October 11, 2022

Preston Pysh interviews billionaire Michael Saylor about Bitcoin’s energy use. Michael provides insights on why Bitcoin’s energy consumption is “worth it”, and why many people misunderstand its use.

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  • Why does Michael believe that if the money isn’t scarce, every desirable good on the planet will become scarce?
  • What is irrational urgency and why does it exist with a fiat system?
  • Is it possible to not inject energy into money and keep it sound?
  • Why do so many people miscalculate how much energy Bitcoin will use in the future?
  • Why is it so hard for people to wrap their head around Bitcoin mining in general?
  • Is the environmental and energy issues currently playing out in the world connected to what Bitcoin is solving for?
  • Where should we start when we think about the energy and environmental impact that’s currently plaguing the world?
  • Why is it important to keep the monetary constants unchanged?
  • What is Bitcoin really solving for, versus every other crypto asset?
  • Is Bitcoin the best ESG incentive in the world right now?
  • Michael’s overall thoughts on why Bitcoin is so important to get right.


Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

Preston Pysh (00:00:03):

Hey everyone, welcome to this Wednesday’s release of the Bitcoin Fundamentals podcast. Back by popular demand, I have the one and only billionaire, Michael Saylor. This conversation is the second episode in what I would describe as a three part series on why Bitcoin’s proof of work and energy use is essential for changing the world. Last week I interviewed MIT graduate student, Jason Lowery, where he provided an in depth discussion on the importances of the differences between proof of work and proof of stake. This episode can be found as BTC 98. I think it’s important for people to listen to that conversation before listening to this conversation with Michael.

Preston Pysh (00:00:40):

With this conversation, Michael provides an in depth overview of why the energy is so important for protecting Bitcoin security integrity. Additionally, Michael covers numerous misconceptions and failures in critical thinking when it comes to Bitcoin’s energy use. This is a long conversation, but to ensure we covered the topic in a comprehensive way that can serve as a resource that you can share with your family and friends, we made sure that no stone was left unturned. If you ever have somebody tell you that Bitcoin uses too much energy, hopefully this episode number 99 with Michael Saylor is at the top of your list to share with them. With that, sit back and I hope you enjoy the conversation.

Intro (00:01:23):

You’re listening to Bitcoin Fundamentals by The Investor’s Podcast Network. Now, for your host, Preston Pysh.

Preston Pysh (00:01:41):

All right. Like I said in the introduction, I’m here with the one and only Michael Saylor. Welcome back to the show.

Michael Saylor (00:01:46):

Thanks, Preston.

Preston Pysh (00:01:48):

Hey, so Michael, last week I had Jason Lowery on the show, and Jason and I did a deep dive on all the nuances between proof of work and proof of stake. And one of the things that Jason has really outlined in what I think is a meaningful way is why Bitcoin requires energy to tether itself to reality. And this is something that we’re going to cover in depth today during our deep dive on energy, energy FUD and whatnot. I want to start off this conversation with a quote from Jeff Booth, and Jeff has this theory or thesis that if the currency isn’t scarce, every desirable good on the planet will become scarce. I’m curious if you agree with this idea. If you do, I’m kind of curious why you think it’s important.

Michael Saylor (00:02:36):

I do agree with the idea, and I think that ultimately it’s anchored in the laws of thermodynamics. The whole premise that is required for the universe to function is conservation of energy. At first, you have to have the existence of energy, and then you have to have the conservation of energy. In the Bible, the first thing we remember is God says, let there be light that. So everything starts with the deity pointing out that in the absence of light, which is energy, there is no life. Darkness is the absence of energy. Energy is fundamental, but conservation of energy is what makes the universe rational, is what makes it work. I think Jeff Booth is pointing out that, right? That the idea of scarcity of money is the same as saying, if money is conservative, then everything else will be conservative. If money is non-conservative, the world goes insane.

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Michael Saylor (00:03:41):

I think the examples there that pop up, a commodity without energy is a coupon. If I have a dozen eggs and I take the eggs away and I replace it with a sheet of paper or a text message, and I send you a text message saying, “This is good for dozen eggs.” Now, I’ve created a coupon, but I don’t have a commodity anymore. Now, the problem is you might forward the text message to a million of your friends and now you have a million text messages that are all coupons, but you don’t have the eggs that equal the coupons and so that’s an example of non-conservative money, right? Money without energy is credit. Commodities without energy are coupons. In cyberspace, an object without energy is an image. If you have an object and there’s no energy, it’s like Plato shadow, a person without energy is a ghost.

Michael Saylor (00:04:40):

When you make a comment and there’s no energy to back it, it lacks credibility. And if you have a cyber persona and there’s no energy that backs it, again, you lack credibility. The energy itself is what creates cost to a copy. Having a cost to a copy is what creates scarcity. If there is no cost to a copy, if we come back to that example of I want to go to a party and I’ve got one ticket, and then I email the one ticket to 10,000 friends, the first friend gets sent to the party, and the next 9,999 friends either A, they all get into the party and the party collapses in chaos, right? Because now you’ve got 10,000 people in a room that holds 200 people and the fire marshal shuts down the party.

Preston Pysh (00:05:32):

And they’re consuming everything.

Michael Saylor (00:05:33):

That’s what happens when the coupon gets redeemed 10,000 times against a single commodity and the other possibility is the person running the party is competent and they only let the first person in because they’re scanning and they deny the next 9,999 people. Then what you have is chaos at the door, 9,999 people, they’re just mad, they couldn’t get in and kind of a breakdown in civilization because now people all go crazy. They all literally go crazy because they think they had the coupon to get into the party, but they didn’t. And so when I apply that to a coupon for food, a coupon for energy, a coupon for access, et cetera, then what you’ve got is an example of everyone plunged into chaos. Nothing has any credibility anymore. I think Booth says, if money is the ultimate coupon, the ultimate coupon is there’s 21 million units of money and you can’t make anymore. If I want to guarantee that it’ll be scarce, then I inject energy into each coupon, right?

Michael Saylor (00:06:46):

That’s equivalent to 21 million gold coins. It’s not perfect, but it’s energy infuse. So there’s some expense to it, so it’s credible. But if I want to make it perfect, then I have to come up with a decentralized ledger Bitcoin type system where it’s not just 21 million gold coins, it’s 21 million Bitcoin and no one can mine anymore Bitcoin, no matter how much energy they expense. In that case, I go from digital coupon when I have no energy to digital commodity, when I have energy, and if I want to become digital scarcity, I have to have digital protocol or scarcity protocol that the energy circulates within. So Satoshi’s protocol converts a commodity into scarcity. If you kept the same proof of work protocol and use proof of work, but you didn’t cap the Bitcoin at 21 million and you didn’t have halvings, the difficulty adjustment controls the rate at which the 21 million coins come out and says they have to take until the year 2140.

Michael Saylor (00:07:50):

But the halvings asymptotically approach 21 million and what they say is, we exponentially decrease the amount of Bitcoin that get produced until we get to 21 million and then we stop produce anymore. The real genius of Bitcoin there is you haven’t created a coupon, you haven’t even created digital commodity, you’ve created a digital scarcity due to the protocol, and the digital scarcity created absolute scarcity that’s fixed. And because you created an absolute fixed scarcity, you created the perfect money and the ideal investment asset, now people can start to act rationally. The other half of the observation is, if the money is totally not scarce, if I can produce 20 coupons, 200 coupons, 20 million coupons, if I told you here’s the ticket to the party, first guy gets in, you rush to the party knowing that you don’t want to be the second person. That’s where I’m saying, here’s some money.

Michael Saylor (00:08:50):

It’s getting inflated at a fast rate, and you’re rushing to spend it before it goes to zero. One aspect of the lack of scarcity is I’m urgently wanting to use the coupon and I’m using it even though my wife is delivering a baby, and I probably should be in the hospital, but instead I’m rushing off to spend the money because the money will be worthless by the time the baby is born. So you’re caught in this wicked conundrum where you have to make irrational decisions because the clock is ticking, and that’s one big problem.

Preston Pysh (00:09:25):

You’re incentivized that if you know there’s going to be a thousand coupons, I’m now incentivized to go to the gatekeeper, issuing them to try to get to front run everybody else. And this is our Cantillon effect, kind of why that incentive exists in this type of system that you’re describing?

Michael Saylor (00:09:44):

You end up with a dilemma of impatience, like irrational urgency. Then the other dilemma is lack of credibility because since they’re just coupons, and I had the experience, maybe I got in the party first and yeah, that’s good, but if I got to the party third and I got rejected, then I’m angry about it. Now, the next time someone offers me a coupon for something else, here’s a coupon for a dozen oranges, I think, well, this one’s probably also going to go to zero. You go through these phases, the phase of ignorance, I didn’t think there was a problem. I get to the party, I get denied. Then the phase of urgency, I know there’s a problem. I rush to the party, I get in. Then the phase of apathy, there’s no way I can beat 999 other people. Someone will get to the party before me.

Michael Saylor (00:10:33):

So this thing is worthless. It’s toilet paper, I might as well just throw it away. Whenever you give me something, I think it lacks substance and I don’t value it. And so now, you have a breakdown of trust in all the systems, a breakdown of trade, a breakdown of credibility, and we come back to in the economy, you’ve got these classic examples, the money is becoming worthless. I have to trade it for something that isn’t going to become worthless. You just get lots of inefficiency and panic. But in cyberspace, we see this manifested for whenever I post on Twitter, 99 Twitter bots will comment and they will say, “Why isn’t anybody talking about this?” Or they’ll give you the crypto giveaway or they’ll offer to let you join their telegram group to get free trading advice. Those are all examples of non-real people.

Michael Saylor (00:11:29):

They’re not real, so they’re not credible. The credibility disappears from all of the personas. They’re obviously just bots. They’re bots because there’s no energy content in the bot. But what happens by inference is first the credibility disappears from the persona, then the credibility disappears from the comment, and then the credibility disappears from the overall system. I went to a party, there were 500 ghosts, they all lied to me. Then I realized I was the only person at the party. Then the party wasn’t fun anymore. I took myself home and I realized that I’d inadvertently been hanging out in a haunted house. That’s what you get, right?

Preston Pysh (00:12:13):


Michael Saylor (00:12:13):

When you go to a party of ghosts. And what I’ve used, what I’ve said, and metaphorically that describes my DMs and Twitter, I think I have a 100,000 direct messages of which in the 100,000, there are 57 legitimate ones that describes my DMs in Instagram, that describes right now if I go to Twitter and I post something, there might be a 1,000 or 1,500 comments of which there might be 50 real comments. We have all of these ghost parties going on and the best situation is, well, they’re just ignored. But the worst situation is the ghost get in your head and drive you insane, literally insane. What happens when your daughter logs into Instagram and finds an 18 year old football quarterback from the school across town that praises her and then it turns out that’s really a 65 year old inmate. It’s like, you don’t really know what they are. I think Booth’s example is conventional economics and he points out that if the money is not scarce, everything else will be because of hyperinflation and economic collapse. There is no method for storing and rationally allocating energy across time and space, so he’s pointing that out. But that economic metaphor, that can be applied in cyberspace, the same thing happens. In essence, you have a collapse of civility and security and credibility in cyberspace on YouTube or Instagram or Twitter or Facebook. You can also apply it as a biological metaphor. If I suck all the oxygen out of your blood, or if I just open up one of your arteries and your blood pressure goes to zero, and you can also apply… So you’re bleeding to death.

Michael Saylor (00:14:04):

And that’s also an example of an energy collapse. And of course, you have an energy collapse. If I go into a room, maybe I go into a school and the school is in the Arctic and it’s 68 degrees and everybody’s studying and cooperating and working well with each other and they’re very efficient and they’re working in the lab and they’re doing things and they’re constructing things and writing books and poems and playing music. Then I crank the temperature down to 58 degrees and then someone gets up where they walk around a little bit and they go and put a coat and they get distracted. Then I crank the temperature out of 48 degrees and then I crank the temperature out of 38 degrees. At some point, the person that was actually composing the symphony is now just jumping up and down to try to keep from freezing to death.

Michael Saylor (00:14:50):

Then the kids are fighting with each other over who gets the clothes or who gets the blanket. When I crank the temperature down at 28 degrees, there’s no teaching, there’s no creating, there’s no joy. The only thing you’re doing is attempting to avoid freezing to death. And in the midst, there’s a lot of fighting. You close the door, I want to burn your desk. You’ll burn the room down. Why didn’t you give me your lighter? You’re too close to me. Get closer. All sorts of crazy insanity. All of these systems all collapse because the energy and the fluid lapses, the energy lapse. I think classic Austrian economics, as you need hard money in order to solve the coincidence of once and in order to trade over spent across domains, through space and through time. I have to have hard money and hard money is simply efficient energy circulation.

Michael Saylor (00:15:47):

I need a fluid that moves through the system that’s no different than your blood holds oxygen and you’re not bleeding or it’s no different than I’ve got a coolant in the radiator, right? Isn’t there a fluid through the system for heat exchange? That’s what you need. If I want to break it, I either remove the fluid or I put a defect in the circulatory system. Generally, the result is a breakdown of cooperation, a breakdown of trust, a breakdown of credibility, a breakdown of patients. How do I do anything that takes four years if I have enough oxygen for one year? How do I do anything that takes three months if I have enough oxygen for three minutes? The only way that I get something sophisticated done that requires extraordinary cooperation is I have to have a long enough time horizon and I have to have an efficient means of cooperation and money. Money is critical technology for that, but really money is just energy.

Preston Pysh (00:16:52):

Michael, would you…

Michael Saylor (00:16:52):

And we can talk about money, but we should just always take it back to the creation of the universe, which is everything works naturally because of conservation of energy, the existence of energy and matter.

Preston Pysh (00:17:07):

That’s where I wanted to go. When you say conservation of energy, and you talk about how this is so important to the physical universe, is it possible to create a digital money without injecting energy into it? It sounds like you’re saying that’s impossible, is that correctly summarized?

Michael Saylor (00:17:30):

I don’t think you can. I don’t think you can. I think that we only have discovered one way that is settled and universally agreed upon to create digital energy or a digital commodity and the one way is proof of work. I take electricity and I run it through some kind of hashing algorithm. You could do it with SHA-256. I mean, you could probably come up with another hashing algorithm. You can come up with certain other algorithms that do it, but I’m modulating electricity to do work. I’d say bitcoin’s an example of the creation of a digital commodity. As I said before, if you took away the difficulty adjustment and you took away the halvings, you could have a commodity more so than a scarcity. The brilliance of Bitcoin is not just that it’s a digital commodity, but that it’s a digital scarcity. If I uncap the amount of Bitcoin, I just let you continue to create it.

Michael Saylor (00:18:27):

Well, I’ve got a digital commodity. Well, I mean, oil is a physical commodity, and so it’s uncapped. I mean, the reason that oil is not necessarily as good in investment as Bitcoin over the long term is A, it’s not digital and so I can’t carry $10 billion worth of oil on a USB stick, but I can carry $10 billion worth of Bitcoin. And the second reason is it’s not a scarcity. A 100 oil miners or oil refiners can produce a hundred times as much as one, whereas with Bitcoin, a 100 Bitcoin miners can’t produce any more Bitcoin than one Bitcoin miner can produce. Oil’s not a scarcity, it’s a commodity, and it’s the physical commodity. Bitcoin is a digital commodity. Now, other people have launched, I mean, other groups have launched crypto networks that use proof of work, I mean, Ethereum was a proof of work network. You’ve got the Bitcoin forks, a handful of other cryptos that are proof of work networks. That might make them, what would I say?

Michael Saylor (00:19:28):

It might make them an ersatz or an architectural digital commodity. It doesn’t guarantee they’re a specialty or it doesn’t guarantee their digital scarcity. For example, Dogecoin keeps increasing its supply. It’s not a scarcity, it’s a proof of work protocol that creates more and more and more, right? It’s commodity in the same way that someone creates more silver or more soybeans every year. It doesn’t necessarily make them regulatory commodities or ethical commodities. And the distinction there is if Apple computer launched a proof of work network tomorrow and it kept half the coins, it wouldn’t be an ethical commodity. It would be an architectural digital commodity. But Apple computer makes it a security because there’s a pre mine. And so if there’s a pre mine or if there’s an ICO, or if I created a protocol where 10% of all the coins that were mined were funneled to a wallet that I controlled, that I used to pay developers, all of those things make it more of an investment contractor security, even though it’s using energy.

Michael Saylor (00:20:47):

The use of energy doesn’t guarantee that something’s a commodity. The use of proof of work doesn’t guarantee it’s a scarcity, right? Because the protocol is what makes it a scarcity, and the providence is what makes it ethical and a commodity. So Bitcoin is special because it has a providence of Satoshi disappears, that Satoshi coins never moved. There’s no ICO, there’s no central development organization, there’s no protocol that funnels energy to developers and there’s no pre mine. The ethical launch of the digital commodity could create a regulatory commodity or an ethical commodity, which would be deemed as an asset without an issuer, right? An asset without an issuer is a technical definition. The regulatory definition of a commodity. So the oranges, wheat, coal, steel, soybeans, oil, natural gas are all assets without an issuer but they’re not capped. Bitcoin is the asset without the issuer because the ethical providence and the way that it becomes without an issuer is you have to have a consensus mechanism that doesn’t require the coordination of engineers.

Michael Saylor (00:22:06):

The problem with proof of stake is that proof of stake is a simulation of the universe or an imaginary universe. You’re imagining energy and you’re cutting a virtual machine. I literally call it a virtual machine, a virtual machine with virtual energy in the form of virtual tokens for virtual security, all manifested in software code. Someone has to write that software code. And if you write that software code and you keep changing it over and over and over again, then you’ve got this problem, which is how can I continually change the software without someone having influence over the software? In essence, have created a software company. So with Ethereum, the Ethereum Foundation is a software company. There’s a lot of software engineers that have to write the software. They have to be paid, someone has to budget for the payment of the engineers. The only hope you have of something based on software becoming a commodity is you write the software once you gift it to the world, and then you stop changing it and you distributed across 20, 30, 50, a 100, a 1,000 different parties.

Michael Saylor (00:23:18):

And if everybody can run the software and if there’s no need to change it, and if no one organization controls it, now it becomes sufficiently decentralized. So you see, that’s the fact pattern with Bitcoin. The reason it’s important for Bitcoin to be simple is the software, the protocol needed to be substantially finished when it was first released by January 3rd, 2009. They needed to have it done. They couldn’t keep changing the protocol because otherwise you end up with a software company. So proof of work allows you to place the consensus and the security and the integrity of the network in the hands of Bitcoin miners and Bitcoin node runners. So you’re using electricity and you’re using 256 Asics in order to create the security and the integrity of the network. That’s generally thermodynamically bound and it’s open and everybody can participate and anybody can create their own Bitcoin miner.

Michael Saylor (00:24:19):

Anybody can mine Bitcoin, anybody can… Electricity is broadly found in the universe, and you’re not waiting. You don’t need the permission of anybody to allow you to get on a network and mine, nor do you need the permission of anybody to run a node. It’s permissionless and that’s what makes it without an issuer. As soon as you decide that you want to get rid of the energy, then you’ve decided to create a virtual machine, virtual energy. And when they create the energy in a proof of stake network or any other non-energy protocol, you’re not just getting rid of the electricity, you’re also getting rid of the material energy, which is the SHA-256 mining Asic. The application specific integrated circuit is matter, the electricity is energy. You’re limiting the matter and the energy, and the hardware’s important here, just as important as the energy because the electricity is a commodity.

Michael Saylor (00:25:19):

Whereas the thing that creates that makes this a specialty or makes it a scarcity, is the fact that you are modulating the energy through a SHA-256 mining chip and that mining chip is special purpose. That’s important. It’s not a general purpose chip, and it’s also getting exponentially more efficient. The genius of the Bitcoin protocol is that the hardware is proprietary, there’s no other use for it, and it gets exponentially better over time, such that the energy efficiency of the network is improving with Moore’s Law and with the having protocol. That makes this an increasingly efficient security protocol, and it protects the protocol from someone that has a huge amount of commodity computing power or a huge amount of electricity power. It doesn’t matter that you build a fusion reactor that generates thousands of terawatts because it’s not the pure electricity that secures the network, it’s the encrypted energy. It’s the SHA-256 hashes that secure the network. If it was only the electricity, it would be vulnerable to an attack from someone that harnessed the power of the sun.

Preston Pysh (00:26:41):

I think what you’re talking about is one of these questions that I have coming up here, and I’m going to just read this because I think it ties into what you’re saying here. In 2017, the World Economic Forum posted an article that said by 2020, the Bitcoin mining could consume the same amount of electricity every year as is currently used by the entire world. This is the World Economic Forum just a couple years ago. Well, as we know, that calculation was grossly misstated, but that doesn’t stop other experts from still stating such salacious headlines right now that we’re seeing in 2022. What is it that these experts fail to understand about Bitcoin’s energy consumption that I think you’re getting at with what you were just talking about?

Michael Saylor (00:27:20):

I think what they’re missing is that the efficiency, that network is improving with Moore’s Law exponentially. That’s what they’re missing. The other day, I walked through one of these Newport mansions and now you can actually download a mobile app to your phone and then you can download the audio for, and you can listen to the tour guide using AirPods, walking to a mansion in the year 2022. While I watched this, I’m downloading it and sometimes the audio tour is 80 megabytes and sometimes it’s 160 megabytes or something. Then I thought back to when I was at MIT when one of my classmates had a five megabyte hard drive or something, and if you simply took the effi… Then I thought about the efficiency of audio in the 1980s, and you could have easily said, if people continue to use computer music or if Napster spreads computer music, by the year 2010, all of the hardware and all of the electricity in the world will be sucked up listening to rock and roll music.

Michael Saylor (00:28:26):

It would’ve been true if you extrapolated the efficiency of music compression and the cost of hard drives, pretty much would’ve said that we can’t allow teenagers to listen to music on a computing device because the world will come to an end. And you could have said the same thing about digital photos, if this keeps up, then teenage girls taking selfies will suck up all the electricity and all of the minerals in the earth’s crust by the year 20 something or other. And of course, what happens in all cases is the efficiency of computer music and the efficiency of storing files and the capacity of memory, the capacity of computer memory, the capacity of computer drives, these things are increasing exponentially, such that it turns out that people can listen to music on their phones and take photos, and the world doesn’t come to an end.

Michael Saylor (00:29:23):

And so when people make these statements about Bitcoin, what they’re doing is the same thing. They’re missing the point. It’s not secured by energy, it’s secured by digital energy or encrypted energy. And the efficiency with which that encryption is taking place is improving somewhere in the range of 36 to 40% a year. Ironically, Moore’s law is every 18 months to double. If you have an 18% improvement every year due to having protocol, and if you have an 18% improvement every year, because every four years the Asics double, okay, you got 36% a year. And when you start dividing that into 70 with a few twists, you realize in about 18 months, you double the efficiency of the network and you keep doing it for the first 30, 40, 50 years. Maybe you continue to do it for a long time to come. As of today, as far as we can see, we run the numbers.

Michael Saylor (00:30:27):

Bitcoin has taken up maybe 15 basis points of the world’s energy and it’s not clear to me that it’s going to grow that much more. At some point, it is some maximum, and it actually starts to decrease because the proprietary protocol is such that ultimately in the year 2100, it won’t matter whether you have harnessed all the power of a star, it won’t matter because that won’t allow you to build, to create hashes. I could give you all the electricity, the powers of New York City tomorrow, but you can’t generate hashes with it. And unless you can get your hands on 256 mining rigs, set them up in a world class mining center, get the transformers and turn it on, so you can see there’s already a limiting factor there.

Michael Saylor (00:31:15):

On the other side, if Google and Microsoft and Amazon, they all decided tomorrow they’re going to turn all of their data centers into Bitcoin mining data centers, their cost to generate a Bitcoin would probably be like a million dollars of coin and not $10 million of coin because they don’t have Asics, right? And the ASIC isn’t thousand times, it’s million times more efficient. It’s this specialization of labor, the driving of the tractor is a better idea than a hand plow, right? In every field of human endeavor, everything humans put their mind to, we find when we create a specialized machine and then we power that specialized machine, then we overcome any generalist who’s willing…

Michael Saylor (00:32:00):

Then we overcome any generalist who’s well intentioned. I toured the DuPont gunpowder factories. The DuPonts showed up. They set up a factory on a hill where the Brandywine River runs down it. And the reason they wanted this creek is they had to harness the creek for hydro power to turn their water wheel to turn the mills to grind the gun powder.

Michael Saylor (00:32:26):

And so, here are some smart immigrants. They use the power of gravity, the power of water. Then they mix three elements together. They create gun powder. They hand you the gun powder and you blow your way through the mountain. Okay.

Michael Saylor (00:32:41):

And someone starts by saying, “I have this idea. I’m going to build tunnels through mountains.” And some non-technologist says, “No, no, no. We can never build tunnels through mountains that will take every single human being in the world and we will all starve to death because it’s too expensive using our little rubber mallets or our little chisels to chisel our way through the mountains.”

Preston Pysh (00:33:04):


Michael Saylor (00:33:04):

Right. And the point is, we’re not doing it that way. We’re going to use our brains and technology. If you actually back calculate, someone says, “Okay, I’m going to connect San Francisco to New York.” And you back calculate, well, how much energy is it going to take to haul a bucket of water on my back 10 million times? Well, we can’t do that because the human race will suffocate trying to connect New York and San Francisco.

Michael Saylor (00:33:32):

And then if you calculate what it costs to build the railroad, you would conclude it’s too much. And if you calculate the maintenance cost on wooden rails, that’s too much. And the answer is, I invent explosives, I invent steel. I come up with some technique to get through, then I create a locomotive. Then I go and I drill for oil, then I put the oil into the locomotive. Then I drive the train back and forth.

Michael Saylor (00:33:58):

Every single one of those things would have used all of the energy in the world, if you were to attempt. We can’t give public transportation to people, that will use all the energy. All the ox carts in the world will be allocated to letting people commute back into work. We can’t let them live in the suburbs.

Preston Pysh (00:34:19):

Michael, this is hard for, I think for a lot of people to wrap their head around because the examples you’re providing are physical examples that people can relate to. And it makes sense to them when you describe it in that way. But when you think about ASICs and you think about Moore’s Law and you think about how these things that people can’t touch or really understand at the level that you understand and that many people in this space understand, it’s just completely lost on them. It’s intangible. It’s not something they can feel or touch.

Michael Saylor (00:34:49):

Yeah. Bitcoin miner is, it’s a machine to create security in cyberspace. That’s what it is. You have to see it as a mechanism.

Preston Pysh (00:34:59):

Like a digital vault. A digital vault if you will. Is that how you’d describe it?

Michael Saylor (00:35:03):

I would almost describe it as a transmitter of encrypted energy. It creates a wall of encrypted energy. You’re feeding electricity into one end and out the other end comes a hash wall. And then you’re building…

Preston Pysh (00:35:19):

Like a bank vault. Like a bank vault, but virtual. Right?

Michael Saylor (00:35:22):

Yeah, that’s probably… An energy vault. You’re putting electricity in and you’re creating a vault of encrypted energy. And that’s what you’re using to build as your foundation to build civilization in cyberspace. Like I said. And a lot of people can’t figure it out. They can’t work it out. But you ever cross a bridge and you look down at the caissons or the structures the bridges are built on. And the bridge is resting on these, what are they? Caissons I suppose. Resting on these structures. And they’re buried 30 feet down into the East River or the Hudson River.

Michael Saylor (00:35:59):

And the average person can’t figure out how to create that bridge. But that doesn’t mean that the bridge doesn’t work. In this particular case, I see the Bitcoin miners as the foundation to hold up the entire digital ecosystem. And we’re feeding them electricity and then we’re running them through an ASIC. And the ASICs just keep getting more and more efficient.

Michael Saylor (00:36:20):

And just like you take a history of civil engineering and you look at Greek architecture and they’re using stone architraves. Those things crack. And then they replace them with some wooden beams and they crack. And then they come up with the idea of a truss. And a truss creates this, dramatically increases the strength of the beams. And now things stop cracking.

Michael Saylor (00:36:44):

And that works well for a while. And then they come up with arches and then buttresses. And of course, ultimately, they solve the problem when they figure out how to put enough energy into iron to create steel. Iron works and steel works and steel is a material energy. It’s a massively dense energy. And if you want to build structures, you have to create the steel. I think about a steel refinery and I think about how much energy goes into the refining of steel and the heat and the energy. And then you think about what comes out. And then, if you want to build any structure in the world, that steel is the material to build that structure.

Michael Saylor (00:37:23):

Bitcoin miners are energy refiners in a way. And what they spit out is digital energy. They not only create it, but they secure it. You can also think of them as supporting the railroad in cyberspace. It’s a railroad. And there’s a fixed cost to build the railroad and there’s a fixed cost to maintain the railroad when something breaks. But once you’ve got the railroad and it’s properly maintained, now the cost to move tons of cargo from one end of the line to the other in the line has decreased, not by a factor of 10 or a factor 100. It’s probably decreased by a factor of 10,000 to 100,000. It might have decreased by a factor of a million, if you want, you did the energy calculations.

Michael Saylor (00:38:10):

Try to move 80 tons of coal from New York to Chicago in one day without the railroad, without the road on an ox cart. I mean it’s such a silly comparison. Because no one would ever think to do it because it’s almost impossible to do. But when we created the railroads, we created this extraordinarily expensive, upfront engineering project that required a lot of capital investment, very capital intensive.

Michael Saylor (00:38:37):

But then after you’ve created it, then for a… You’ve got a moderate maintenance cost and then you get this super conducting effect where you’re able to move material. And it’s orders and orders of magnitude less cost.

Preston Pysh (00:38:53):

Michael, since Bretton Woods, when we go back in time, the world has become more digital than at that period of time, where you didn’t have these digital units representing energy and representing money. Our currencies have become digital. And with that, there appears to be a need for a technology to tie this virtual digital world to physical reality.

Preston Pysh (00:39:14):

If people are going to desire physical goods but keep virtual records, there needs to be a way to force virtual records to be immutable. Do you see this as the crux of the energy debate? Do you see this as the crux of the environmental situation that we see playing out? And I know those are two very big and separate, maybe not separate, but two separate questions. But I’m curious how you think about this.

Michael Saylor (00:39:41):

Yeah, I think the best way to break it down is in two areas. With regard to currency and digital currency, the problem we have right now is, although the world wants to be digital, there is no digital money. There is only digital credit. Remember when I said money without energy is credit. And so, right now, what you have is credit circulating on the digital network. And the credit is got a first order failing and a second order failing. The first order failing is the credit card network where the settlement is slow once a month or something. The settlement is censored and it’s crippled. I can’t settle between France and Nigeria or between Argentina and China. I can’t settle between the US and China. And you can’t settle with three, four, 5 billion people that aren’t on your credit network.

Michael Saylor (00:40:37):

The first order problem is the settlement is just crippled and it is slow and it is expensive. My transaction will go through a third of the time to a third of the world for two and a half percent fee with a one month delay. After lots and lots of expensive engineering to get the systems to work together and after lots of expensive KYC, AML and compliance issues. That’s the first order problem with circulating credit.

Michael Saylor (00:41:10):

And the second order problem is the underlying asset, the euro, the dollar, the peso. They’re credit and they’re not backed by energy, which means that they’re all lapsing in energy content anywhere from 10% a year, to 50% a year, to 90% a year. Over time, the entire system is collapsing because there’s no energy backing it. And it’s neither a commodity, nor is it a scarcity. It’s not a commodity because any politician can decide to print as much as they want whenever they want so it’s just political money. It’s not a scarcity because it’s not totally capped.

Michael Saylor (00:41:49):

It’s really just mismanaged credit on the base layer with 20th century inefficient banking on the transaction layer. And so that itself is a structural problem. And we can leave that for a moment. I mean, Bitcoin solves that problem by substituting. Bitcoin is the base layer and Lightning as the transaction layer.

Michael Saylor (00:42:10):

And now you go from a velocity of one transaction a month to one transaction a millisecond. You’re increasing velocity by a factor of 10 million. You’re decreasing impedance transaction fee by a factor of 10 million. You’re converting the coupon into a commodity, upgrading it to a scarcity. You’re setting up an energy system that will hold money without energy lapse forever and will move it millions of times or billions of times more efficiently. And you’re making it open as opposed to permissionless.

Michael Saylor (00:42:44):

8 billion people can access any kind of monetary transaction, friction free with instant final settlement. That’s why Bitcoin and Lightning or superior monetary system to fiat currency and credit cards and banks. Now we go to the energy side. The entire energy debate is interesting because I don’t really think bonafide energy activists are focused upon Bitcoin. I’m not even sure if there are bonafide energy activists to tell you the truth, Preston. And I think that the entire debate about energy usage has been corrupted and has always been corrupted by the political process and commercial interests.

Preston Pysh (00:43:30):

In what way?

Michael Saylor (00:43:30):

And so, I think in what you have is a bunch of…

Preston Pysh (00:43:31):

Yeah. In what way?

Michael Saylor (00:43:31):

You have a bunch of propaganda that’s being driven by self-interested groups for either political or for commercial purposes that have generally very little to do with the environment. I might say, out of 100 people or actors that are acting in this bath, there might be one or two that actually are doing it because they actually believe this is an environmentally good thing, whatever they’re advocating.

Michael Saylor (00:43:57):

I think 95 to 98 are doing it because they’re being paid by someone to advocate a certain position. And so let me back up and let’s start with the classic example, the Jack Abramoff affair. If you want to know how lobbying works in DC. It used to be a bunch of people that are playing online poker. I’m very famous for an online poker quote I once said. I once said, “I think Bitcoin’s going the way of online poker, just a matter of time.”

Michael Saylor (00:44:25):

What I should have said, by the way is, “Crypto is going the way of online poker. It’s just a matter of time.” If I’d actually understand the nuance of Bitcoin versus crypto, I would’ve said, “The cryptos are probably going the way of online poker. Just a matter of time.” But here’s the online poker story. A bunch of people set up online poker, gambling sites. Everybody loves them, people like to play online. And it starts to cut into the earnings of a bunch of casinos, especially some Indian casinos.

Michael Saylor (00:44:54):

These India casinos are making a fortune because they’ve been given a government license to allow gambling on their reservation. The Indians decide they want to stop online gambling. They go to DC and they hire a lobbyist, Jack Abramoff. This is all, they made a movie about this, Casino Jack. You can watch the movie, you can read the records.

Michael Saylor (00:45:14):

They give Abramoff tons of money, let’s say 20 million. Abramoff keeps half the money and he turns around and he gives the other half the money to a bunch of fundamentalist ministers, a variety of ministries. Now what do ministries have to do with Indian reservations? Well, he got the ministries to then go and they probably kept a third of the money. He took a third of the money and bought TV ads and he gave a third of the money to the ministers. And the ministers signed a letter and they put the letters in the New York Times, the Wall Street Journal, in the Washington Post and the like.

Michael Saylor (00:45:47):

And they said, “We think online gambling is abomination of the eyes of God, it’s corrupting America’s youth. It’s not Christian, it’s corrupting.” The fundamentalists began lobbying against online gambling. They weren’t lobbying against gambling on Indian reservations or in Vegas, presumably maybe because Junior can’t get there from his bedroom, but he can… I guess there’s some kind of, I argument that somehow it’s much more corrupting for America’s youth. You can do it online and you can play poker.

Michael Saylor (00:46:17):

You had a non-profit organization, seemingly unrelated organization, promote morals. Why did they choose to pursue improvement of morals by shutting down online gambling or online poker? Well, no one’s giving them money to object to other breaches in morality. There’s a customer here offering them money. And so they took the money, they signed the letter. Then Abramoff took the letters to Congress and he marched in front of a bunch of congressmen and senators. And they ended up passing a law making online poker playing illegal.

Michael Saylor (00:46:50):

Okay. They shut down online poker. People go back to the casinos and the Indian reservations. The casinos are happy. Inadvertently, it’s not really a debate about whether you should gamble. It’s a debate about whether or not you should give your gambling money to my competitor or you should do it in person.

Michael Saylor (00:47:09):

This idea, which is I have some money and then dirty money and I use it to corrupt the lobbyist. And then I actually find a non-profit. And the non-profit becomes my front organization to lobby the general public. And then I combine that with a bunch of donations to politicians. Now the politicians can’t just take my money from the Indians and outlaw their competitor. That looks bad. But the politicians can take money from everybody involved and say they’re outlawing the Indians casinos competitor because they want to protect America’s youth, is acceptable.

Michael Saylor (00:47:43):

Everybody gets paid, Abramoff gets paid, the politicians get reelected, they get paid, and the non-profit gets paid. Like an iron triangle. I think that’s been going on since time immemorial, for thousands of years. If you look at the nuclear industry, nuclear looks to be the cleanest, most efficient way to generate energy. And yet it was environmentalist, the Green Peaces of the world, that lobbied against the nuclear industry.

Michael Saylor (00:48:11):

Now why would they do that? Well, because nobody’s paying them money to lobby in favor of the third redwood tree. The redwood tree is not paying you money. If you’re lobbying in favor of ultimately no one’s going to pay you money to save the 19 millionth dolphin. But if somehow I happen to run a fishing operation and my competitor uses carbon fiber fishing javelins, then maybe I can give you money to lobby against the use of inhumane, cruel carbon fiber fishing javelins from these evil offshore people.

Michael Saylor (00:48:49):

And then I shut that down so I can fish the waters and they can’t fish the waters. Ultimately, what you find is the most common driver for all these narratives is someone has an agenda. And the agenda is either a foreign government, like your enemy, like a political enemy has an agenda. Or maybe a frenemy. Maybe a foreign government that trades with you has an agenda. Or a not in kind competitor to you has an agenda.

Michael Saylor (00:49:20):

With nuclear, ironically it was probably the oil and the gas industry that was paying off the non-profits to shut down the nuclear industry and they were very effective at that. We haven’t built a nuclear power plant in 50 years. Okay. Who’s lobbying to stop the creation of a pipeline in the US? Well, who would benefit? The Russians would benefit because they saw the oil. They have their own pipeline, so they might benefit, but also all the Middle Eastern countries would benefit.

Michael Saylor (00:49:51):

If you’re pumping oil out of the desert in the Middle East, you would benefit from a oil and gas pipeline getting shut down in the US. our allies that produce the same product would actually benefit by having a non-profit organization fight for the rights of Indian Native American burial mounds.

Michael Saylor (00:50:12):

You remember all the arguments that were made to keep the pipeline going through in the US? It’s like, “Well, we’re desecrating Native American burial grounds.” No, you need a Native American Indian to campaign for that. How do you do that while you go and you give them tons of money? What does everybody want? A job. Okay, so I will give you a job protesting or I’ll give you a job restoring the Native American burial grounds. I happen to live in Asia and I own billions of barrels of oil, but I’ve decided to take a special interest in restoring Native American burial grounds that happen to be in the 10 square mile radius that the pipeline’s going across.

Michael Saylor (00:50:52):

Now, I’ve got a non-profit, I’ve got a local interest, I funnel the money quietly. Now it becomes an embarrassment for the local politicians. What happens is maybe that campaign works and now they shut down the pipeline, which creates a net shortage of 10 billion barrels of oil that they have to buy from somebody else. But the price of oil goes up and the competitor sells it.

Michael Saylor (00:51:18):

Ironically, it might be an foreign intelligence. If I was a hostile nation state and I wanted to undermine my enemy, I would want them not to build ports, not to build infrastructure, not to build refineries, and not to have oil and not to build nuclear power plants. It might be in foreign intelligence. They have plenty of money and the motive. It might be just a friendly trading partner in Europe or the Middle East.

Michael Saylor (00:51:46):

Remember, it used to be we have these campaigns against child labor. Okay. Well, if the child labor is your 16 year old kid working at McDonald’s, no one much cares. But if the child labor is 16 year old working in a shoe factory in Indonesia. And that’s competing against maybe another factory in the US or another factory not in Indonesia, then maybe I want to actually campaign for the rights of child laborers. And the way that I’m going to help the children in Indonesia is I’m going to make it illegal to buy from that factory so they all lose their jobs and their parents lose their jobs and they all starve to death.

Michael Saylor (00:52:23):

But no one’s going to think about that. They’re going to be thinking about whatever the issue is. The classic trope, propaganda is you can’t tell people what to think, but you can tell them what to think about. My agenda is to shut down a foreign import. I can’t say, “Stop buying from my competitor that’s cheaper and better than me.” I say, “Stop buying from that vendor that’s unethical, that uses child labor.”

Preston Pysh (00:52:51):

Michael, so a lot of this granularity that you’re getting into is I think an area that people probably have never really considered. Let’s say that you have a person who’s looking at the environmental narrative that is hot and heavy, ESG. Hot and heavy right now. I have a hard time even going down that path because it seems like the world, and if you buy into this environmental discussion point that people are making, that they candidly believe in, I’m of the opinion that they haven’t gone far enough upstream to, if the money is in sound, how in the world can we possibly expect the efficiency and optimization of producers and consumers to take place?

Preston Pysh (00:53:42):

It’s like this unit that we’re using in order to conduct trade amongst each other is so mutilated and so distorted that how can we possibly expect it to happen efficiently? And then you’re going to have over consumption if you have all these digital units that have no peg or no scarcity to them. Is that where we should start when we’re thinking about energy and environmental impact?

Michael Saylor (00:54:04):

I think all the ESG fund is originated by and promulgated by the other cryptos. This starts within the crypto industry and it is a fire set by the crypto industry. And so, the whole basis is Bitcoin is bad because it uses energy and we have a better tool that doesn’t use energy using proof of stake. And it’s a not in kind propaganda campaign or marketing campaign. Call it gorilla marketing. This is all just gorilla marketing by other crypto promoters.

Michael Saylor (00:54:35):

And the motive is I want to convince you that you should consider a crypto other than Bitcoin that doesn’t use energy. And also, I want to distract you from the observation that the other cryptos without energy or unregistered securities and therefore, you can’t trade them. And you shouldn’t buy them. It’s not ethical to promote them.

Michael Saylor (00:54:55):

I want to change the subject. There really is no defense to creating a software company and issuing a coupon and selling to the general public without a registration statement. It isn’t morally defensible. It isn’t legally defensible. You can’t start by saying, “I want to do it. Please let me do it.” What you say is, “That thing you’re looking at is interesting, but it’s using too much energy and our thing does the same but without energy.” And they hope you don’t think too much beyond that.

Michael Saylor (00:55:29):

I think you can approach this from two points. But one point is you can make the deep argument that you need sound money. And the problem with that is you have to explain to people this sound money requires energy and it actually requires scarcity, requires more than energy. Gold is not sound money because of all the other defects in gold. It’s just better than the other stuff. Gold is a commodity. What you really want is scarcity for sound money. You can go down that path, but ultimately, the crypto attack is, “Yeah, but we can create our own token without any energy and it’s just as good and it’s just as secure.” And so now, and so you really have to go the other direction, which is to make the observation that if you take the energy out of the coin, you’ve created a coupon. And if you take the energy out of the coin, it’s not money, it’s credit. And if you take the energy out of the coin, it’s not a commodity, it’s a security. And therefore, the only question is how are you going to inject the energy? You can inject the energy into the coin with multiple protocols. You can do it with Satoshi’s protocol. You can inject the energy into the coin with the Doge coin protocol. You can do it with big blocks, small blocks. There’s plenty of other protocols. You don’t need to use SHA-256, but you can’t avoid putting energy into the product if you want to create something of substance.

Michael Saylor (00:57:03):

I think it doesn’t hurt to explain the theory of money and the theory of economics and Austrian economics, and why we’re doomed if we don’t have sound money. It doesn’t hurt. But ultimately, most people that are looking at cryptos and they’re trying to figure out between Bitcoin and all other proof of state coins, they’re definitely not thinking deeply about Austrian economics or sound money. They’re just juggling six different tokens. And they’re probably not considering this for more than 10 minutes to an hour.

Michael Saylor (00:57:34):

And so, in their case, I think the real challenge is to explain to them why there’s a moral hazard and an economic hazard and a technical hazard to take the energy out of the crypto network. The economic hazard is when the energy disappears, it’s easy to spin up 10,000 copycat networks. The real problem is once you go to proof of stake, well the what’s to keep you from making copies, endless copies of all these networks because you’re running on generic hardware using imaginary energy.

Michael Saylor (00:58:09):

How many teams of eight programmers can copy and paste and then spin up an AWS node or set up nodes and gen up their own system. We have 20,000 cryptos now, so there’s no scarcity. And ultimately, the economic hazard is they’ll be 50. And then they’ll all just chew into each other’s monetary premium and then there’ll be 100, then 1,000 and the like.

Michael Saylor (00:58:33):

And so, there’s no way that it will hold value because there’s no scarcity when you take the energy out of it. It becomes a marketing game. It’s really a casino chips or coupons. And you’ll be limited to the value that you can create in a coupon network or a security network, which is two orders of magnitude less than a monetary network. That’s the economic hazard.

Michael Saylor (00:58:59):

The technical hazard, The technical hazard to not using hardware with electricity, not using those two forms of energy, is that you have to create a simulation. And what you’re doing is you’re creating a virtual world. And in the virtual world, you have to simulate everything people might want to do. And it turns out that playing God by creating a simulation of the world is really difficult. For example, you can turn off your Bitcoin mining rig. It’s decentralized. ETH hasn’t figured out how to withdraw your ETH stake token yet.

Preston Pysh (00:59:32):

Yeah. Which is crazy. Which is crazy.

Michael Saylor (00:59:36):

And by the way, it might not be that they haven’t figured out. It might be they don’t wish to.

Preston Pysh (00:59:40):

Yeah. I think that’s where that’s at. Yes.

Michael Saylor (00:59:44):

The technical hazard is I have to have the purge and the surge and the verge. And I’ve got pretty much a decade worth of programming yet to do. I’ve got to implement slashing. And you’ve got slashing and charting and withdrawals and staking and all these things. And you’ve got to deal with a question of, “Well, what if someone does this? And what if they do that? And what if they do this?”

Michael Saylor (01:00:04):

That’s very expensive. That creates a lot of technical debt, it creates very complicated code. And because it creates very complicated code, it creates very large tax surfaces. From a computer science point of view, a lot of security threats to it. But from a maintenance point of view, there’s a lot of technical debt and you have all these regressions.

Michael Saylor (01:00:23):

Every time you add a feature, you break two things. And I know this because I’m actually in a business. There aren’t that many people that have overseen the same software for 30 years. MicroStrategy software, we were coding it in 1993. And so, we have some code, and ’92, ’93, with some ideas there that now they’re approaching the 30th year. And I can say that after you’ve had some software and you’re 30 years in and you’re the sixth generation of engineers, the 13th version, you add a feature and you break something. And you add a feature and you break two things.

Michael Saylor (01:01:01):

You end up spending as much time on regression and technical debt, and then you have to go back and rearchitect the entire thing to make progress. And these are just extraordinarily expensive rearchitecting exercises. And you have this entropy and you reach this entropic frontier. And it just gets to be really, really challenging. That’s a technical risk.

Michael Saylor (01:01:24):

If you live in a universe where the laws of thermodynamics hold, there’s a rate at which heat dissipates everywhere in the world. And you don’t have to write a piece of software to tell Bitcoin miners how to dissipate heat. And you don’t have to write a piece of software to apply gravity and apply the speed of light. You get that for free.

Michael Saylor (01:01:45):

In a virtual world, you have to actually write the software to control things like speed of light and speed of sound and heat dissipation and gravity and materials coefficients. And what you find is it’s not so easy for a small group of engineers to duplicate what the universe worked out over the last 4 billion years. You’re literally playing God and you forgot one thing.

Preston Pysh (01:02:11):

Yeah, go ahead.

Michael Saylor (01:02:12):

And the one thing blows you up. Bitcoin, because it’s working in the physical world, it absorbs all of the physical constants in the universe. And everything works in parallel at the speed of light. Whereas in a staking network, you have to create a simulated world where you have to simulate all these constants and you have to enforce your own concept of time.

Michael Saylor (01:02:35):

And when you attempt to create a decentralized world in software, you’ve bitten off probably more than you can chew. If you get everything perfectly right, then it may work for a time. But of course, if you actually just overlook one thing. And who knows what that one thing is? It only takes one mistake in the code to bring it all crashing down on your head. And of course, when it crashes down on your head, the entire universe collapses on you. It’s a very challenging task. And so that’s why there’s technical hazard.

Michael Saylor (01:03:09):

The one last point I wanted to make is, in addition to the economic hazard and the technical hazard, there’s the moral hazard. And the moral hazard is when you choose to create something that’s a simulated universe and virtual security on a virtual machine, you have to have a very organized software development function. And generally, you’ve created the software development company.

Michael Saylor (01:03:31):

And the software developers have the ability to… If they have the ability to slash or to grant permission or deny access. Or for example, to let you withdraw your tokens are not. At that point the software company has become so central to the network that you’ve created a security. It becomes an investment contract per the definition of securities law because you are relying on the efforts of others. And it’s pretty much impossible not to rely on the efforts of others when you require software-

Michael Saylor (01:04:00):

Rely on the efforts of others when you require software engineers to make the sun shine, and make the planets to revolve around the sun, and enforce gravity and the like. Even if they didn’t want to, if you finish it, eventually they’re subject to nation state attack. The government shows up and says, “You have to do this, block that.” You have to make it impossible to spend the coupons in China, or you’re not allowed to spend the coupons in Russia. Now you’re jiggering with the universe. Now imagine if I was able to stop gravity in Russia, or if I was able to make it impossible to eat oranges in China. Well, they wouldn’t be commodities, right? The universe wouldn’t work if one software engineer has that kind of power. The real problem with a virtual universe and a virtual network is ultimately the power concentrates in the hands of the software engineers, and inadvertently you’ve created an investment contract, and you’re relying on a software company and the token becomes equity in a software company.

Michael Saylor (01:05:08):

There’s an ethical way to sell equity in a software company. It’s been done by Oracle and by Microsoft, but you see it requires registration statements and a whole set of other disclosures, and that’s not in the crypto ecosystem. They can’t really afford to do that. That’s why energy, a la Bitcoin, is the superior approach, and maybe the only approach that we know of for solving the problem of sound money.

Preston Pysh (01:05:36):

Michael, what you’re talking about there with this virtual reality universe constant, I think is such a profound idea, and it’s such a profound idea especially for policy makers. If there’s policy makers out there listening to this anywhere in the world, they’re being fed narratives from this perverted incentive structure that you so eloquently covered, from all these other protocols that are out there, specifically proof of stake protocols. No proof of stake protocol is bigger than this announcement that was recently made with the merge and Ethereum. I’m about to play, I’m going to play you a clip from Vitalik Buterin who’s the, whatever you want to refer to him as, the CEO of [inaudible 01:06:19]. But here’s the clip of him talking about something that completely relates to what you were just describing in detail, Michael, with respect to virtual constants.

Vitalik Buterin (01:06:32):

I think to summarize that, one of the ways that I think about this in a more philosophical way is proof of work is based on the laws of physics and so you sort of have to work with the world as it is. You have to work with electricity as it is, hardware as it is, what computers are as it is. Whereas because proof of stake is virtualized in this way, it’s basically letting us create a simulated universe that has its own laws of physics. That just gives us as protocol developers a lot more freedom to optimize the system around actually having all of the different security properties that we want. If we want the system to have a particular security guarantee, and then often there is a way to modify the [inaudible 01:07:16] mechanism to also achieve it. It’s just much more flexible and it shows through in the efficiency and the security of the network.

Preston Pysh (01:07:26):

Michael, what are your thoughts?

Michael Saylor (01:07:29):

Giving the protocol developers the freedom to optimize the system as they wish is what makes it a security and not a commodity. The whole reason that it doesn’t work is because you’ve got us. Who does us refer to right? In the entire [inaudible 01:07:47]? Presumably us refers to a small group or a defined group of protocol developers that are tinkering with the code in order to make the universe the way they want it to be. That makes it a software company and that makes ETH an investment contract and that makes every ETH investor reliant upon the efforts of others. That throws into a bunch of questions, which is, there’s so many different problems with this.

Michael Saylor (01:08:16):

One problem is you’re implying that you’re going to get one group of software engineers to write software to simulate the entire universe. Good luck with that. But the second problem is if one group of software engineers did write the software, that makes it a investment contract. The only way for it to be a commodity is you have to have dozen different groups of software engineers without coordination bouncing into each other randomly agreeing on some software code that simulates the universe after lots of bitter dissent without any one of them able to take a leadership role.

Michael Saylor (01:08:55):

You think about it and you just think, where to even start? If you found the hundred smartest scientists in the world that ever lived and you put them on the team to write the code, it would be a security and that would be an investment contract, and it’s not a commodity. But if you found the not a hundred smartest people, they’d probably screw it up. You probably can’t write software that simulates the universe. It’s not so easy to do it perfectly for a billion years, even for a year.

Michael Saylor (01:09:28):

Then the third problem is you just can’t have… Vitalik implies that they’re just going to keep changing it whenever they wish for whatever reason they wish. Well, who appointed him God, and who appointed the ETH developers God? If the people that talk like that are software company CEOs, if you’re the CEO of a software company and you have the controlling interest in the shares, maybe you’re Mark Zuckerberg, you could say, “I’ve decided I’m going to change the way Facebook works. It’s my way or the highway,” but it’s a security and he’s accountable to his public shareholders. The reason he can do it is because he runs the company, but if you’re actually promoting your crypto network as the commodity, nobody has the power to dictate what happens next, and certainly you shouldn’t be able to force that.

Michael Saylor (01:10:20):

If you can force your views onto the asset holders, then that doesn’t sound like consensus. If you can force your views on the Bitcoin, on the ETH miners, that doesn’t sound like consensus. The fact is, you have a situation where a small group of software engineers have hijacked a crypto network to their benefit to the detriment of the outsiders and the miners. It wasn’t a vote for sure. The ETH miners never would’ve voted to convert to proof of stake. They weren’t given a vote.

Preston Pysh (01:10:52):

Which proves it’s decentralized. That’s the proof.

Michael Saylor (01:10:57):

Everybody with their ETH [inaudible 01:10:59] stakes is waiting to see how much they’ll be diluted once the software developers decide, and everyone with their money staked is waiting to see whether they’ll ever get it back once the developers decide. Now the question is, how do they decide who is we? Vitalik, he actually refers to us. Who is us? In a publicly traded company, you would have to file a registration statement and then you would disclose the management team, and the board, and you would disclose who has the voting stock. Any investor would actually would some idea of corporate governance, and you would also disclose all your risk factors. But in a commodity, none of those things are disclosed.

Michael Saylor (01:11:40):

If you have a situation where you have a small group of individuals that are actually writing software that determines whether another group of individuals make money or lose all their money, in theory, couldn’t the protocol developers just decide to never let you one stake and pay you no fee? They could. What are you going to do about it? What’s your ETH worth in that case? The staked ETH is worth nothing, right?

Michael Saylor (01:12:08):

On the other hand, they could do the opposite. They could say that the staked ETH is the only, no one else can stake anymore ETH, and you get paid 10% or 20% of a year in ETH, and then the non staked ETH goes to zero. You have a classic example of a small group of people that are basically playing God. You don’t even get around this by saying, “We’re going to take a vote.” Of course they don’t take a vote. If you took a vote, you’d be taking a shareholder vote. Corporations take votes. You’re still a security.

Michael Saylor (01:12:38):

The way that you actually get to be a commodity is you create something which no one can reasonably change without overwhelming universal consensus. Almost like, you could even say universal consensus. You want to change something? If I don’t change my node, you can’t force me to change the node. You can fork off, you can break off and do your own thing, but you can’t force me. You can’t reach in and stop me. That’s what makes it a commodity, the lack of governance.

Michael Saylor (01:13:12):

If you have a plan, if you have a roadmap, the fact that you have the power to implement the roadmap is what makes it a security. I think in Bitcoin, the difference between Bitcoin and ETH is, Vitalik would say ETH is only 40% finished and Bitcoin is 80% finished. That’s what he says. But if you ask the Bitcoin, they would say “No, ETH may be 40% finished. It doesn’t look that finished to us, but it’s something finished, but bitcoin’s done.”

Michael Saylor (01:13:42):

Bitcoin was 100% finished on January 3rd, 2009. It was a complete protocol. The only thing that’s going to happen in Bitcoin is we’re going to fix a fatal bug, or if we have an overwhelming 100% consensus that we might want to create for [inaudible 01:14:02] with a [inaudible 01:14:02] or something, maybe we will. But that’s why Bitcoin has been all soft forks, no hard forks. You’re going to take four years or longer with a massive bitter debate over even an inconsequential soft fork, right? Because we would say Bitcoin is substantially done. I think there’s even a famous line, or maybe it was Satoshi that said, “The nature of Bitcoin was such that it was, substantially the protocol was complete in the beta.” As soon as it went to beta, it was pretty much done. You weren’t going to change it.

Michael Saylor (01:14:34):

The idea that you can keep changing it and changing it, I think in Vitalik’s keynote speech, he had four more phases to go and each phase looks like two years, which means it’ll stretch the three or four years, and each one has to be funded. Who’s going to pay for it? That’s interesting. Who’s going to pay for it? You almost get this sense that the miners all have to die so that the money that was going to go to the miners for hardware security or physical security can be redirected to the developers to add software.

Michael Saylor (01:15:03):

If you’ve made the decision that you’re going to derive all of your security and integrity from software, then you’ve made the decision to fund a software development effort at infant item, which means you’ve made the decision to fund a software company. I don’t know how you fund one, but now imagine you’re going to launch six of them. How do you get six different independent software companies to do the same complicated thing and fight with each other over the next 10 to 20 years in order to be decentralized?

Preston Pysh (01:15:33):

You talk about perverted incentive structures like you were describing earlier with lobbying and things like that, I could only imagine what type of infighting could potentially cause a split in some of those incentives as you’re talking about a niche group of programmers that are working towards what update they personally want. You talk about the seniorage that’s doing the consensus as well, and the validation of a proof of stake system and how infighting and lobbying could play out so that it just gets consolidated more and more into the hands of the few because it’s not tethered to physical reality.

Michael Saylor (01:16:09):

Yeah, Bitcoin is on one handed an example of how to do it. Set the protocol January 3rd, 2009, don’t mess with it. Occasional soft forks to fix a fatal bug or something, but really don’t mess with it. Leave it well enough alone. The monetary protocol in a year 2140, we have every reason to believe is the same as the monetary protocol today and the monetary protocol in the year 2240 or 2340 or 2440, the same as today. I think ETH is the other extreme, which is we’re sitting here in the security protocol that’s a month old or a few weeks old. We don’t know what’ll happen there. The monetary protocol is still not set.

Michael Saylor (01:16:51):

For example, what’s the staking yield? Nobody knows, right? What’s the staking yield for the next 120 years? We actually know what the Bitcoin mining reward structure is for the next 120 years. We have an algorithm to determine transaction fees for the next 20,000 years. We know that. We knew that on January 3rd, 2009. Hasn’t changed. That’s the monetary protocol of Bitcoin, capped to 21 million.

Michael Saylor (01:17:16):

The monetary protocol of ETH hasn’t been set yet. In fact, there’s not even a date by which it will be set yet. You don’t know if you can stake, you don’t know if you can unstake, you don’t know what the consequences are, and you’ve got a never ending set of technical changes. Charting is just another feature set. What about slashing? You’ve got all these questions. One could reasonably say Bitcoin is substantially complete. Well, Bitcoin was substantially complete January 3rd, 2009.

Michael Saylor (01:17:52):

Ethereum is substantially incomplete now. That fundamentally is the problem, and the challenge with Vitalik’s philosophy is this idea that we can simply imagine anything and do anything that we imagine is unhinged from reality. You really can’t just do anything that you want. Anybody that’s ever built software before knows you start with this idea of a cool feature and then you go down the path and then you realize that either you couldn’t get it to work or nobody wanted it, or it’s dysfunctional or backfires. I think Ethereum and all the proof of stake cryptos, generally all the cryptos, they’re very overly idealistic, and the idealism ultimately makes them inappropriate as money and makes them inappropriate as commodity.

Preston Pysh (01:18:42):

I think it’s important, so when you have policy makers that are hearing these debates and they’re getting swayed one way or the other, it’s very easy for people who don’t understand what Bitcoin is fundamentally trying to solve for. What is it fundamentally trying to solve for versus somebody who would look at an Ethereum and say, “Yeah, but it does smart contracts and it does programmability on the base layer and it does all these other things.” When I hear that side by side, I immediately, in my brain, I’m saying that person does not understand what’s fundamentally broke and what’s fundamentally being solved for.

Michael Saylor (01:19:19):

Let’s boil it down to one idea. Bitcoin is attempting to be a digital asset without an issuer. The whole ethos of crypto properly understood is the creation of a digital asset without an issuer, and that idea, or aspiration has been achieved by Bitcoin. There’s a massive debate as to whether or not half a dozen or a dozen other networks have achieved it. We could debate that back and forth. But the other 20,000 are really just coupons running on software databases. The idea that I can do all these cool things without all the functionality, that’s called software. Smart contracts and the like are all available in software. They run in software. You can do them on web browsers and servers and iPhones using a very small amount of electricity, very little energy, and you can do them beautifully in software. There’s no innovation there.

Michael Saylor (01:20:18):

The innovation that’s really critical in crypto is the creation of an asset without an issuer. Whenever you default to have a software organization create that asset and essentially maintain it, you failed. You haven’t created a crypto, you’ve created a software program. It may be a software program running on 20 computers instead of one computer, but you’re just creating a software program. And so therefore there’s no breakthrough there. The slight of hand here is somehow to say, “Well, Bitcoin is a digital asset without an issuer, and we’re sort of like Bitcoin, but we have a lot more features and don’t use electricity, so favor us.”

Michael Saylor (01:20:59):

But of course the logical fallacy is they’re nothing like Bitcoin because they’re not assets without issuers, they’re assets with issuers. The fact that Vitalik can actually say what they intend to do is proof that they’re not a decentralized network. A true crypto network doesn’t have anybody that can tell you what’s going to happen next. That’s why Satoshi disappeared.

Preston Pysh (01:21:22):

Michael, it’s not just that it has, and I’m assuming this is your opinion, but correct me if I’m wrong, it’s not that it just has this no issuer, it’s that it has no issuer with a terminal fixed supply that can never be based beyond that amount. That’s the game changing piece that solves the problem, which I want you to address what that problem is.

Michael Saylor (01:21:43):

Yeah, let’s talk about that. The creation of a crypto asset without an issuer is the innovation. Bitcoin is one step beyond that. If you create a digital asset without an issuer, you’ve created a commodity, a digital commodity, but you haven’t created digital money or digital scarcity. If you want to create the perfect digital money, you don’t just want a commodity. Remember stock to flow?

Preston Pysh (01:22:12):


Michael Saylor (01:22:13):

Silver is a commodity that makes bad money. Bales of tobacco and seashells and glass beads are commodities that make crappy money. Gold is a commodity that makes better money because it’s got a higher stock to flow ratio. Bitcoin is a commodity that makes the best money because the stock to flow ratio is infinite. In essence, it’s 21 million. We know where it ends. It’s completely capped, completely scarce. Those coin may or may not be a digital commodity, I’m not sure because I’d have to determine whether or not it was ethically launched and whether or not it was truly decentralized, and whether or not there’s anyone that has true influence over it. I can honestly say I haven’t studied it enough to know whether it is or isn’t.

Preston Pysh (01:23:01):

Neither have I.

Michael Saylor (01:23:03):

But let’s say hypothetically you forked some Bitcoin code, but then you change some of the code to remove the having. Well then would’ve a digital asset that you might be able to argue is a commodity. If you forked it, gave it to the world, disappeared, and it ran like Bitcoin, but without the havings, then it would simply continue to inflate at whatever, 3, 4% a year, X percent a year, forever. Now that’s a commodity, but it’s not a scarcity. It’s weak money. It’s not hard money, it’s weaker money. You could make an ethical argument that you should be able to trade in on a crypto exchange without filing a registration statement.

Michael Saylor (01:23:55):

The thing that’s missing right now is the ability to actually apply to the CFTC or the SEC and submit your crypto network and say, “This token should be deemed a commodity.” But let’s say that they’ve already agreed Bitcoin is a commodity. There’s nobody to apply because it’s so decentralized that there’s no one left, but that I could just take the protocol and submit it and I could say, “Look, no one has the power to change it. The protocol hasn’t substantially changed in years and years and years. Is this commodity?” They would probably say yes. I don’t see an issuer. There’s no ICO, there’s no pre mine, there’s no one that seems to have it.

Michael Saylor (01:24:32):

Satoshi, looks like Satoshi mined a lot of coins, but they haven’t moved and Satoshi’s gone. So yeah, it looks like commodity. Now, if I forked it, if I forked Bitcoin the year 2022 and I removed the havings and bitcoin’s… and this is Bitcoin lite or weak coin, we’ll call it. Weak coin, or maybe it’s minor coin because some minor decides it’s a good idea because their block rewards will just stay constant. I can create minor coin, M-I-N-E-R or M-I-N-O-R, depending on which one [inaudible 01:25:10]. Miner coin, and I fork that and I submit that application to the CFTC and I say, “Look, this is this. There’s like 27 minors that are mining miner coin. Is this a security or commodity?” If I did in a fair and equitable fashion, it would be a digital asset without an issuer, because you’re allowed to do a little bit of sulfur engineering.

Michael Saylor (01:25:35):

You can copy and paste the code, change having line, and again, issue it to the public domain. You’re just not allowed to give yourself an ICO, give yourself 20% of the supply, sell 20% to the general. You can’t sell 20% to the general public, keep 20%, and then keep control of the protocol and then call it a commodity, you see? In this particular case, the miner achievement, which we should recognize as an achievement, is the creation of a digital commodity, but the brilliant achievement, the brilliant achievement is the creation of a digital scarcity.

Michael Saylor (01:26:15):

What you just said is right in a way, that is Satoshi’s genius is creating digital scarcity, a digital commodity without an issuer, but the thing that makes it scarce is the protocol. You can create… the protocol. Another way to say it is not all digital commodities are equally good, just like not all commodities are really good. Just like copper versus silver versus gold, they’re all commodities. One is harder than the other.

Michael Saylor (01:26:47):

You can have a superior protocol or an inferior protocol. What I would say with Bitcoin is, and what I would say with crypto is, you have to have energy, a proprietary energy, to create the decentralized secure network that creates a commodity or creates an asset with an issuer. You need that. You have some choices in the software protocol. [inaudible 01:27:11] every six years instead of every four years. Like choices, you have choices in the hardware. Well, actually not. I’ll take that back. The hardware, you have choices how you build the hardware, but anybody can build any hardware they want.

Michael Saylor (01:27:23):

The Shaw 256 protocol, which is a software decision, determined the hardware that followed, and now people are creating hardware optimized for that software. The genetic code was set. There are other genetic codes that could result in digital assets without an issuer. There are also other genetic codes. There are other software protocols that could result in digital assets without an issuer that are also scarce. You could create a Bitcoin copy that’s capped to 21 million coins, but the difficulty adjustment takes place every four weeks instead of every two weeks, and having takes place every five years instead of every four years. It would still be a scarcity, but it’ll be a different network, a different protocol. Would one be better than the other? Maybe it’s like single cell organisms. There’s that bacteria and this bacteria, and they kind of look the same to all of us, but one of the bacterias is better than the other bacteria when it comes to fighting for survival.

Michael Saylor (01:28:26):

I think what we have is Bitcoin is a digital asset without an issuer that happens to be a digital scarcity and a digital commodity. There’s a question as to how many other digital commodities or scarcities there are. There is no process in the regulatory system for having something formally designated a digital commodity. The presumption is most things are securities until proven otherwise. The observation is most of them look like securities because they have CEOs and management teams and BC and ICOs and airdrop and pre mines and all sorts of indicia of investment contracts.

Preston Pysh (01:29:08):

Michael, when I look at the problem that it’s solving, if I was going to quantify what problem I think it is, I would probably state it like this. Bitcoin is solving the breakdown in fiat currency, A fiat currency that has been manipulated for decades on end, and has now created a head bashing between net exporters and net importers around the world where the net exporters don’t want to be paid in these credit-based fiat paper promises because they’ve been manipulated down to nothing percent. But the net consumers insist on paying in these paper promises. Bitcoin steps in as a wedge between these two importers or net exporters and net consumers, and solves the unit of account that they cannot come to agreement on for their settlement. Do you agree with that? Do you see it differently? Do you think I’m using a word sandwich to describe the problem? Can you describe the problem more simply than that? What are your thoughts?

Michael Saylor (01:30:23):

I agree with what you said, and I agree on the dilemma. I can’t help but remember going Parabolics phrase hard money, you can’t F with.

Preston Pysh (01:30:33):

Jason Williams, the shout out.

Michael Saylor (01:30:36):

Yeah, go Jason. Hard money you can’t F with. I think Bitcoin, it’s hard money, right? We’re moving into a world where the credibility of the fiat currencies are collapsing. My fiat currency has been money since, I mean maybe it’s been money since 1914. I mean, we could debate. We had a goal standard 1865, 1914. Then we had a goal reserve standard until 1971, and then we just had pure fiat. We’ve had some flavor of fiat, but I guess the trust in fiat since 1971 has been decaying at some progressive rate.

Michael Saylor (01:31:17):

Now we’ve reached a point where we have an unprecedented crisis of confidence or loss in confidence, and we see it in the collapse of the euro, the yen, the pound against the dollar. We see it in the collapse of developing world currencies against the dollar. We see it in the breakdown of world trade. There’s between… all sorts of blocks, there’s a problem of trade between the Chinese and the Indians and the Russians and the Americans and the like. Hence a re-embracing of commodities, and it seems like people want commodity backed money.

Michael Saylor (01:31:52):

The dilemma that the world has is it needs two things. It needs a monetary asset and it also needs a monetary network. In the age of gold, the monetary asset was a bar of gold and the monetary network was move it on a ship or a plane or a train, probably more than likely a train or a ship, no planes really. That was the old world. And then the last hundred years have been this intermediate period where the monetary asset was substantially the dollar. From 1918 on, the pound was secondary, but for the most part the dollar and the banking system was the network or the central banking system has been the network for that time period.

Michael Saylor (01:32:38):

Now the world wants a new monetary network. We have an economic problem, we have a technical problem, we have a political problem. The technical problem is 8 billion people need to be able to do transactions 10,000 times a day with each other over 50 billion computers. That’s a technical problem. You could solve that with Bitcoin plus layer two and layer three protocols. But you need money that moves at the speed of light with final settlement in a milli a second. We don’t have that through the 20th century. You don’t have it with the central banks, the correspondent banks, and the credit card networks. You just don’t have it. That’s a technical problem.

Michael Saylor (01:33:19):

The economic problem is that all the fiat currencies are losing purchasing power and they’re collapsing. If they’re collapsing at, right now, it looks like they’re collapsing between 10 and 20% a year in total. The world reserve currency, the dollar was collapsing at 7% a year for about a hundred years. We managed to live through the 7% a year, but I don’t think we can live through the 15 to 21% a year. The rate of collapse is just accelerated, and in some places, a lot of places, it’s collapsing even faster.

Michael Saylor (01:33:59):

That creates, I don’t know, $10 trillion a year worth of economic damage. That’s basically…

Preston Pysh (01:34:07):


Michael Saylor (01:34:07):

… energy lapse. We’re all freezing to death. Think about the dysfunction in Lebanon right now. The dysfunction that happens when the bank freezes, the currency collapses. How much creativity in industry is taking place? Or the dysfunction in any war zone and the dysfunction in South America, the dysfunction in Africa. We can almost, you could probably say there’s been dysfunction in Africa for hundreds of years. You could point that one of the major sources of dysfunction in Africa is the lack of a monetary network with integrity. If I give you a billion dollars in most African nations, how long would the money be there, and would it be gainfully invested or would it be dissipated? It’s kind of similar to, you’ve got an open artery and I’m pumping blood into your arm, but it’s coming out the artery. That’s the economic problem.

Michael Saylor (01:35:16):

Then finally, the political problem, the political problem is nobody trusts anybody. If I was sitting with a politician and try to explain why do you need an energy based currency like Bitcoin, why do you need a digital asset without an issuer that’s properly architected, the proper architecture is the scarcity protocol. Why do you need a functional digital money? The answer is because you don’t trust the other country and the other country’s not going to trust you. It’s like if someone says, “Well, I want it from a company.” “Okay, fine. Well, do you want it from a company in China?” “No, not that company.” “Okay, well do you think that 1 billion Chinese…

Michael Saylor (01:36:00):

… that company. Okay, well, do you think that 1 billion Chinese want it from a company in America?

Preston Pysh (01:36:06):


Michael Saylor (01:36:06):

No. Do you think the people in North Korea are allowed to get it from you? Do you want it from a company in Cuba? Do you think the Cubans want it from you? Do you think the Russians are going to trust fill-in-the-blank? Are you going to trust them? No country can trust another country. States don’t trust each other. Cities don’t trust each other. Companies don’t trust each other. And if you did, pick the country that you trust. Okay, how about this one? You’re a Republican. Do you trust America? Yeah. Okay. Are you going to give absolute power to the White House? Not if a Democrat’s getting elected next month. Okay. Reverse it. You’re a Democrat. You want to give absolute power to the White House with the possibility that Republican, or your political rival, will be in power?

Michael Saylor (01:36:59):

So, the truth of the matter is: No country trusts each other, no one can trust any company, and you can’t trust any institution over time. Okay, so what if I tell you, “Well, I guarantee you the next 10 elections,” do you still want that much power? What about the 11th? The problem that we’re solving is monetary integrity through time and space across domain. So, “across space” means I need to do them everywhere in the world, billions of times an hour. And “across every domain” means that I need a hundred million companies in a hundred countries to trade with each other across 10,000 different political jurisdictions. Think about how many different agencies and jurisdictions there are. There’s the county. The precinct. The township. The city. The state. There’s 47 federal agencies. Now, think about the Cartesian product of 47 federal agencies across a hundred jurisdictions across who-knows-whatever-else. Right?

Michael Saylor (01:38:07):

It just gets to be such a complicated set of cross products that you can’t do it. So I need to trade cross domain, cross space, and then I need to trade cross time, and it’s pretty easy if your definition of time is “for the next eight days.” You look at most people in this market, they think in terms of hours or days or months, and all their comparisons are that way. “Longterm” is 10 years. And the last time I saw anybody on television or in the mainstream media do a reasonable analysis where they looked out 10 years, I can’t remember. That’s very rare. No one says a hundred years, and nobody says a thousand years. So, if you’re trying to solve the problem, “How do you build something truly great?” you need to look out hundreds of years. The hardest substance, the hardest mineral, is granite or schist. Of all the materials, you want something really hard, the thing that deflects the least under pressure: granite. No surprise that New York City is built on that bedrock, schist, which is that hardest thing. And the question is: How long do I want it to be there? Well, it’s been there for 200 million years. If I’m going to build a city: a thousand years. Go look at the Venetians and see the problem of a city that simply holds up for 50 years. They built on pilings. The pilings are sinking an inch a hundred years, or a couple of inches every century. That just doesn’t work. I mean, it turns out that the city will be gone.

Michael Saylor (01:39:51):

And so, ultimately, if you want to create something that is going to last a thousand years, that’s going to work across a hundred million companies, across 10,000 cultures, across 10,000 regulatory domains, and you’re going to do it at the speed of light, if you’re going to do it at 50 kilohertz, I want to write a program that looks at a hundred-thousand counterparties every minute, and then moves my assets around to maximize the yield and minimize the risk. And I want 10,000 counterparties of weight come on the network and exit the network. If I want something which is truly fluid and efficient, then it has to be a digital asset. It can’t be a digital security. And notwithstanding the issue of: You need 250 people to issue a security responsibly. But even if you bought into that notion, the issue is, in the US, we’re not recognizing Chinese securities.

Michael Saylor (01:40:57):

The Chinese aren’t recognizing our securities. And the securities, and the protocols of the securities, are controlled by a management team, and the management team is subject to the influence of a family or a founder. Or, if you’re the CEO of a company, then there’s any number of politicians that can hold a gun to your head. The mayor of the town you’re in can coerce you. The neighborhood association can coerce you. The county can coerce you. The state can coerce you. The federal government can coerce you. 187 regulatory agencies can coerce you. So, to the extent that you have anything where you’ve got an influencer, that they have influence on it, we can make changes if we see fit. That’s the kiss of death for a commodity, the fact that you can change it. And I think that most of the problems in the world are well-intentioned people changing things.

Michael Saylor (01:42:08):

That’s the problem. The fact that you can change it is what corrupts it, right? I mean, literally, what’s the difference between the definition of “change” and the definition of “corrupt”? When do you corrupt something and not change it, right? I mean, the truth is: For example, let’s take another commodity, like steel. Okay? You can change it any way you want. Go ahead. How would you like to change it? I put you in charge. You’re the CEO of steel. Okay. Now that you’re the CTO of steel: “Preston, we need you to invalidate steel’s tensile strength in Russia because we’re fighting a war. It’s your patriotic duty.” Okay. Did you change it? Did you improve it? Did you corrupt it? How about just the difference between: Why is steel a commodity and why is iron a commodity? Well, because when they figured out how to create steel, the recipe was released into the universe and they couldn’t take it back.

Michael Saylor (01:43:21):

You can create a commodity. Bronze is an alloy, right? It’s a creation. And you could argue bronze is a commodity. But it’s a one-way function. You created it, you released it, and your worst enemy can build a sort of it and kill you with it. That’s how you know it’s a commodity and is not a security. Lord knows if it was a coupon for a bronze sword and I came at you, you would revoke my coupon. Like, “Preston, here’s a coupon for a Glock. Can you give me the Glock? I’m going to shoot you in the head with it.” I don’t think you were redeeming the coupon, right? And so, fundamentally, I don’t think there’s a difference between being able to change something and being able to corrupt something. And that’s why it’s very dangerous to actually take this idealistic notion that we’re on a journey and to keep building in the protocol.

Preston Pysh (01:44:22):

So, Michael, I hear this all the time. People will say, “Bitcoin just costs too much. Too much energy expense. It’s too much.” And my immediate thought when I hear this is, “Relative to what?” And so, when you think about the existing settlement system, the traditional settlement system, how do you possibly quantify the cost that’s associated with that? And the cost isn’t just the numeric energy expense of the existing system. There’s a lot in there, like you were talking about Africa and how it was unbanked and all these other intangible costs that are associated with a system that is corruptible.

Michael Saylor (01:45:05):

I think the people that say it costs too much are the 0.1% crypto promoters that are promoting their crypto token. They’re a yo-yo coin, whatever, and they say a cost too much because they’re desperately grasping for relevance. Okay? I think that the 98% of the world that doesn’t really understand or think much about Bitcoin, they don’t have a strong opinion one way or the other. They hear a little bit of barking from the crypto promoters and the entrepreneurs, but from their point of view, they’re not sure. Aqueducts costs a lot. Take away the aqueduct and everybody in the city dies. Sewers and reservoirs and dams. The Hoover Dam costs a lot. Power plants cost a lot. Railroads cost a lot. Railroads used to bankrupt everybody. Right? Steel costs a lot. I mean, how many people have ever seen a steel refinery? Gun powder’s hard to make too. It costs a lot. You study the history of the DuPonts, right? A couple of them got blown up in their own gunpowder factories.

Michael Saylor (01:46:19):

Dangerous? Yeah. Too dangerous? Not if you want to win the war. Right? I mean, take away the steel, the oil, and the gun powder, and then fight World War I and World War II again. Or take it out of the North. It determines whether you win or whether you lose. Ships cost a lot. The Manhattan Project costs a lot. If you study what went into that, it must have been half a million people were working on all those projects to basically drop two weapons. So, I think you could say, in general, every significant thing cost a lot. Look at the Brooklyn Bridge. Look at the Verrazzano-Narrows Bridge. Look at the skyscraper in Manhattan. Look at Manhattan in general. Costs a lot. They all cost a lot. The Union Pacific Railroad costs a lot to connect the country.

Michael Saylor (01:47:10):

And they all have the same thing in common. There’s a profound investment of capital and in human intellect and labor in order to construct something with some degree of utility. And in this particular case, when you look at it in that context, Bitcoin doesn’t really cost that much at all. Bitcoin is… Probably there’s 25, $30 billion of hardware that’s been purchased or capitalized in the network. They burn something like 3, 4, $5 billion a year worth of electricity to run it. They’ve kind of crossed over to the point where the network is getting… It’s probably getting increasingly energy efficient. And so, say it’s $10 billion a year to run the Bitcoin mining network, which is in essence the Bitcoin security network, for that cost you’re currently supporting $400 billion of assets. But it’s like you spent $10 billion on a railroad that’s worth $400 billion that moves… What is the number? It’s billions of dollars an hour of transactions, but it moves trillions and trillions. 10 trillion, $20 trillion a year or more, some large amount, right now.

Michael Saylor (01:48:34):

But the network is almost infinitely scalable at this point. So the same $10 billion of hardware and energy expenditure per year that could support 10(x) as many transactions or transaction value could support 10(x) the asset value. So it’s like a railroad. The cost to create the railroad was high. The value of the railroad will scale dramatically by 10(x) and by a 100(x) and by a 1,000(x). Ultimately, it’s the price you pay for the civilization. You’re an aviator. The cost of building a 747: obscene. The cost of a First Intercontinental jet is 10, $20 billion for the first plane. The next plane, much cheaper. And you’re [inaudible 01:49:30], so by the time you’ve been flying the plane for 30 years, you’ve reduced the cost of going between New York and Tokyo down to some few hundred dollars. So, who would actually say it’s too expensive? The guy that’s selling the ox cart would say the railroad is too expensive.

Preston Pysh (01:49:51):

Yes. Yes.

Michael Saylor (01:49:52):

And the guy that’s actually got the sailing yacht would say the steamship is too expensive. And the person that was pitching the automobile would say the subway is too expensive. And the dude that wants you to buy coal would say the oil is too expensive. And the oil person would say the nuclear power is too expensive. And if I came up with a fusion reactor that ran off of a bottle of water that would light up the entire city for a hundred years, the dudes in the nuclear industry say, “This is strange and too expensive.”

Preston Pysh (01:50:29):


Michael Saylor (01:50:30):

” Dangerous,” or something, right? I mean, everybody always says that to prevent the next technology change. So I think that the solution, clearly, is educate those that are objective and explain to them why the civilization is based upon this monetary network. And the monetary network needs to be without an issuer, without dependence on a country or a company. It’s ironic that it’s companies that are paying money to lobbyists and academics and non-profits to lobby against Bitcoin’s energy use because they want you to rely upon their company and their company’s token.

Michael Saylor (01:51:18):

And ultimately, it’s pretty obvious to anyone that thinks about it, that we’re not going to trust a private company to issue our money. And even if we did, even if it was the most perfect human being imaginable, they’d better be God and they better live for the next million years, because we’re not going to trust their kid or their kid’s kid. Name one person who’s universally trusted by all 8 billion people on the planet in every nation state. Who would that be? Yeah. The answer is nobody. Nobody can agree on trusting any political or commercial entity, but the one thing we can all agree on is on electricity and fire and steel. In every one of those nations, in every one of those places, if you went and you said, “Who do you trust?” they couldn’t agree, but they’d probably all be using electricity.

Michael Saylor (01:52:16):

They trust Maxwell’s equations, by the way. They trust Newtonian physics. And steel is wildly popular, even in communist regimes. Socialist regimes, communist regimes, fascists, leftists, rightists, everybody agrees they like steel. And if you go study civil engineering and you look at how difficult it is to build a building using masonry, stone blocks or a wood, then someone comes along with steel… And steel is kind of like the solution to everybody’s problem for the next 2000 years. And it’s such a good solution that all your problems go away, and it doesn’t matter what your politics are. So I think that the most important point to make about Bitcoin is Bitcoin is crypto steel. It’s digital steel, and it has to be a commodity without an issuer.

Michael Saylor (01:53:11):

And if you’re not going to be reliant on the efforts of others… Gensler uses this phrase a lot: “Efforts of others.” It’s the Howey Test. Definition of investment contract is: some people make an investment of money based upon the efforts of others. But forget about the idea of whether it’s an investment contract or, “Did you invest money?” The point really is: When you walk out on a steel bridge, you don’t want to be reliant upon the efforts of others halfway around the world to make the bridge not collapse. So forgetting about… You don’t have to be caught up in the debate over security versus commodity. The real question is: Can you create digital material and digital energy? Can you create digital matter? If I want to create a bridge, I need to create it with a material that will not collapse depending upon the opinion of a politician or the opinion of a company, and I don’t want to have to worry about a software engineer putting a bug in the code.

Michael Saylor (01:54:14):

That’s why I trust what? I trust a steel that’s that’s been certified after I’ve seen it successful for 50 years or 100 years. And that’s why I wouldn’t trust balsa wood. And that’s why I wouldn’t trust a software-actuated bridge. When we break this rule, tragedy occurs. If you look at the Boeing 737 MAX debacle… The 737 is a totally safe plane, and it’s probably one of the safest planes ever built. They engineered it in the 1970s. The sixties and the seventies, right? It’s been flying that long. Why did it start falling out of the skies 50 years later? It’s because some well meaning engineer wanted to improve it. “We can make it better.” And so, the way they made it better is they wrote software that attempted to compensate for human error, because the software engineers arrogantly thought that they were better than the pilots. Playing God is… It’s a pretty serious responsibility.

Preston Pysh (01:55:31):

Especially when you don’t have a hundred people on the plane, but you have the whole planet on the plane.

Michael Saylor (01:55:36):

Good point. Yeah. I mean, what happened with 737 is they overengineered the software and the software crashed the plane and killed everybody. And if they hadn’t done anything, the pilots would’ve done just fine. And I think that that’s the argument in favor of simplicity, right?

Preston Pysh (01:55:58):


Michael Saylor (01:55:58):

“Keep it simple, stupid.”

Preston Pysh (01:56:00):

Yes, yes.

Michael Saylor (01:56:02):

And mission critical systems… You see this a lot in the military. When someone’s life depends on something, oftentimes you would opt for the low-tech solution where you can verify it with your own eyes. I don’t want a piece of software that runs a million lines of code that tells me that the thing is stable. I want to test it myself, or I want to see it, that it’s stable. And I think to your point, the difference is: When software drives a car, the software may kill you. And when software flies an airplane, the software may kill 100 people or 500 people or 1,000.

Michael Saylor (01:56:46):

But when software runs the monetary network, may kill a billion. Actually, the truth is we’ve got two problems. Two extremes. And maybe they’re both the same. One extreme is central bankers running the monetary system, and every time they change something, they make it worse. And we just saw that happen in Britain this week. Just chaos. A trillion dollars changes hands, and the bankers say, “Oh, well, we were busy trying to keep a bunch of pension funds and institutions from a massive loss of billions of dollars.” What they don’t say is, ” We were busy keeping a bunch of rational investors on the other side of the trade from making billions of dollars.”

Preston Pysh (01:57:35):

Yes. Amen.

Michael Saylor (01:57:37):

I mean, they took a hundred-billion from one group and gave it to another group that happened to be politically connected, and then they masquerade as virtuously protecting the system from a meltdown. What they were doing was they were keeping the system from rationally correcting to a fair interest rate and rewarding rational thinkers that did the right thing. And they punished-

Preston Pysh (01:58:02):

And incentivizing, in the future, for more people to pile in to further risk. Yeah.

Michael Saylor (01:58:10):

Yeah, they create that moral hazard.

Preston Pysh (01:58:12):


Michael Saylor (01:58:12):


Preston Pysh (01:58:13):

Yes. Thank you.

Michael Saylor (01:58:13):

Punish the wise, reward the foolish, and create an insane world where the only way to get ahead is to act foolish. And if anybody ever fixes the world, everybody dies, so they turn the world upside down. And they did that manually. The danger with software-driven systems is you might inadvertently… Some piece of code in the system meant to optimize for something and it just goes catastrophically awry, and it crashes the entire system for everybody else. It’s a classic example of the phrase, “Don’t let the perfect be the enemy of the good.”

Michael Saylor (01:58:56):

The whole problem with most of these networks is they’re continually chasing perfection, and they’re willing to accept all sorts of ineffable, non-quantifiable risks that they don’t understand in order to pursue a tangible benefit they can see. So the fact that we manage to avoid a $50 billion loss by a pension fund is used as a justification to inflict a trillion dollars of damage on everybody else who is not on the fund. But I’m not wise enough to necessarily conceptualize the trillion dollars of damage I’m doing. Or maybe I am, but it’s just they’re not screaming at me right now, so I’m going to take the expedient path.

Preston Pysh (01:59:44):

Michael, when we talk about energy, everything that we’ve kind of talked to date, or in this discussion, has been a defensive response to what we hear all the time. What also drives me a little crazy is: I get all these DMs from people showing me various charts of how they’re using Bitcoin almost like a capacitor or a battery on the grid to strengthen the grid to make it more reliable. And the excess energy above whatever’s being required off the grid is being immediately converted into stored energy, digital energy, and it’s just making the grid more robust. You look at the flaring, the methane, and you look at how Bitcoin can be used in that capacity, and it’s earth-shattering what this adds to the infrastructure for energy companies. I guess go on the offense of and explain to people that are listening how revolutionary this is for energy companies.

Michael Saylor (02:00:46):

Yeah, I guess to that point: If all you do is write software, then the only thing you can ever do is improve virtual circumstances. So anything that’s software only means you’re creating a virtual machine to move imaginary tokens around to achieve an imaginary goal to create imaginary happiness. And you’ll never get out of that metaverse. You’re kind of trapped in the metaverse. If we were wired in cubicles, getting fed through a feeding tube or an IV and we never moved and we lived in our brains, then maybe you would just focus on that metaverse. But that is literally like the Matrix. If on the other hand, you want to improve things in the universe, if you have interest in solving problems in the universe like clean water or healthy food or a comfortable environment or providing people with physical luxury, then you have to build machines and you have to manipulate matter and energy.

Michael Saylor (02:01:49):

So, the number one problem with all the non-energy-based cryptos is they’re all just software programs, and so you can write a hundred million billion software programs, they’re never going to feed you. The only way that you’re going to change the real universe is plug a piece of software into a machine. And so, Bitcoin Mining is really the digital energy business, and what you’re doing is you’ve got a software protocol plugged into a machine and the machine is converting electricity, intermittent electricity anywhere in the earth powered by any energy source, into digital energy; and it’s also creating security and integrity. So what you’re getting is you’re getting a block of digital energy, an asset that you can move around at the speed of light, friction-free, but you are also getting a block of digital energy, digital scarcity, digital money that will last forever. And so, the entire network is therefore monetizing energy, and that means you’ve created a machine to convert waste energy into digital energy. That’s really valuable for remediating methane or remediating stranded natural gas.

Michael Saylor (02:03:20):

It’s also useful for monetizing stranded geothermal or stranded any other power. You’re never going to monetize stranded power or waste power with a software-only program, right? So all the proof-of-stake networks are irrelevant to solving an energy problem because they’re not interfacing with energy. So the real value of Bitcoin to the energy business is: I can monetize intermittent energy. I can monetize stranded energy. I can recycle wasted energy. I can create an economic sponsor to either develop an energy source where it would not be economically viable. Right? So I’ve got a small, stranded group of people that need energy, and I can’t afford to build a plant to scale for them unless I pair a Bitcoin miner with their colony. So I can deliver energy to a place that needs it. And one example would be a small group of people that need it or a small business that needs it. Another example would be: I need to run a generator on a methane flare, and it costs money to bring in the generator, right?

Preston Pysh (02:04:41):


Michael Saylor (02:04:42):

So it costs money to remediate the methane flaring, and I can’t afford to do that if there’s no customer for the electricity that I generate or the pure energy I create. So Bitcoin allows you to pursue all sorts of these energy monetization strategies at different frequencies, at different scale, intermittently and off of different sources. It also allows you to cross political jurisdiction. So if you look at why Bitcoin mining is interesting, it would be interesting to any nation that wanted a hard currency export. So I might do Bitcoin mining just to generate hard currency when I have no other natural buyer for my exports.

Preston Pysh (02:05:34):


Michael Saylor (02:05:35):

I might do Bitcoin mining to monetize stranded or waste energy because I know a customer. I might do Bitcoin mining because I have an interest in security itself and I might have capital that I just want to put into this. So if I have extra capital. I might do it because I have extra semiconductor capacity, too. So there are a lot of motives for this, but in terms of environmental conservation, it seems, to me, to be the only technology that can monetize stranded or waste energy or remediate environmental fluttering of any scale anywhere. I mean, most of the other ideas are kind of crippled ideas. You wouldn’t be able to scale them up to be meaningful.

Preston Pysh (02:06:40):

Michael, I have a friend that has sent me an article kind of getting into some of the things that we’ve been talking about throughout this interview. I’ll have a link to that in the show notes. He goes by “Baseload.btc.” And he made the comment to me, he said, “Bitcoin is basically the best ESG investment vehicle in tech ever invented.” And so, I think for people on the outside, they might hear that statement, they might laugh hysterically, and say, “How in the world could that possibly be true? It uses energy.” But when you look at the incentive structure of what Bitcoin incentivizes, especially on the long tail, 10, 15, 20 years from now, how do you envision Bitcoin miners being integrated into the grid? And do you agree with his statement that it’s the best “ESG investment vehicle and tech ever invented”?

Michael Saylor (02:07:35):

I do agree with the statement. I think that it’s pretty clear that, environmentally, it’s the most efficient use of electricity to create value that the human race has come up with. And so, on the energy side or the environmental side, it seems to be pretty obviously clean and useful. If you look at the other two, the S and the G, from a societal point of view, you’re giving economic empowerment to 8 billion people. Digital money-

Michael Saylor (02:08:00):

… giving economic empowerment to 8 billion people, digital money to the human race. So it’s obviously good for the society, you’re banking everybody. And then from a governance point of view, it’s a digital asset or a digital network without an issuer. So corporate governance or governance normally is all about fair governance. And this phrase popped up because there were companies that were thought to be poorly governed maybe for the benefit of the family or the benefit of the community to the detriment of the shareholders, et cetera, Bitcoin is literally without a CEO, without a board of directors, it is the most fairly governed thing in the universe. It’s more fair than any country, any city, any state, any company. So in terms of ESG, it definitely checks all three boxes. In fact, it hits home, runs out of the park on all three. I’d probably just make one more point here, which is look, if you’re concerned about ESG, you really asked the question, what is a universal entitlement to the human race? The most ESG friendly stuff is clean water, power, bandwidth like internet access, steel, functioning materials, transportation, and just pure energy, food. These are the things that life is based on. So if you want to create a civilization, and the Romans knew this, a famous historian and he said, “I admire the Romans for their aqueducts, their roads and their drains.” And you think about this, “Oh really drains?” Well, the aqueducts brought water to the city, and the normal consequence of course is the city population grows by a factor of 10. And without the water, you can’t flush away the waste byproduct because everybody dies of typhus or some cholera, some awful disease. So you need the water and then you need the roads to be able to move.

Michael Saylor (02:10:14):

And then the drains carried away the waste and they carried away the waste water and also shed water so that the buildings didn’t collapse and kill everybody. So if you think about that and aqueducts is ESG friendly, it’s very expensive to build the first one and lawyer to help you. And it’s hard to build the first one. I mean no one else could figure it out. That’s why the Romans dominated because no one’s could figure it out. And then after the Romans disappeared, people forgot how to do it and the civilization collapsed. And 90% of the people died in some of these cities because you run out of water three days and you’re dead.

Michael Saylor (02:10:56):

So I think if you think about Bitcoin, the same framework, a digital energy network, it is providing the ultimate gift, which is clean money. Clean money to go along with your clean air, clean power, clean food, clean water. And what happens if the water is dirty? We die. If the air is dirty, we die. If the food is dirty, we die. If the money is dirty, it kills us. The money is dirty right now. And you want to see what happens in an environment where the money is dirty just go to any economy where the currency’s collapsing. Like all those people in Lebanon that are robbing banks to try to get their own money back. They don’t count the number of people that commit suicide probably after they get wiped out from that but it’s quite a lot.

Michael Saylor (02:11:54):

So I think anybody that really cares about ESG care about a fair, equitable, monetary network and establishing a stable financial foundation or monetary foundation for the human race to stand on. There could be nothing more important at this stage I think. Short of just don’t nuke us, all right? As long as we don’t explode in a nuclear fire, then I think after that we need to fix the money.

Preston Pysh (02:12:23):

On that point, when we look around the world and we look at what I alluded to earlier as far as this strife that’s happening between net producers and net consumers around the world because they can’t agree on how they’re going to be paid for tangible items that are desirable. We started off this conversation with Jeff Booth’s quote, and I want to end it here on a similar note, but I’m going to invert his quote and if I invert his quote I say, it reads, “If the money is sound desirable resources will be efficiently consumed and managed and global cooperation should take place.” Do you agree with that? And paint a picture for us, what does the world look like? Are we able to divert this enormous amount of social unrest that is brewing? And the trend of that is looking very concerning for a lot of people. I hear from people all the time, they’re very scared as to what’s happening in the world right now. Paint of picture for us in a Bitcoin world.

Michael Saylor (02:13:29):

Unsound money creates chaos and foolishness. The definition of foolish is shortsighted and chaos is uncoordinated. So foolishness and chaos is what you get when you have unsung like this collapsing. And when you have a shared sound monetary network, which is what Bitcoin represents, you get the opposite. You get rational order. We’re orderly, you’re going to get trade through time and space. I can now afford to invest. I can build something for the next three years to sell you for a lot of money in the fourth year. And I can find a way to finance it. And I don’t expect the society to collapse in four years. So I can make long-term investments, I can do long-term research, I can defer gratification and then I can transfer my capital for me to you for the next year because it’s fair and I’ll get a fair return on it.

Michael Saylor (02:14:36):

So you get rational behavior by producers and by savers you get trading. If I could trade cross borders, that’s a big deal. Being able to trade with everybody. I mean every country is not trading with everybody. We have massive efficiencies cause we can’t trade with China right now. If you want to fix it, you bring down the trade barriers and then you can trade. And the ideal network would allow you to trade within anybody over any domain, at any frequency for any period. And that’s a big idea, like any frequency. How do I trade a thousand times an hour between 100 countries? Now that’s impossible. How do I trade with someone in another country where the duration of the contract is six years or 60 years?

Michael Saylor (02:15:40):

For example, there’s a joke you’re going to give someone loan for 100 years when the payment is in a fiat currency that’s collapsing. That makes no sense at all. So it’s impossible to do that. But what if the trade wasn’t in the currency that was collapsing? What if it was in Bitcoin something that’s scarce? So in a sound environment with sound money and technically proficient monitoring network, then I think you get high frequency, high bandwidth trading over long durations with a bias toward rational action.

Michael Saylor (02:16:24):

I’m not saying everybody would act rationally because some people are so stupid and do stupid things and we can’t always agree on what the rational behavior is. But the bias is toward rational action because over time the rational actors will accumulate the capital and the irrational actors get squeezed out of system. And in unsound money environment, the irrational actors accumulate the capital. The rational actors sometimes are being squeezed out of the system and everybody learns that if they don’t actually influence a politician to give them some unfair advantage, they can’t get ahead.

Michael Saylor (02:17:02):

So instead of investing all my time in figuring out how to build goods and services and products that people need, I invest all my time trying to figure out how to manipulate the political system to get an unfair advantage to steal from someone else. In essence, you have the rise of the parasite class. Politicians and lawyers and lobbyists that are manipulating the public in order to give themself an advantage. And it gets so bad that even if you are a creator, you still have to hire lobbyists and lawyers to protect you from the other parasites. So large portions of the economy are diverted to parasitic activity. And when you have a sound monetary system and a sound monetary asset, then the tendency is toward the opposite.

Michael Saylor (02:17:54):

I’ve said before, I think Bitcoin fixes half the problems in the world. So I should interpose right now only half. Half the problems are due to defective money and a crippled monetary network. The other half of the problems are due to politics and culture and acts of nature and force majeure, things that are beyond our control. So I have no doubt they’ll still be unfair rules and unfair cultures and unfair situations and suboptimal things. Even if we fix the money, that’s why the other half will be there. But I do think that we inflict about twice as much inefficiency on ourself as we need to by having defective money. And if you’re looking for a metaphor, the simple metaphor is one athlete had to give a pint of blood before they ran the race and the other athlete didn’t.

Preston Pysh (02:18:59):

That’s no world I want to live in if I’m the one not receiving.

Michael Saylor (02:19:04):

Yeah. It’s just a never ending drain. On the energy of the civilization it’s like how well you going to run? Or are you going to train for the Olympics in four years if I tell you that I’m seizing your house in one year and you’re going to jail in two years. It’s just very difficult to focus. So what you have is you have a lot of chaos that’s interfering. What you would do is you would stop and you would hire a lawyer to defend you on the one thing and then you would go shopping for another place to live that you’re not going to lose for the other thing. And in the third block of time, if you had time left, you would train for the marathon.

Preston Pysh (02:19:47):

So Michael, is there anything else that you think we may be left out or that you think is important to this conversation?

Michael Saylor (02:19:55):

Yeah. I mean the entire talk about energy, it just brings me back to a basic principle. The whole problem and the civilization is an energy and balance and an energy and efficiency at the base of our entire economy and maybe the base of our entire civilization. And we’re trying to fix it. It’s like there’s a whole in the civilization and trillions of dollars of energy are flowing out of that container every year, and we need to plug the hole.

Michael Saylor (02:20:38):

I think of it like this. If you think about the basis of the money supply, it’s the US dollars of the reserve currency of the world, all the other currencies are linked to it. You’ve got 100 trillion worth of that stuff floating around. And then you’ve got other currency derivatives. You’ve got bonds, massive amounts of bonds, massive amounts of real estate, property and stocks. And you’ve got companies that are valued based on cash flows.

Michael Saylor (02:21:12):

So let’s say we have 500 trillion worth of stuff in the civilization. All is really predicated upon this fundamental unit of account, store of value, medium and exchange, which is the fiat currency, that underlying currency that’s collapsing right now. And we talked about a collapsing 10 to 20% a year and all of those derivatives of the currency are losing value. So you could almost think about the civilization resting on a platform, which you got a big hole in it, and the energy of the civilization is draining out that hole. Bitcoin represents a new monetary base. What we have is that digital scarcity. And the idea is 100 years ago we thought goals should be the basis and then it became fiat should be the basis. And now we create digital scarcity as the basis or what we might say is a perfect ledger.

Michael Saylor (02:22:18):

And if we had a fair, equitable immutable ledger or a proper ledger, a ledger that didn’t lose 10% or more of its energy a year, but rather it was conservative. In that case, the goal becomes to shift the entire civilization from an imperfect foundation that’s losing. It doesn’t really matter whether it’s 10% or 20% or 7%, all of those numbers. And even 2% is too much. If the civilization is sitting on a foundation where two or three or five or 20% of the energy is lapsing out the bottom of it every year into the ether. Then you’ve got a suboptimal situation. And when the number gets to be 20 or 30%, you approach economic collapse.

Michael Saylor (02:23:17):

So that’s the problem. The solution is seal the energy lapse. We have to seal the economic system. We’ve invented a way to do it. This crypto steel or digital energy, which we know is Bitcoin, we’ve invented a way to do it. You can’t do it with a country. We’ve been trying to do it with the political process. The British tried to do it the pound, we tried to do it with the dollar, the Mark, the Peso, the Franc, the Euro. So we already know what happens when we try to do it politically. We can’t do it corporately because nobody trusts a company. We can’t use Apple stock as the basis of the civilization. I mean a company is even less credible than a country. So we’re left looking for a digital asset which is trustworthy with integrity, an economic material that is strong enough to build a civilization on top of without it collapsing.

Michael Saylor (02:24:34):

I gave you the model of Venice as the city collapsing and pilings that keep sinking. And our civilization is a bigger problem than Venice. We’re collapsing at a faster rate on pilings that are sinking. The challenge of humanity forever has been how do I build something that will last on a foundation that won’t sag over 100 years? How do I build a civilization over 1,000 years? So we’ve got this idea, digital asset that we call Bitcoin. And now the challenge is how do we move 500 trillion of weight? Because you can measure mass and energy and monetary terms. A million dollars will buy you a certain amount of steel. A billion dollars will buy you thousand x more steel. So you can measure the mass of the civilization and money.

Michael Saylor (02:25:37):

We need to shift our entire civilization to a firmer foundation. We need to move from a swamp to granite. And the only way we’re going to do it is if everybody can agree on something that’s fair and equitable. And that means it needs to be open and it needs to be permissionless and it needs to be incorruptible, indestructible, immortal. And once you understand the idea that we need to move from something which is not working. If you’re an American, you might think the dollar works but we can be quite sure if we go to the Russians, they’re not going to say the dollar works. It’s not working for them. And if you go to the Chinese, they would disagree. And of course everybody would disagree that everybody else is foundation works.

Michael Saylor (02:26:30):

So if we want to create a civilization that rests on a mathematically sound foundation, you need to create an economic material that will not deflect. And that’s really the story of civilization. The iron age was an improvement over bronze and steel was an improvement over iron, and the truss is an improvement over the beam. And each crude oil and oil is an improvement over pedal power or a wind power. So the civilization is a continual quest for a stronger material upon which to build a civilization.

Michael Saylor (02:27:15):

And when your life depends on it, things become apolitical. Like if you had a Republican and a Democrat and a communist and a socialist, and they’re all standing on the 88 floor of a building that’s got steel beams and you recommended that you replace that with organic bamboo leaves to be ESG friendly all the way down. You probably wouldn’t get much consensus. You could probably get them to agree that the steel beams in the concrete floors seems a little bit better than organic bamboo leaves as a structural material upon which, and even if I was radical, I probably wouldn’t march my three year old son or daughter across the 88 floor organic bamboo leaves.

Michael Saylor (02:28:10):

So generally people can get beyond competition in politics when it is truly a utilitarian entitlement. Even competitors that hate each other both use electricity, they still use math, they’ll still use the English language, they’ll still use concrete and steel and they’ll still fly in airplanes because it’s pretty axiomatic to everybody that these things work. So the most fundamental thing to understand about Bitcoin is if we’re going to improve the economy, if we’re going to create an ethical monetary asset and a trustworthy technically sound, economically sound, ethically sound, monetary network, you’re going to have to do it in a fashion that it doesn’t require nor does it allow the intervention of a company, an individual, a group of programmers, a country, a politician. And to the extent that anybody doubts that it is neutral, it will fail. It needs to be beyond a shadow of a doubt. Nobody in China thinks that an American politician can make their steel building collapse by passing a law in America. That’s why they use steel. And that’s why we universally use steel to build beautiful things.

Michael Saylor (02:29:41):

So fundamentally, if this conversation is made me think anything, what it makes me think is, it’s just very important that people see the stakes. 500 trillion with 10 to 20 trillion going down the drain every year versus 500 trillion. What happens to the 500 trillion when we close the drain? You get 20 trillion worth of prosperity per year and you compound that over a few years and the human race there steps up to prosperity. And I think we can all agree on an engineering breakthrough.

Michael Saylor (02:30:27):

So when you’re talking to politicians or Investor’s and they say, “Why energy?” It’s because we’re trying to engineer a better world. And you can’t engineer a better physical world without physical energy and physical matter. If you want to engineer a virtual world, put on your virtual goggles, put on music and stare at some avatar and never take them off, and then software might solve that problem. But it’s certainly not going to solve the problem that the human race has and is going to have for the next 10,000 years.

Michael Saylor (02:31:09):

We need to live in the real world, in the universe, and we need to do the one thing that human beings have always done in order to elevate their condition. And that one thing is to channel energy. We will either channel energy and prosper as a nation, as a civilization, as a people, or we will fail to channel energy and we will suffer. And of course, if another country or another people figure’s out how to channel energy better than us will be extinct, our entire way of life collapses. And the world is full of examples. A lot of people that thought that explosives were too difficult to invest in, the Native Americans didn’t have explosives. They didn’t have railroads either. I mean the Romans invested in serious siege equipment and roads and standardized production and many of their enemies did not. And we know how that ended.

Michael Saylor (02:32:18):

Ultimately, it’s the channeling of energy that determines the winners from the losers. And our best hope to uplift all of the civilization, all of humanity, is to channel energy more effectively. And money is the last great engineering feat for us to move to the next stage. You can point toward already extraordinary achievements in channeling information, energy and electrical energy and mechanical energy and chemical energy and nuclear energy. But if you’re looking for the great breakthroughs in channeling economic energy, you had coinage followed by banknotes, followed by credit and here we are. And none of those previous systems were channeling economic energy would be deemed by an engineer to be anywhere near acceptable. Any machine that lost 2, 3, 5, 10% of its energy, every cycle would’ve been discarded as a prototype.

Preston Pysh (02:33:25):

Wow. And it’s such an exclamation mark for me when you’re saying the stakes are so high. People that are listening to this that are not heavily involved in economics or understand what’s happening in the markets right now, I don’t think fully understand how profound this 500 trillion number that you’re stating, I don’t think they fully understand how precarious that is at this exact moment in time.

Michael Saylor (02:33:57):

No, it’s pretty critical. I mean, the Romans invented the aqueducts, the empire rose but then again the aqueducts broke and people forgot how to fix them and the empire fell. And we invented nuclear power and then we created the nuclear regulatory commission. And for 50 years we stopped building nuclear power plants and now we’re staring at massive crisis throughout the world because we can’t generate enough energy. And one wonders, if we hadn’t stopped and investing and building nuclear energy, would we have any energy crisis right now?

Michael Saylor (02:34:36):

So we can’t take it for granted. There are examples of the political system destroying engineering achievements, but there are other examples of the political system embracing them. And I think right now it’s pretty important for all of us to communicate to the politicians, to the mainstream media, to investor’s that this is superior technology. This is digital energy technology, digital energy, digital money, digital commodities. They’re critical to embrace and especially digital scarcity to the future of the human race. And I’m optimistic, but we just have a lot of talking to do.

Preston Pysh (02:35:23):

You and me, both. When I look at the complexity of it, the education is the piece that we’ve just got to keep on educating people on what this is. Especially when we look at policy makers that are being fed, all sorts of narratives that come with individual incentives attached to them sometimes that are parasitic type narratives. And having a conversation like this with you, Michael, specifically around energy, because I think it’s one of the biggest pieces that is really difficult for people to wrap their head around, I can’t thank you enough for making this time that you’ve made to try to explain it from your point of view as to what this thing is. Just really appreciate it.

Michael Saylor (02:36:08):

Yeah, thanks for having me. I appreciated it. It’s fun working through these things.

Preston Pysh (02:36:12):

If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for, We Study Billionaires. The Bitcoin specific shows come out every Wednesday and I’d love to have you as a regular listener. If you enjoyed the show or you learned something new or you found it valuable, if you can leave a review, we would really appreciate that. And it’s something that helps others find the interview in the search algorithm. So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening and I’ll catch you again next week.

Outro (02:36:46):

Thank you for listening to TIP. To access our show notes, courses or forums, go to This show is for entertainment purposes only, before making any decisions consulted professional. This show is copyrighted by The Investor’s Podcast Network, written permissions must be granted before syndication or rebroadcasting.


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