Stocks Valued on expected cash flows only hold value if those cash flows grow faster than the rate of monetary expansion.
- Michael Saylor
MicroStrategy is the first American public company to purchase Bitcoin in large quantities. Below is an interview with Michael Saylor, CEO of MicroStrategy, on Context Livestream, where he shares the logic behind his company's decision to buy Bitcoin.
Video material - https://www.youtube.com/watch?v=avWV6vF7zr4
Michael Saylor - Member of the Board of Directors and CEO of MicroStrategy, founded the company at the age of 24.
How to view Bitcoin -
The first world-class digital asset
Digital assets worth 100 billion - 200 billion - 500 billion - trillion dollars (fastest growing)
Global open-source currency protocol
The first successful technology that can serve as a monetary network
In March 2020, started purchasing btc
Modern protocol disruption
The cost of money increased from 5/6% to 24%.
How the board thinks about this:
In February, no one understood.
In March, due to the increase in the cost of money, people started doing their homework.
250m in BTC | 250m in stock | 250m in insurance — how to choose?
How to start buying?
3 months of consensus building, understanding the underlying layer
Start making announcements in June
Learning materials: youtube - video, Hope.com (bitcoin resources)
Those who don't understand think it's speculation; those who do understand see it as a solution to a problem
Price in 5/10 years:
You should look at 10 years, 1 year
trillion dollars worth of assets
In the past 10 years, Bitcoin's growth rate was 201% (Gold 1.88; S&P 500 Index 11.6; NASDAQ 17)
shortterm - 4years；long term - 10 years
Looking at the short term is meaningless, it's all noise
The difference between information and noise:
For example, from 2003 to 2021, dollar vs. Argentine Peso, 1:3 - 1:15. You can see the trend every year.
In the past ten years, most currencies have collapsed; most are very weak, only a small portion engage in multilateral transactions.
If you were in Argentina, ten years ago if you had converted all your Pesos to dollars and then deposited those dollars in a bank or sent them overseas, otherwise your assets would depreciate by 15% annually.
Saylor once said that stocks valued by cash flow are only valuable when the growth rate of cash flow is faster than the rate of monetary expansion.
More importantly, it's the Cost of Capital, and the monetary expansion rate, which is approximately equal to broad money support (M2 money expansion); SP 500 index, meaning inflation, which is currently between 24% - 35%.
If inflation is 0%, then the cash flow generated by companies has value; you can own real estate, stocks, bonds, and venture capital (VC).
Then, if inflation is 8%, the cash flow still has some value; there can be companies with 20% growth, like Apple and Amazon.
If it's 24%, then in 10 years, money will be worthless (devalued by a factor of 8); only super risky high-growth assets will remain, such as SPACs.
Currently, with 24% inflation, money is losing value, and stocks are also losing value.
Bonds currently offer only 2%.
Gold - Money is fleeing; it's currently a disaster, with only a 2% annual growth over the past 10 years.
Value stocks cannot exceed 20%.
Tesla, SPACs, meme stocks are all speculative; in 5-10 years, they may not necessarily be more valuable.
In Finance, everything that is agreeable is unsound, and everything that is sound is disagreeable.
- Michael Saylor
How to think about Bitcoin?
The crypto asset network is like establishing a bank in cyberspace, with 21 million units. Buy these units so that neither the CEO, the company, nor the government can dilute the number of units; place them beyond human control. The value of BTC equals the value of the money invested in this network to prevent inflation divided by 21 million.
Started entering BTC when it was at $200 billion. Currently at $1 trillion. 100 million depositors, thousands of companies involved. Fastest-growing digital asset to reach $1 trillion. (Amazon 24 years, Google 22 years, Apple 42 years, Microsoft 44 years, Bitcoin 12 years).
Facebook Social Network；Bitcoin Monetary Network
Has already passed the first phase - irrational exuberance.
Serves as a store of value role ($100-200 trillion).
Will replace gold (10 trillion dead money)
google maps vs paper map
Apple digital photo vs Kodak
Cathie Wood's asset allocation advice - 60% equity, 20% bonds, 20% bitcoin
The year 2021 became the first year of mainstream institutional adoption of BTC
Feb 8th - Tesla fired the first shot
Ted Mathas (CEO of NYL) joined NYDIG - the investment and technology solution provider for BTC
BTC will rise to 20 trillion, twice the value of gold
Should small companies buy BTC in cash or build technology on the blockchain?
Don't blindly put half of your assets into BTC
BTC has increased by 200% over the past 10 years, and by 600% this year
Add a little bit of balance sheet
Shift products towards BTC (for example, insurance companies offering insurance for BTC; mobile companies supporting BTC payments)
Don't directly compete with large companies, but strategically the company can be more open to accepting BTC
If raising 50 million in financing, 25 million could be used to buy BTC (haha, too extreme)
If you want to reduce risks, buy more BTC because the US dollar is losing value
It is recommended that people who want to start mining buy BTC first.
Apple has 275 billion in cash.
If no action is taken, there will be an annual loss of 25% cost of money.
500 million in revenue and 75 million in cash flow, but with a loss of 100 million in cost of money.
Running forward at 5 miles/s, but if the headwind speed is 20 miles/s, then you move backward 15 miles per second. Therefore, it's necessary to choose running with the wind.
Instead of buying Disney, you should buy BTC.
Bitcoin is a company with 200% growth.
A better idea for the balance sheet
I suggest Elon Musk use 20 billion (out of 100 billion in cash) to buy BTC; it's hard to double your market cap through business alone.
Buying 20% bonds is not as good as buying 20% BTC (lol).
Apple‘s investment income is 0；all operation income
Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.
- Archimedes
For "the fulcrum is Bitcoin, the level is Apple's 10 billion cash (30 billion loans),"
500 million in capital - 500 million in BTC
（20% cost of capital） - 100million dollars investment income + 75 million operation income
500 million worth of BTC is now valued at 1 billion - 200 million investment income
Borrowed 650 million in cash - purchased BTC
Borrow 1 billion cash (0% interest) - and bought BTC
5 billion assets in BTC （1 billion return）
The company's current growth is 8%, and shareholders feel it's too slow (compared to Wall Street's expectation of 16%). Instead of borrowing money to buy back the company, it's better to buy BTC.
Summary: His logic is that the cost of capital is 20% per year. If the money just sits idle, you lose 20% annually. However, if you buy assets more valuable than cash (essentially finding an asset whose value growth rate exceeds the monetary expansion rate), it can offset this 20%. He turns this 20% into investment income. Of course, the asset itself also becomes more valuable. The assets themselves are appreciating.
MicroStrategy has done some pioneering work for other CEOs.
Open-source legal analysis, due diligence (DD), government materials, tax advisory services.
Public youtube live show
It can help other CEOs shorten three months of preparation work to three weeks.
The risk of exiting
Black swan events, unknown events
The fear of this unknown thing, btc, by the public (similar to the historical fear of cars, airplanes, modern industry)
How to make the world a better place?
7.8 billion people support BTC
His non-profit organization, Saylor Academy, makes education permanently free
saylor.org - Free learning website
Create a billion Ph.D.s (currently 10 million Ph.D.s) at no cost