Table of Contents
SPEECH TITLE: THE Future of Bitcoin
SPEAKER: Michael Saylor
CONFERENCE: BTC Prague 2023
I was really excited about this opportunity to come and give this keynote in Prague. A lot of my speeches have been fireside chats or just discussions, and the organizers in Prague are very thoughtful. They said, “You know, you really should come up with slides.” And I thought, slides, hmm, so, this is my first presentation this year with slides. I’m hoping that by the time I finish, you’ll conclude there is no second-best set of slides. And without further ado, I’d like to talk about the future of Bitcoin.
The Endless Economic War
Let’s start with an observation: there is an endless economic war raging worldwide. It has been raging since the beginning of time, and it is going on right now. That war is over the redistribution of economic energy, and we call that wealth. But it is all of the money and the power in the world right now. And so, we have a nice map of the wealth of the world here. And the question is, how is that wealth being redistributed? Every single month and every single year, there are three primary drivers.
The first driver is government policy. The most powerful actors in the economic war are governments everywhere in the world. They are moving money around. When I use money here, I mean economic energy or wealth. They’re redistributing it.
The second big driver in this economic war is technology. It’s the advent of the Apples and the Googles. And it’s electricity and it’s fire and it’s cars and it’s Teslas and it’s AI.
The third driver in this economic war is work. It’s all the hard work, it’s the competition, it’s the energy. When you get up in the morning, you go and you work as hard as you can. Sad to say, the government is an order of magnitude more powerful as an economic driver than technology. And the technology is an order of magnitude more powerful than your work. I think you understand this. If you work as hard as you can but without a machine or you work as hard as you can without access to a computer, there’s only so far you’re going to get.
I was thinking about Bitcoin and how Bitcoin plays into all this. And you can see in my chart, Bitcoin’s about 400 billion dollars of this 900 trillion dollars worth of global wealth. You see gold is 12 trillion and equities are 115 trillion. It used to be gold was equal to equity. If you go back 50 years, it used to be gold was about equal to equity. So what happened? Well, there’s a lot of technology and equity. We talk about gold being a shiny dead rock, but think about gold mining and think about what technology has done to gold mining in 50 years. Semiconductors don’t make it easier to mine gold. Mobile phones don’t make it easier to mine gold.
What’s happened in equity? Well, you’ve got Tesla, you’ve got Apple, you’ve got Google, you’ve got Amazon, you’ve got the internet, you’ve got the telephone. So, technology has shifted the balance of power from gold to equity. Government policy shifting the balance of power. Look at bonds. Bonds are driven very heavily by government policy. Real estate is driven very heavily by government policy because government policy controls capital and cost of debt, and that drives real estate. And of course, there’s money over here. So, the most important point is the government is changing this field. Technology is changing this field. And you can work as hard as you want, but you’re going to have to take into account government policy and technology if you want to actually survive in this world.
The World Reserve Currency
The world reserve currency is the dollar. It’s collapsing against assets like the S&P index, real estate, gold, and art. This is a sobering thought. If we had sound money, the dollar wouldn’t collapse. But you’ve probably seen this chart. This is the dollar collapsing against consumer goods. The dollar is 95% weaker means consumer goods are 20 times more expensive today than 100 years ago. Now, consumer goods are manufactured items: candy bars, bottles of water, Netflix videos. They’re things that are coming off an assembly line, and they’re getting stamped out with a low variable cost. This is the cheapest, least scarce stuff in this civilization, and yet it’s 20 times more expensive.
A lot of times, government officials show you this chart and they say, “Well, this is the impact of inflation.” This was generated by the Bureau of Labor Statistics. But the sad fact of the matter is, this is as good as it’s ever going to get for you. This is a different picture. What if it wasn’t easy to stamp out manufactured biscuits or Netflix videos? What if you had to do work to dig the gold out of the ground? Gold is a bit harder, and so the dollar has collapsed 99% against gold in that same hundred years, not 95%. By the way, gold is not scarce. We keep creating more gold, we get better at it, but at the end of the day, you know it’s a bit scarcer than Netflix videos and a bit scarcer than drywall. Let’s talk about something even scarcer: the 500 most valuable companies in the S&P. The US dollar has lost 99.8% of its value against the S&P index over that same hundred years. That is actually a closer measure to the inflation rate. This is the world’s strongest currency, the currency backed by the country that won every war in the last hundred years. This is as good as it’s going to get for you. This is as good as it gets. It will get worse. How do you measure inflation? If I measure inflation against something I can manufacture for free, inflation doesn’t look that high. If I measure inflation against a fixed and thermodynamically sound yardstick, then you see the true measure of inflation. The S&P is one example of that. This is Miami Beach. Miami Beach runs 96 blocks. There’s that much beach. A hundred years ago, there was that much beach. No amount of semiconductor technology or factories make more beach. The dollar has fallen 99.8% against the beach in a hundred years. That’s how you start to see what’s really going on with the world’s strongest currency.
I have some bad news for you. We’re not in America; we’re in another country. Foreign currencies are collapsing against the dollar. This is the Argentine Peso against the dollar. In 20 years, the Peso goes from 1 to 500. The Peso has lost 99.8% of its value against the dollar at the same time that the dollar has lost 75% of its value against the S&P index. I’ll let you do the math. If you run a company in Argentina and you’re going to work hard, you’re going to have to grow your revenues from 1 million Pesos to 500 million Pesos over 20 years to stand still. That’s why I say no amount of hard work is going to solve the problem of being on the wrong side of an economic war. There’s only one strategy here: you have to get out of that Peso; you have to exit.
This is the Lira. This is before this week. It lost 95% of its value. Now the number is about 97% of its value against the dollar. This is the Rupee. It’s lost 90% of its value against the dollar, so that 99.8% loss is another 90%. We’re kind of running out of numbers to calculate just how much of your wealth has gone from you to the government. When the government collapses the currency 99.9%, what it means is over a hundred years, they, in essence, take all of your wealth and redistribute it to their Cronies, to whoever they want. And that’s the rate at which it’s going. This is Pakistan, 82% against the dollar. This is the Brazilian Real, 65% against the dollar.
If you want to preserve your wealth, you have to convert that currency into an asset that’s scarce, desirable, portable, durable, and maintainable. Certain things are scarce and desirable but don’t move, like beachfront property. And, by the way, maintainable—if you own a million dollars of property in Miami, you have to pay twenty thousand dollars a year, every year, to maintain it, and it gets assessed up. So, you have to have a million dollars to cover the taxes on a million dollars of property in Miami Beach over about 20 years. You can’t maintain it. So, if you’re going to be a smart investor, here’s smart investors, people bragging about making money in the stock market. The S&P index is going up 7%-8% a year, and so you must be really smart; you invested in companies that are making good decisions. But look at the money supply. The money supply is going up at the same rate as the S&P index. And what you begin to realize is most investment gains aren’t really gains at all; all you’re doing is simply tracking the monetary inflation rate, if you’re lucky.
Now, let’s talk about all the assets. This is a 20-year return on asset classes compiled by JP Morgan. On the far right, you see commodities. They’re awful. Commodities include silver, gold, natural gas, especially oil, soybeans, lumber, pork bellies. Why are Commodities awful? Because humans are really good at creating more of them, and they will drive the price down using technology, ingenuity, and capital. Commodities lose your money. Cash is also pretty awful. Now, you see the inflation rate that the largest bank in the United States marks. They market it at 2%. That’s what the government tells you their inflation rate target is – 2%; that’s their consumer inflation rate. That’s fake, right? Every few years, I’ll just redefine the market basket of goods. I’m going to put drywall, manufactured biscuits, Netflix videos, and something cheap. You can be sure I’ll take the expensive stuff and move it out of the consumer basket. I’ll take cheap stuff and put it in the consumer basket. You’re moving toward a world where you live in a 300 square foot apartment constructed of drywall, sitting on a cheap rickety plastic chair, with a set of goggles on while you’re imagining yourself in a beautiful universe with a bunch of digital stuff. You’ll get digital healthcare, digital entertainment, digital friends, and you’ll take digital trips to digital vacation destinations in your digital jet, and everything will be good. That’s the problem with the CPI.
Now, look at the S&P Index. You feel like you’re a genius if you’re getting 7.5% against that. But what if I told you the real inflation rate of the US dollar over a hundred years is about 7.5%-8%? That’s the actual inflation. Now you see the average investor getting 2.9%. When they’re smart, commodities are less. The S&P is underperforming the inflation rate. Look on the far left, what’s your best chance? It’s called a REIT (Real Estate Investment Trust). If you have a property company and you buy the scarce, desirable real estate in the middle of London or New York, and if you can generate a yield on it, you might be able to just barely keep your head above water. But, you know, none of these look all that compelling, right? I mean, investment consists of either losing your money fast or losing your money slow, or, after a hundred years of brilliance, assuming that the government doesn’t fail and you don’t have your assets seized, and I didn’t include taxes, as long as you don’t die, you don’t have any capital gains, and you don’t have any inheritance tax, you might barely just keep what you had a hundred years ago in this world.
Most investors perform poorly due to bad habits. What kind of bad habits? This is a 30-year chart of returns on the S&P index, and this chart tells you that if you missed one day, there’s one day every year when 90% of all the gains come – one day. And there are 36 hours a year when all investment return takes place. So, in 365 days, nothing happens 99.5% of the time. This is why we have the laser eyes. This is why we say HODL. And I have said before, trading bitcoin is a sign of lesser intellect. If I were to say 1% of the days you could trade successfully, I would be overstating your odds of success. You literally have to find the 24 hours out of 365 days when the market moves, and you will be wrong 99%+ of the time if you trade. You’re going to sit here and bitcoin is going to be whatever it’s going to be, and then one day you’re going to wake up and it’s going to double. And if you missed that day, you’re going to be kicking yourself. HODL, don’t trade. Most people destroy themselves by thinking that they actually can time the market.
This is a chart as of about a month ago, and what it shows is year to date, 1% of the companies in the S&P index had all the gain. If you look at this chart this week, there are 493 companies in the S&P index that have collectively 0% return, and there are seven that have 50% return. Another way to say that is 99% of the companies cannot keep up with inflation. You think you’re going to pick stocks, you’re going to pick the winner, there’s a 99% chance you won’t.
And maybe there’s a bigger idea here, which is if you have one of the greatest companies in the world, there’s a 99% chance after a hundred years of being great you still can’t keep up with inflation. And this is why I say maybe your hard work doesn’t matter as much as government policy matters. You’re not going to find the winner 99% of the time. And you remember I’ve said before, diversification, it’s selling the winner to buy the loser, right? All these really brilliant investors that diversify, their base, if they’re smart enough to buy Apple or Amazon when they diversify, they go from 44% return to 10% return. And if you manage to get it right, you may be the 0% return. So that leads us to the question, what is money?
What is money?
Investment assets aren’t working so well. What is money? Well, in theory, money is a way for you to store your economic energy and not have it stolen from you by the government by a bad investment decision, right? Perfect money is, in fact, the solution to all your problems. But what is good money? Gold has been an aspirational money but it’s defective, and the reason gold is defective is because we keep creating more of it and you can’t custody it. And so, if I keep creating 2%-3% more, then that means that the half-life of your economic energy in gold is 35 years. It means every 35 years your money’s cut in half or the value of your wealth is cut in half. The only way to make gold perfect is to stop mining it and make it possible to teleport and carry around in your head. And of course, this is not happening with gold.
It is difficult to create sound money. How difficult? Well, Bitcoin has gotten 50 trillion times more difficult to mine since it was formed. What is that telling you? Well, for the money to be sound, I have to cap the supply and in order to cap the supply, I have to make it exponentially more difficult to create it. And human beings in this small corner of the world, Bitcoiners who have been ignored, they figured out how to create 50 trillion times more work in those 14 years. That’s what you’re fighting against, and that’s why commodities make awful money. That’s why anything that can be produced with human intellect and capital will always be awful money because you’re betting against human intellect. I’m going to actually store my money in something that you can make more of, and I’m going to bet you’re too stupid to make more of it. Okay, that’s an awful bet. Somebody somewhere with less money than you has a lot of time on their hand to figure out how to get your money. That’s why you need something like the difficulty adjustment, and that’s why it’s so difficult to create sound money. Bitcoin is sound money.
People around the world use all sorts of assets in order to store their economic energy. All these monetary assets have a different natural frequency. For example, oil gets produced with a stock-to-flow ratio which is extremely low. The Argentine Peso is doubling in supply every one to two years. Silver is growing at a fairly rapid rate. When the dollar inflates at 7% a year, that means that over the course of 10 years you double the supply of the dollars. So therefore, the half-life of money in a dollar is 10 years. As the stock-to-flow ratio goes up, the half-life of the money goes up, the natural frequency slows down. Gold has a half-life of 35 years. Obviously, gold is a better money than the Peso, it’s a better money than soybeans.
But now you see the real key is, what is the natural frequency of the asset? And what’s brilliant about Bitcoin is it started with a higher frequency, but that natural frequency is going to infinity. It’s becoming a very low frequency money. Next year after the halving, stock-to-flow is 120, the half-life of your economic energy in Bitcoin goes to 100 years. In the year 2036, the half-life of your economic energy in Bitcoin becomes a thousand years. In 2048, the half-life of your economic energy in Bitcoin is 10,000 years. Now politicians want to tell you that this is impossible. Commodities in nature tell you this is impossible. But look at my chart here. In your lifetime, there’s one asset that has a long enough frequency that you can actually expect to keep your money forever. This is economic immortality. When flow goes to zero, stock-to-flow goes to infinity, the money lasts forever. If the money lasts forever, you have hope. What is money? Perfect money is a way to escape the misery of the economic war that is depriving you, your family, and your company of 99.9% of everything you have with absolute certainty. And there is no amount of work and there is no amount of trading, no amount of thinking that is going to escape this reality. You’re going to have to find this solution. What’s the winning strategy?
There’s only one winning strategy that I see: it’s hold the best money [and join the future of bitcoin]. If you hold the dollar, which is the best currency, you’re going to zero. If you hold a weaker currency, you’re going to zero in a few years. Gold is sort of better money than the currency. Stocks are better money than gold. Bitcoin is a better money than stocks. But let’s talk about this a bit:
Corporate Equity vs Bitcoin
The conventional organization, company, investor—they think corporate equity is the best money. They have monetized it, and that’s what they’re using. I wanted to break down what corporate equity looks like versus bitcoin. The traditional return of the S&P index is about 7% a year. Well, Bitcoin should, in theory, return 14% a year. It’s returned a lot more. It’s returning 40-50% a year over the past three years and much higher over a longer period. But I want to lay out the reason that companies don’t work as well as perfect money or digital money.
First of all, you’ve got dilution that comes from management. Management’s going to pay themselves 1% of your return every year. You’ve got the risk of labor. Companies unionized, they have to pay labor. The cost of labor keeps going up. It’s another 1%. You’ve got competition. There’s going to be someone that’s going to produce more gold or more iPhones or more computers. It’s going to cost you another 1%. You’ve got technology. You had a really good camera business, and then the camera becomes software. It’s going to cost you 1%. You’ve got regulation. The EU is going to actually fine Facebook or Google for doing something on the web. It’s going to cost you 1%. You get taxation. If I can locate your employees, locate your management, locate your company, locate your headquarters, it’s going to cost you 1%. And then you’ve got war. The war may be a hot war where you’ve got a tanker and I blow it up, or it may be an economic war like a tariff and I’m just going to put a 25% tariff on you. Companies have all those risks. If you ask what’s the cost of it, about 7% a year. What you can expect is over time, over a hundred years, you’re always going to pay the 7%. Now, what’s the implication of getting a 7% yield versus a 14% yield? Because Bitcoin actually avoids that.
How does Bitcoin avoid it? The Bitcoin virtues are: we replace management with cybernetic control. The software controls the system, not people. The software does the work for free. I replace labor with a digital system. I replace competition with an immaculate conception. There’s only one Bitcoin. Satoshi gave it as a gift to the world. There’s no competitor, there’s no second best. Why? Because someone created this, gave it away to the rest of us without any beneficial interest in it. That’s what makes it unique, irreplaceable, special. Instead of technology risk like the iPhone 15, bitcoin is just money, 1/21 millionth of everything there’s ever going to be. It’s not going to actually obsolete. It’s an immortal product. In a thousand years, you’re going to want to own 1/21 millionth of everything there is. In a hundred thousand years, you’re going to want to own 1/21 millionth of everything there is. That’s how you escape the competitive downdraft, and that’s how you avoid the technology destruction. Of course, with regulation, taxation, and war, by being a digital asset, you’re living in cyberspace. You can’t destroy it. It’s indestructible, it’s incorruptible, it’s global. Bitcoin is going to duck the exposures of these other systems.
So, what’s the implication of that? If you had a million dollars today in your company or in your family, and you hold it in cash, in the world reserve currency, that is 7% inflation rate, in a hundred years you will have, in today’s dollars, $977. You will go from a million to a thousand. You’ll lose a thousand X. It’s one divided by two to the tenth. If you take all your million dollars and buy government bonds yielding 3.5% interest, you’re going to have a 3.5% negative real yield. Carry that for a hundred years, you’re going to have $31,000, 3% of your wealth. If you’re brilliant and you invest in the S&P, you’re going to have a million dollars. You’ll have the same value, the same wealth, in a hundred years you have right now, but no more. If you take half of it and invest it in bitcoin and the other half in the S&P, you’re going to have $512 million. And if you go a 100% bitcoin, you’re going to be a billionaire. All you got to do is flip your million dollars into bitcoin, hold it at 7% real yield a hundred years, and that’s the money you have times two to the tenth. And so you can see in a very simple way there’s a winning strategy, there’s a losing strategy. Every other strategy, the trading, the investing, it’s just a waste of time. You could ask, what about the real world? Here’s the real world: in the last 2.5 years since MicroStrategy entered bitcoin, bitcoin has outperformed the S&P, the NASDAQ, gold, silver, and bonds. Bonds are destroying wealth, silver is destroying wealth, gold is destroying wealth, bitcoin’s crushing everybody. And you can say, well, what about MicroStrategy? All the guys on Twitter, they’re all like Twitter trolls, ‘Hey, you lost some money investing in bitcoin’…
That’s the MicroStrategy performance. That is your company on a bitcoin standard. That is your family on a bitcoin standard. See, you just keep dollar-cost averaging or bitcoin-cost averaging, and at the end of the day, it doesn’t matter at what price you buy. What matters is you keep buying and you don’t sell, and you don’t invest in the bonds, the silver, the gold, and the rest.
The Future of bitcoin
The world’s in an economic war, but the world is beginning to realize bitcoin is the superior asset. As they realize that, bitcoin is going to demonetize all these other assets over time. It’s going to first demonetize gold because gold doesn’t make any sense, and then it’s going to demonetize the other store value assets: the real estate, the S&P index, the bonds. And so you’re going to get a 30X bump as we demonetize gold. But there’s no reason why you can’t have a 500x increase in today’s dollars by demonetizing these other things.
I’ll end with this thought. We have laser eyes because laser eyes say focus on what you can change, save what you can save. In this particular case, you can make bitcoin a success. You can tell the world about bitcoin. No country can stop inflation. Nobody can stop inflation. I can put you in charge of the world; you cannot stop inflation. 99% of the companies, they cannot outrun inflation. 99% of the workers, they cannot outrun inflation. 1% may beat the market by skill and luck. Don’t assume you’ll be the 1%. Everybody can buy bitcoin. So, buy Bitcoin. Thank you.
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