trouble?" What people don't realize is, a company like MicroStrategy, we have a hundred lawyers and accountants and we sit in a huddle and we obsess over every clause and every contract, every agreement, not only whether to enter into it, but then how to disclose it.

Then we obsess over how to control for it and how to audit it continually. Your failure is not making a mistake. Lots of people in the crypto industry made a mistake. "Oh, I made a 700 million uncollateralized loan." That's a mistake. The failure is just not disclosing it. "Oh, I made it but I didn't tell you I made it." The failure sometimes is fourth order. There's a person responsible for checking to see whether that was disclosed properly and that person lapsed in their IT account so we fired them. The degree of do care and adult supervision and responsibility is there's a backup to a backup to a backup looking at this.

Jeremy: Totally different level.

Michael: That's what the world wants before they move billions of dollars around on crypto rails.

Jeremy: A lot of people ask me, when we decided to start the process, becoming a public company, which was a year ago or a little over a year ago. People were like, "Why do you want to do that?" It was all about transparency and accountability and control structures and how important that was in our business. That is critical. If we don't have that, people will not build on this. People will not build on it. To us, that is like extraordinarily valuable. No matter how my company stock trades, what's valuable is that ultimately the product company and what we are and who we are, that's what matters. Having being held to the highest standards is really, really critical. That's really the foundational reason.

People even ask me now like, "It's a crappy market. Stocks are down, this, this and that." Why would you want to be a public? It's still the same reason. I'm not looking at this through a short-term lens of what's the valuation going to be next quarter or the quarter after that. It's got to be, not just belts and suspenders. This is foundational stuff. It's really key. I appreciate your comments and insights around that, Michael. It's spot on. Certainly, punctuates as well I think very much how we've been thinking.

Michael: It's worth sharing as a public company, we could spend a year vetting a counterparty and it would take us a year if we went fast. If it was urgent, it's a one year process. In that one year process, we have to get comfortable with the management team, the products, all the contractual relationships, the history of the company from time immemorial, then we have to vet their auditors, their lawyers, their controls and any other relationships they have.

If all of those things check out, and by the way, then our auditors have to trust their auditors. Our lawyers have to trust their lawyers. All of those things have to align for us to decide to give you a single dollar. That's the price you pay. That's just how the world works. On the other hand, if you can jump through that hoop, we can give you a billion dollars as quickly as we can give you $1.

Once you understand that you realize the right thing to do is do the work. Go public. It's more expensive. It's going to cost you more lawyers, more accountants, more time. You have to be more careful. You might have to shed yourself of some part of your business, which is deemed to be too risky. It's the right way to grow if you want to be an industrial strength institutional provider. If you want to live in a gray zone and be an entrepreneur, you just don't do it, but you're not going to get big.

Jeremy: No, I'm right there with you, man. Pretty cool. Well, look, this has been a great conversation and really grateful to have you on. We'll definitely want to have you back and we're going to be checking in on the status of these things every year. Also just excited to be pursuing these big ideas with people like you in building towards this future, which I think we both see really clearly.

Michael: Onward and upward.

Jeremy: Awesome. Thank you, Micheal.