Michael Saylor on Bitcoin, Money, Inflation, Digital Property, and Securities

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Michael Saylor may truly be said to be invested in Bitcoin. The company he founded, MicroStrategy, was the first publicly traded company to make a substantial investment in Bitcoin, buying BTC 21,454 for its corporate treasury for around US$ 250 million in August 2020 and later increasing its position by subsequent acquisitions to a total, as of 2021-11-29, to BTC 121,044. His personal holdings, independent of the company, stood at BTC 17,732 as of October 2021. With Bitcoin currently trading around US$ 40,000, the corporate and personal holdings together are valued at around US$ 5.5 billion.

In this wide-ranging interview with Lex Fridman, he discusses the fundamentals of property versus securities, the proper definition of inflation, the need for multiple layers between the fundamental reserve asset and high-volume transaction processing, the consequences of rendering paper money issued by coercive governments impotent and obsolete, and how government attempts to manipulate currencies for economic and foreign policy are driving the adoption of decentralised alternatives.

Four hours is a lot of time to spend listening to a conversation, but there is a huge amount to be learned from the discussion.

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Starting at 3:10:10 there is an interesting discussion of how a fast, inexpensive, and high-volume micropayment system implemented as a “payment layer” of the Web can restore “conservation of energy” and impose “friction” on abuse of the Web which is possible today because neither cost nor consequences are imposed upon the abusers.

Of course, Ted Nelson foresaw this in the design of Xanadu in 1964.

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I listened to the interview before you posted. It was interesting. I was thinking while watching that I should suggest/ask you to write a gnome-o-gram on BTC.

I own a small amount of BTC. I vacillate on the value. Saylor makes great points. All points that resonate with people with a Libertarian and/or technology bent. However, he didn’t adequately address a few things that I think are risks.

The State will not give up their power over currency or property: He actually indicated that government could have crushed BTC, but helped it by declaring it property. A government decision is arbitrary. One day your house is your property and the next the government declares that Target can destroy it to build a store.

The other risk is that BTC will not be adopted by ordinary people. Not as a speculation, but as property. It is one thing to explain how it is property in some philosophical discussion with a Phd, Libertarian or technology advocate. It is easy to accept a basket of apples or barrel of oil as useful. It is not as easy to accept bitcoin. The Fugazzi has the State dictating that they must be accepted. Over time because they are accepted, the Fugazzi is thought to have value by the ordinary Joe. Maybe someday there will be so much commerce backed by BTC that it will be accepted.

Because there is a final fixed amount, if people accept it as property with no shelf life, they will holdl. Every other asset is part speculation. BTC won’t be speculation. It will do what Saylor says. Always go up. This is a catch-22. Once widely accepted as the asset that backs commerce, it will become illiquid. Way more illiquid than land. Over a long period, the BTC will be accumulated into the hands of fewer and fewer people. They will have an outsized ability to manipulate the system.

Assume all the bitcoins are accumulated by one individual. How exactly does a person get layer 3 coins? Presumably by a loan. Like gold backed banking, except the bank doesn’t have many depositors that could loose their gold if the bank fails. Thus, when one person is the bank, that person or small group will decide how much lvl 3 exists.

I did a calculation, but lost my scratch sheet. The percent of the total amount (21 million) BTC that Saylor currently owns is a greater percentage that the gold holdings of China.

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The problem with bots, denial of service, anonymous posting, is obviously something that needs a solution. It really is one of the crappiest parts of the internet.

Hope a solution gets implemented soon

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I don’t see a reason to believe this would happen. We had 40 years of experience with the classical gold standard during a time when there were multiple industrialised and trading economies using it on a global scale. During this time, the quantity of gold above the ground grew only around 1–2% a year, and so was effectively constant. Production of goods and services grew much faster than this, and the consequence was what would be expected: a generally declining price level and growing prosperity.

Although most gold was in the hands of a limited number of central banks, gold never became illiquid—individuals or other parties could buy as much gold as they wished at a generally stable price, simply because there was a global market in it and (absent restrictions from countries that prohibited gold ownership or cross-border transfers of gold [to their detriment]), there was always a seller to hit the bid of a buyer.

I would expect the situation to be much the same were Bitcoin to become a reserve asset in the same way gold was. Transactions would occur in instruments ultimately traceable to Bitcoin, but actual Bitcoin would not be transferred any more than physical gold bars were shipped around during the 1890s and early 1900s. Some people would want to own Bitcoin outright, just as some in the Gilded Age wanted to own gold, but this would be as a disaster hedge, for which they were willing to pay the price of its generating no income and the risk of it being stolen somehow.

But, unlike Michael Saylor, I do not believe that Bitcoin is the ultimate and eternal answer to the problem of trustworthy, distributed money. What I do believe is that in an environment in which candidate monies can compete for that role, the free market will converge upon the best solution which will eventually gain a large market share.

The point is, cryptocurrencies do not have to work all that well to compete with government currencies, which have a record of incompetent management, consistent depreciation, and callous manipulation for political ends. The question isn’t “Is it perfect?” but “Compared to what?”. From that standpoint, the appreciation of Bitcoin and its slow adoption by the mainstream is understandable.

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Here’s an interesting conversation with Ted Nelson and Doug Engelbart from a decade ago, where they talk about the web, technology, crap detection, and information quality:

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Have you seen the price of MSTR?

Michael Saylor is the founder and chairman.

I will provide future updates on Saylor

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Hedge fund recommends shorting MSTR.

This is not my recommendation.
This is not investment advice.

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Did you happen to see Peter Schiff’s comment with regard to Saylor’s proposal for the government to sell all of its gold to buy Bitcoin?

Peter said the government could save money by making its own cryptocurrency, limit its supply just like BTC and declare that it could be used as a currency.

I would add that they could do a number of things:
-They could set the value to the same as BTC initially.
-They could hold a large reserve and then divvy up the remainder equally amongst US citizens.

He wasn’t actually proposing it as if he supported the idea. It was Peter taking a shot at BTC.

I think it was a good jab. It points out that there is nothing technically unique about BTC. It points out that BTC supporters like Saylor have strayed a long way away from the original reasons for BTC. It points out the pit Saylor stepped into by pointing out that the government could just issue its own crypto and if your a supporter of governments owning Bitcoin what is your argument against the government creating its own crypto. If there is a government backed coin that is technically equivalent and implements a better technology than Bitcoin, what is the value of Bitcoin.

I consider Saylor a pumper. Even when I watched the interview with Lex, he struck me as a pumper. Lex did a crappy job of challenging him on anything. Many of the original arguments for Bitcoin that I found compelling have truly faded.

The original intent of bitcoin was to be a purely peer-to-peer version of electronic cash that would allow online payments to be sent directly from one party to another without going through a financial institution. It would be anonymous. It would use cryptography instead of third parties as verification. It would be limited in the number of bitcoins produced to prevent inflation.

There are always people that just regurgitate whatever they believe, but does anyone truly knowledgeable about BTC believe it will be a means of exchange as originally intended? It seems to me that it is now being positioned as digital gold. That the means of exchange will be “built on top” of BTC.

I think the built in assumption is that BTC will be the base money similar to gold and the monetary system would function like it did on a gold standard.

Below is a snippet of an exchange that includes Lyn Alden. It started with Joe stating the fact that banks create money whenever they create a loan and this expands the money supply.

She is pointing out that today the Fed steps in and papers over issues when credit bubbles collapse by expanding base money. She is correct that there is a big difference, but this does not answer the question of what happens then? When IOUs collapse down to base money and the base money cannot expand… sounds to me like what happened at the start of the great depression. Maybe she is saying it would collapse before it got this big. Ok, but we also know historically that inadequate money supply has created problems.

It also sounds like the monetary system based on Bitcoin that Lyn is advocating looks almost identical to the gold backed system except somehow the system will be better because it will detect problems sooner before they get too big. That assumes the system knows how many IOUs is too many IOUs.

It also ignores how the gold backed system went belly up. Magically governments will stop overspending by having wars like WW1 or racking up 37 trillion in debt without a war. BTC will fix this because it is faster?

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Those guys back in 1913 knew exactly what they were doing by joining the 16th amendment to the Federal Reserve act at the hip.

The plebs are not appropriately educated about network effects that drive sovereignty is to Fiat money so as to avoid volatility in its value. If they were then they would recognize what a scam 1913 was and would instead demand property money.

As it stands the only people properly educated about network effects are the upper-class parasites.

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I have read your Property Money post multiple times. I have some questions that are not disagreements but to determine if I understand your post.

Walking through your process:

  1. The government issues the landlord title to the house.
  2. The government asks for bids on the title.
  3. Investors place bids in escrow – property money deposits at 100% of the bid.

How is it possible to have a bid higher on any given property without a lower bid
somewhere else? The aggregate of all bids cannot exceed the current amount of
property money even if the rNPV of any or all the property actually increases.

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The supply of liquidity adjusts to keep CORR (cost of replacement reproduction) constant as follows;

When the CORR increases, the government increases the demurrage charges, thus taking property money out of circulation via property owners.

When CORR decreases, the government decreases demurrage, thus putting money into circulation via the sovereigns.

So let’s say there is a new house with a corresponding (net) wealth added to the economy of $50,000. As you point out, liquidity flows into this house’s high bid in escrow which means it has to come from somewhere else thus lowering the assessed value one or more other properties. In general, this would take the form of supply increasing thereby lowering the price of housing in the market. This decrease in the price of housing decreases the CORR (cost of replacement reproduction). This then invokes the second rule above: Mint new money to keep CORR stable.

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Is property money the only money? How does one pay for something other than property?

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  1. Yes.
  2. Transfers between bids in escrow from the consumer to the producer.

Re #1: Any society will have multiple forms of so-called “money” but when it comes to civil society (implying “government”), its job is protection of those properties* it recognizes as “rights” ie “property rights”. Government money is money by “fiat” hence “fiat money” is tied to property rights.

Re #2: Let’s say you want to buy a tootsie roll. As with a business’s property insurance, the tootsie roll will not be inventoried by the insurer or, in this case the government as a “property right” separate from the retail business’s liquid value (ie Walmart’s “mark to market” capitalization). If Walmart depletes its inventory, other things being equal, then its “mark to market cap” will go down as the market acquires this information.

* The most-extreme “libertarian” civil society would make government’s defense of people contingent on treating people as property, with all the attendant ethical, moral and philosophical ramifications, including what would amount to a kind of poll tax in proportion to a person’s value as “chattel” to the “owner” even if only as self-owner. This isn’t something I wish to see. I prefer seeing investments in human capital as exempt for reasons similar to seeing income as exempt.

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A monthly dividend is unconditionally and equally sent to those citizens who are responsible for placing their flesh, blood and bone between chaos and civilization.

Who are these people? Is this males between the ages of 18 and 30 or 18 and 70 ? People currently in the military? In the police, FBI, CIA, Homeland Security, firefighters?

Nowadays, CORR is dominated by the amount of money a woman can make by exchanging her most fertile years for gainful employment with the help of birth control and abortion. The more valuable her characteristics to the economy, the higher the CORR associated with her socioeconomic cohort. To sustain intergenerational value, CORR must account for the fact that the economy has a structural bias toward removing from the next generation the characteristics it values in this generation.

How do you propose that CORR be calculated for the woman working?

What do you mean the economy has a structural bias toward removing from the next generation the characteristics it values in this generation? An example would probably help.

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  1. The answer resides in the word “force”, which occurs 10 times in the Property Money essay, the 10th being:
    Such citizens are “sovereigns” as they embody the force inherent in any society.

The ultimate answer – bearing in mind the destiny of technological civilization is not the surface of any planet – to this must entail a radical notion of the much-abused word “gender”:

Anyone not under a revocable mutual agreement with an Individual Sovereign to be “shielded” from challenge to a mutual hunt in nature.

Since people haven’t been living in the headspace that I have since my 1980s participation in both Space Studies Institute and the Sierra Club, I can’t expect them to view the above definition as sane – not even Jeff Bezos who pays lip service to O’Neill’s assertion about technological civilization and “Nature Preserve Earth”.

That’s why I look for operational definitions like "those who are registered for the draft (Militia.Money’s) that embody the our legacy of sexual being. However, I do recognize that this, too, is being subverted – most viciously by those who hold Israel up as an exemplar for the US to follow in addressing TFR. The US isn’t Israel. The Nation of Settlers in the US aren’t Jewish settlers in the Levant. US Jews aren’t Likuds in the sense of holding the border of the US as sacred as do the Likuds hold the border of Israel. US Jews are, in fact, generally hostile to the TFR of the Nation of Settlers and to US borders. Despite all that, US Jews hold sway over the most vital US policies and are in a conflict of interest with the Nation of Settlers regarding the allocation of the fertile years of what might be called “Farmer’s Daughters”.

Militia.Money’s specialization of Property Money leverages a legacy definition – those registered for the draft – that, almost as soon as I suggested Militia.Money, was under attack by That Unspeakable Thing In DC in the form of Biden’s attempt to subject women and illegal immigrants to the draft. That “coincidence” spooked the hell out of me as it should you. The result would simply be the sexual allocation of young women to a combination of illegal immigrant military age men and the politically selected virulent officer class of the US military.

  1. Short answer: The Foundation World Model That Might Have been:

Long answer: Yes I know I’m not considered “sane” by social pseudoscientists – including the machine learning industry’s approach to truth discovery (including Musk’s lip service to same) – so let’s attempt something that isn’t a so-called “non-starter”:

There are well documented correlations between what women prefer as the number of children and the number of children they actually can afford based on their household’s income. There are not-so-well-documented correlations between household income (relative to their proximate “cost of living”) and household TFR. These can be projected as estimates.

  1. Viewing women in their fertile years as economic units of labor subjects them to commodity pricing. This demand is a combination of their genuine direct value as labor and the occult value as office ornaments sustaining primate social status in corporate tribes. Either way, money is being paid to them to take them out of the reproductive pool.
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The main appeal of bitcoin is that it is not backed by a government or central bank. Even if a government creates a digital or cryptocurrency that is technically equivalent or better, the value proposition of bitcoin doesn’t change, namely no government/central bank backing.

The Lightning network is an off chain payment network for transactions under $1000 (approximately) that settle instantly, anonymously and very low fees (under 0.2%).
On chain is still used for transactions over $1000.

I don’t pay attention to Peter Schiff regarding bitcoin because he has a personal axe to grind.

The problem at the start of the Great Depression was the money supply shrank by 33% between 1929 and 1933. If the money supply was ‘stable’ then no financial calamity.

Regarding Lyn Alden’s comments, I’m not so sure. The bigger problem imo is fractional reserve banking when reserve requirements are close to zero or under 10 percent. My take seems to be lone wolf.

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Click thru to see video clip from 2012

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The manner in which a currency is created matters because it affects the distribution of the currency. Choosing to trade in dollars empowers those individuals who already hold many dollars, or who can create new dollars. Bitcoin is relatively decentralized, which makes it a more egalitarian choice compared to fiat. Most people who own bitcoin own a greater fraction of the entire supply of bitcoin than they could ever hope to own of the entire supply of their local currency, which is already consolidated in a few hands. The transition from the dollar as the world reserve currency to the bitcoin standard is resulting in a great redistribution of wealth as the individuals who own or create bitcoin are not exactly the same individuals who already own or create dollars, although there is some overlap.

In addition to its technical merits, a new currency would need to prove that the distribution of wealth brought by the new currency would be better than the distribution under bitcoin. This will be a difficult task given bitcoin’s decentralized nature and because bitcoin was apparently created by an individual with the best intentions, evidenced by the fact that the Satoshi Nakamoto coins have never moved. Many new cryptocurrencies have been pre-mined by their creators or otherwise rigged to favor a certain group. Bitcoin’s moral superiority in this regard is the reason why it has yet to be displaced as the predominant cryptocurrency, even though many competitors exist with arguably better protocols.

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This addresses the technology issues with cost and speed of transactions. If there are fees it implies to me their is an entity that is the equivalent of Visa. Is this a third party intermediary?

I started to write my concerns about BTC and the reasons why I think accumulation defeats the likelihood of it becoming used as the basis for ubiquitous transactions.

After leaving and coming back this reply from John was right above this reply editing zone. It is his reply to my concern that accumulation into a few hands is a problem. I wish I would have followed up with some questions.

In the 40 year period he referenced which I think was roughly from 1870 to 1914 there was fractional reserve banking. Thus, the money supply could grow and account for economic growth being faster than gold growth. It also is a period that overlaps with the populist movement of the farmers in the central plains and southern US which I believe was in part due to the deflationary pressures. Crop prices fell making it hard to make a living. Farmers need to barrow in the spring and pay in the fall. Barrowing costs were high.

The thing I wonder about, whether it be gold, bitcoin, property money or whatever the monetary system, is the inherent instability of societies. In a capitalist system there will be some that do better than others. Those that suffer will rebel even if the system is better for the overall society.

This populist movement led to the direct election of Senators, the income tax, labor unions and they were against the gold standard. They wanted government intervention in the economy and the Democratic party adopted many of their ideas. The Democrats elected Woodrow Wilson and this was the start of the progressive movement.

I think most of what the populists accomplished were bad outcomes, but my point isn’t to debate this. I am thinking about whether a monetary system can fix the inherent instability of societies due to the fact that outcomes will be different and life isn’t fair.

What is BTC’s real value proposition? It is a better monetary system than the current one run by the FED and the government. What percentage of people are benefitting from government spending? We cannot even hold the budget constant or even hold it to GDP growth because nobody will elect a person that takes away their rice bowl. Isn’t any monetary system that doesn’t allow the rice bowls to be filled going to cause a populist revolt?

I believe that too, but the question is what percent of the people really believe in a free market?

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