Transcription
I remember when we bought our first Bitcoin in 2020. I figure the floodgates were open. If we're moderately successful, in 5 years, our Bitcoin business will go from being worth a h 100red billion to a trillion. Moderately successful.
Hello everyone. I am here at Strategy HQ with President and CEO Fong Lee. Um, today we're going to talk about strategy. We're going to talk about Bitcoin. We're going to talk about business analytics. We're going to talk about AI. Uh, cool sneakers. Um, everything. So, I'm just going to get into it. I'm really excited to be here. Thong, thank you for inviting me to HQ. And, um, I really appreciate being here.
>> Adrian, thanks for coming. Thanks for all the work that you have done uh, in the Bitcoin space and with formerly Micro Strategy, now Strategy, and with True North. It's uh, it's it's a pleasure to have you.
>> Thank you. Thank you. So, I'm just going to get right into it because I've got the perfect story as I was just mentioning. So, in the flight over here, um, it got delayed and um, a older lady saw my sneakers, the strategy sneakers, which I don't know if you aware are going for $2,000 on eBay.
>> Oh jeez.
>> Yeah. So, that that's that's another segue that we can get into later about the the impact that strategy is having culturally. But, um, she saw the strategy B on the back and she said, "What's strategy B mean?" And I had to get into Bitcoin. And I had to get into what strategy was. I had to get into um, just overall what it means in terms of in the market of what strategy is actually doing. And we actually got into the topic of preferreds. I mentioned that their big initiative that there your big initiative is preferred offerings. She had no idea what a preferred offering was. So we got into the the concept of a dividend. We got into a concept of pay a monthly dividend or a quarterly dividend. And that was something that she was very interested in. The reason why I bring that up is this. It's very interesting to me that on X, I see a lot of individuals that are my age, the millennials and younger, very, very interested in the preferreds. Now, at a random conversation with a woman that's clearly in retirement age, she's also very interested in preferreds. She was interested in them, the quarterly preferred and in Strike, Stride, and um, Strife, and she's also interested in the monthly in um, Stretch. Does that surprise you that it has such broad appeal, or is that what Strategy was hoping on?
Well, I I think when you think about Bitcoin and its appeal as a store of value uh that's non-s sovereign and supply limited and you think about digital assets and their appeal as a media exchange broadly. We focus on Bitcoin and securitizing Bitcoin. And when you get into the world of uh public equities and public debt and public prefers which is a hybrid uh product uh, what Bitcoin provides is access to superior returns and superior volatility uh with our equity MSTR which generally speaking performs at call it 1.5 to 2x Bitcoin returns, 1.5 to 2x Bitcoin volatility and not everybody wants them, right? Uh and and so if you think about the world securities, there's also things that are public debt and public hybrids, and those offer lower returns, lower volatility, more downside protection. Uh and hybrids are somewhere in between. Uh so it's not a surprise to me that if you strap these public securities to Bitcoin that number one, everyone learned and uh liked the performance and volatility of the MSTR. And then there are people out there that want different per return profiles, different fixed income profiles. Uh the person that you met on the plane, right? And so so if if you think about the entire market, uh the debt and equity market, we need a product that addresses all of them that are backed by Bitcoin. Uh and that was the realization, the unlock uh the last five years that when you strap securities to Bitcoin, they provide better performance whether it be a public equity, a public hybrid or a public uh debt. Uh and so it doesn't surprise me. Uh and of course, you know, we happened upon all this. We've transformed uh the capital markets essentially by stropping things to Bitcoin. And that's the great thing about Bitcoin. You strap a pair of sneakers to Bitcoin and then everybody loves them all of a sudden. You strap an iPhone, you make it orange, thank you, Tim Cook, to to to the Bitcoin color orange and I think it's probably selling better than they expected it would sell. Wow. Right. So, uh, you put anything and you put Bitcoin behind it. You put a company, you put a public equity, you put a public debt, you put public prefers, you put convertible notes, you put Bitcoin behind it and it performs better. And so there are different people with different investing profiles. There's me, there's you, there's institutions, and then there's the woman you met on the plane. And I think at some point in time, people realize that you strap any security to Bitcoin, it's going to perform better. It's going to give you better uh returns, and in some cases, it's going to give you better dividends and uh better fixed income, which is likely what she's looking for.
>> Absolutely. I think it it reflects um quite a few things. I I I mention often that um on my live streams that I talk to my dad about Bitcoin a lot. He's a man in his 80s and very, very different generational profile. But one of the things that I'll be able to do to get him, you know, get get him into the fold, so to speak, first with IBIT and now potentially with preferred is at his age, he doesn't want to risk money, but he also doesn't he's not opposed to having an idea of getting a dividend, having money coming in. So for him, something like one of the preferreds is great because it can be a monthly expense that he just takes off of his his docket and he doesn't have to worry about. That's one of the things that appeals to him. The woman that I spoke to on the plane, she was very, very similar. She's she thinks that on a monthly um occurrence, if she had a dividend coming in that didn't put a lot of her capital at risk, that'll be something that she's very interested in. Then on the flip side, as I mentioned on X, we have a lot of younger individuals, especially with the listing on Robin Hood now, that are very, very interested in the preferreds. I think that people are really underestimating the impact that the preferreds can have in terms of scaling and in terms of broad appeal. So, there's a two-part question I have with that. One, the listing of the preferred on Robin Hood, I thought was huge because they, to my knowledge, never had another preferred listing and it shows that the leadership at Robin Hood was really paying attention to the community and the demand was there and the and because the demand was there, they made the decision rather quickly, I would think, given the age of the preferred to list them on Robin Hood. Um, what do you what does that say to you in terms of their potential? because we talked about appeal, but I think potential is being grossly underestimated. That's the first part of the question. The second part of the question is how big do you think they can get? I know that Michael Sailor talked about completely taking a chunk of all these different markets and having them be um served by the preferred offerings. I don't want to put you on the spot to say how long do you think that would take, but what kind of a vision does does strategy have for that in terms of one, it's obviously achievable. Two, it's obviously attainable, but how long do you think it's going to take? Because there are a lot of investors wondering, well, why haven't the preferred scaled yet? And they're being they're in my view being somewhat impatient. What kind of a timeline do you have internally, if at all?
>> Yeah. So let let's start with what our preferreds do for uh call it the millennial retail investor, those who are on Robin Hood, those who are on X. Um, you know, you go go back to back back to sort of this premise that Bitcoin actually lowers folks time preference uh and encourages people to save uh because now you can save your money in something that uh has is supply limited, is not going to continue to inflate uh and is a great store value, right? You start there. And what problem are these preferred solving? They're solving the problem that if you're a 25y old and you have $10,000 saved away in your bank account and you don't really want to risk it on public equities because this is going to be your retirement savings and frankly it's the only thing you have right now. Uh you didn't really have an alternative to savings in the past. You could put it into your bank account and earn nothing, right? Likely that that's what you're getting from whatever bank account you have. You can put in a money market and earn 4% which is 2 and a half% after taxes. those weren't attractive avenues for savings. And so for the most part, what'd you do? You you put in your Door Dash order. You Uber everywhere you go. You maybe buy a vehicle with a lease. You you go out with friends and you spend the money, right? Because there's really no reason to save that money. Uh and so what a preferred that gives you, you know, 10.25% 25% uh dividend paid monthly tax deferred is something that you put your savings into. And I think it's amazing that 20 year olds, you know, those in their 20s and their 30s now are looking at this as an avenue for actually saving money and creating wealth. Uh and you know, not everybody wants to go risk it on on, you know, the 2x levered MSTR, right? I totally get that. They want something that looks like uh a basically it's looks looks like a bank account that's paying 10 and a quarter percent. So I think that's awesome. You know, we talked to the folks at Robin Hood about listing our preferred and and and there is a technical requirement. You know, there's a technical uh work that needs to be done, development work to be able to support a preferred instrument which pays dividends, whether it be quarterly or or monthly. That's a lot different than listing the next additional equity. And I don't know what happened within Robin Hood and the reason for the decision-m uh that Vlad and team had to to list our prefers, but clearly they're listening to their customer base and there is demand for this. The same people who are previously not saving anything now saying I have an avenue to save and to earn income on it. So I I I think that's really exciting that they were moving that quickly. And what Robin Hood is, it's a great technical platform. You know, I'm I'm on the app. It's better than most other apps out there. And so, uh, it's a great platform because they're listening to their customers. So, I I think it's awesome what they've did to not just list our preferred, but now they have a platform in which they can list prefers in general. And hopefully what we've done with a preferred market is what we did with the Bitcoin Treasury Company market, what we do with the convertible bond market. We're going to transform it over time. So, it'll be a great business decision for them, not just because of our current four preferreds, but for future ones. Um, where is this all going? Uh, we launched our first preferred strike uh eight months ago, right? And and sometimes I have to take a step back. We launched uh Stretch, which we think is going to be uh the largest because of its market appeal uh three months ago. So we all sometimes to your point Adrian I've heard you talk about this this you know have some perspective right we have to take a step back. Uh I remember when we launched uh when we bought our first Bitcoin in August of 2020 and a month later uh Jack Dorsey and Square then now Block announced that they bought Bitcoin and I believe it was March of 2021 where Tesla announced that they block bought Bitcoin. I figure the floodgates are open, right? Like I started talking to all these corporate treasurers, corporate CFOs, CEOs, board members, you know, numbering in in the dozens. And I just figure in 2021 we were going to have 50, 100, 200 companies with Bitcoin on their balance sheet. And I was wrong. Right. and and what it took were founder le tech CEOs Michael Sailor, Jack Dorsey, Elon Musk and others to take that leap. Uh and it took essentially five years, four to five years before we hit the tipping point of companies putting Bitcoin on their balance sheet. Now we go into the preferred market, right? Bitcoin back prefers and what we've done now uh with four different preferreds uh we know the entire market is about $30 trillion money markets uh savings accounts bank accounts uh etc it's about $30 trillion uh we believe I think realistically what can we get of that 1% of $30 trillion would be $300 billion could we get $30 billion dollars of that market. I think we could right now how long can it take? You know, I I'm I'm I'm a consmate optimist and and you know, like if you had asked me when we launched Stretch, how long would it take for Stretch to Season to be uh trading at par value $100, I might have said couple weeks, right? A month, right? I also believe in in in liquid and and reasonably perfect markets. Uh and so I would have guessed that stretch would have traded to a hundred bucks right away. It hasn't. Right. Uh we need to see that happen. We need to see the market season. You know, when can we we see, you know, $30 billion worth of preferreds, $300 billion worth of preferred. It's it's hard to guess, right? But I what I do know is I know we have a product in these preferreds and we have a market uh like those on X like uh the lady you are sitting next to on the plane that wants the product. We we have we we have a product and we have a market and we have to match those things together. We have product market fit, right? And and that you know as as a software person and a technologist what you create doesn't always have product market fit. You might have a great product, nobody wants it. You might have a market for a product and you can't create the product. We have a product that the market wants and a market demand that has a product. And when you create something like that, uh I believe there will be growth. I believe it'll season. I believe uh it'll mature. you know, I think we'll be sitting here a year from now and starting to see not just the maturation of these prefers in the market, but other companies doing the same thing. Uh, and so that's what's exciting about it. Uh, and and I I I think Stretch is absolutely, you know, at at the tip of the spear. I think it's the the most interesting of the perfuries that we've created and we'll have the highest demand.
I I'm inclined to agree just because um the bulk of the questions that I typically get on X fall into two categories. One um what do you think the price is going to do obviously and two about the preferreds? There are a lot of individuals that um have actually reached out to me and said that they have no exposure to MSTR. They have a full exposure set of preferreds. They have their money sitting in them in strike and strife and stretch and they are quite content playing it out for a long period of time getting that dividend riding that appreciation as as they scale that that minimal appreciation as they scale and that is their investment plan and I that has been something that's been very surprising to me because there are a lot of individuals that are my age and older that are saying the same thing and I think that the with what you mentioned about you know typical savings accounts and typical money market accounts and typical investment vehicles. They do have a level of risk or they have a level of low return. With Bitcoin backed securities, it can give you the best of both worlds in a way. And I think that as they scale, they'll become more apparent. But I want to pivot to something else that's related, but um more of a fun topic. So, your video production manager made me aware that the strategy dunks were going for over $2,000 on eBay. I didn't believe it. I had to look and they absolutely are. We have also Apple as I know you have the same phone as I do. Apple has the orange iPhone. Now, I don't think that was coincidental. I think that was very, very deliberate. I mentioned that to to say this. You now have the Strategy merch store. You have orange iPhones. You have sneakers that are going for $2,000 on eBay. Strategy has become a bit of a cultural movement in a way. You have a very, very impassioned investor base on X that cuts both ways. Yeah, because with passion comes criticism and with passion comes dedication. Um, did you anticipate this kind of a cultural movement in terms of what strategy was doing um being being a result of what strategy was doing? Because you have irresponsibly long community. You've got true north as a as a result. You've got all these um individuals that have made a I don't want to say a career but a built a following around just covering strategy. and as a result covering the other Bitcoin strategy companies as well which in my very, very direct view is a direct offshoot of strategy. Did you see this coming? Did you think it was going to be just another part of the Bitcoin ethos or did did you really see it becoming its own thing because the Bitcoin treasury companies now very much so are their own community versus the broader Bitcoin community. Is that something that you anticipated happening?
Yeah, you know, if if you go back to 2020, uh there were certain things we were hoping for and there were certain things that we did not at all expect. Uh we were hoping that we would strap our company to an asset class uh that was growing faster than any other asset class in the world and that that will continue to happen. and because of primarily uh the technical characteristics of Bitcoin that we're going to do very well as a security and we're going to outperform our historical performance and we're going to outperform the S&P 500 and we're going to outperform the MAX 7. We're hoping those things. We're also hoping that it would open up a retail base of customers uh and investors that were interested in the underlying asset class Bitcoin. Uh and you know we even created some models of what that might mean in terms of share price return. Um a a as as you know Bitcoin all our models were broken. We didn't even come close. Uh the anticipation of what was going to happen in terms of of the the passionate retail and institutional investor base. We didn't anticipate that. Uh we anticipated we're going to put Bitcoin on our balance sheet. We didn't anticipate we're going to become a Bitcoin treasury company. uh with Bitcoin back leverage and Bitcoin back securities and Bitcoin back convertibles and Bitcoin back secure notes and and and all of that was was not anticipated. But on the other hand, we we were ready uh to sort of catch uh the the waves of opportunity that came our way. Um the merch store is a good example, right? Like you know, I'm not trying to make money off the merch store. It's just a fun thing, right? Like what better way to give back to our community than doing interviews. Mike's on on, you know, hundreds of different podcasts, talking to our community directly. That's why I'm doing this. We figure the merch store is just a fun thing to do to give back to our community. Uh the people in the company that work on it, no one has it as their dedicated job. It's a side gig, right? Like the person running the website, you know, using our platform, he's got a day job. The person who's buying the merchandise, she's got a day job. the person who's running our inventory, he's got a day job. So, uh, if you think about the fact that inside the company, there's all these people who just like working on things Bitcoin related that aren't directly applicable to their day job, right? Did somebody who who, you know, who whose job is basically to train salespeople realize five years ago they're going to help, you know, decide what merch to sell in our store? No. But that opportunity came because of Bitcoin. Uh, and so, you know, I like to like just Bitcoin just it just opens doors. It's like the conversation you had with the person on the the plane. You probably wouldn't talk to her otherwise, >> right? Uh, you know, very random. >> Yeah. And and so it just opens doors for conversations and opportunities and and and you know, what are we going to be doing in 5 years? I don't know exactly, but I know there will be things that come along as we identify innovations and we find a product and we find a market and they come together because of Bitcoin. And that's what's exciting about it.
>> I would agree. Speaking of innovation, um, one of the things I wanted to touch on is, and I know you had this um, as a topic with in your interview with Tim Codsman, but people really underestimate strategies broad history of trailblazing, especially in the business analytics field. um give us a quick overview of that again please. And the reason why I bring it up is one of the things I've been fairly I guess you can say bullish on is the potential for the BI side of the business to scale and become its own real real scalable um highly more successful business than it already has been. I think there's real opportunity there. um give the audience if you can a quick overview of some of the trailblazing that strategy has done in their history and then I'm going to use that to pivot into where I think strategy can go and I would love to have you have your thoughts on that.
>> Yeah. So I I uh I have the good fortune of spending about half my time on our software business and half our time on our Bitcoin business. Uh and it's the most fun thing in the world to be able to context shift between those two things on a not even daily basis but on an every 30 minute basis. Um and the software business in its own right uh is a very successful business to your point. You know, if I told you that you could start a enterprise analytics business that has 1500 employees, that counts nearly half of the S&P 500 in the US as its customers, has a valuation of call it $2 billion, uh, and you know, h has a retention rate of about 95%. Everyone said done, my career is done. I'm happy. I need nothing else. uh and that's what Michael Sailor built uh essentially in about 15 years from 1989 in our founding we went public in 1998 some of the innovations is if you hear the terms business intelligence uh back in the day it was decision support systems like we largely invented the space Michael largely invented this space we were the first to if you ever use uh any uh any web application that has semblance of analytics We were the first in 1998 to provide enterprise analytics on the web. If you're using a mobile application and you have any semblance of enterprise or just general analytics on it, we were the first to do that. 2008 we're the first to launch mobile analytics. We're one of the first analytics companies in the cloud in 2012. Um so we have this to your point rich history of innovation. Now you can probably count amongst it 50 to 100 things that didn't work out but every every 10 years we invented something brand new and so you know you get to 2020 and we event putting our our our balance sheet in Bitcoin. It's just another major technology innovation bold move. But the enterprise analytic space has been fun. Uh it it's what allows us to have a video crew, right? like uh we you know if we were just a Bitcoin treasury company we probably wouldn't invest in in in a video crew a studio uh you know this building here great headquarters we support our Bitcoin hub so those two things together do have an important codependence uh that I don't think people quite recognize what it is to be a mature software company that also has a Bitcoin strategy.
>> I would agree which leads me to my other um question as I mentioned I'm very um bullish on the potential for the BI side of the business to scale. And I say that for a few reasons. In my day job, as we briefly touched on one, the two main areas that I typically help um clients and customers with ties to data analytics, data conversion, system integration, and then onboarding of AI tools. There's a lot of overlap with those two and that's because most of the companies they see Gemini, they see Claude, they see um chat GPT, they want to make a chatbot, they want to integrate it, which is which is great, which is very very valid um and a very useful um use of um time, but they're not ready to to take that step. They're not ready because the data is not ready. They're not ready because their data hasn't been cataloged and itemized and hasn't been structured. Uh they don't have a data methodology. they don't have any of the um necessary um scaffolding to make that next leap. And the reason why I bring that up is and I want to get your thoughts on that is an I think strategy has a very, very big opportunity in the data integration AI onboarding tools um area. I think those verticals are very, very underrepresented in the market. Um just because of what I do and just because of the the client load that I see and others in my in my um you know relative field see are are these areas that strategy is even looking at or better yet what are some areas that strategy could be looking at for the business analytics side of the of the company to to scale it and to make it grow because my assumption is that's still going to be part of your future going forward. So what do you see in that future?
>> Yeah, I I'll start with um I do think our software business has a great opportunity to grow and scale. And what's fantastic about uh the marrying of an operating company and a Bitcoin treasury company is although our operating company has a great opportunity to grow and scale, it doesn't have to. Uh and because we don't have to, it actually causes the likelihood of the business growing and scaling uh to increase, right? When when you're a standalone operating business, a public company, uh the desperation and the need to provide quarterly results that are short-term focus and hitting certain earnings numbers, hitting certain revenue growth numbers, uh obsessing every single quarter on what your investors think, what your analysts think. detract significantly in a technology company company from the core focus which should be creating great product, creating a great sales and distribution channel, a marketing channel, servicing that product and supporting that product and innovating over the long term. Which is why by the way you see a lot of technology companies not accessing the public markets. They stay private because when you're private you can focus on the long term which is making great product. When you become public and you focus on the short term, what do you end up doing? You end up with inorganic M&A. You'll buy somebody. You'll end up with short-term revenue pressures eking out margins. You know, getting from 15 to 20% margins, reducing your cost, etc., etc. I don't think that's a great uh form, a great hotbed for technology innovation. So what's happened in the last five years with strategy on our software business is we've been able to focus on innovation. Uh we were the first uh BI company to offer fully integrated AI. Now to answer your question where is this all going? Uh absolutely we have been in the the world in the space of creating uh semantic models business definitions of data right uh and so you might put your data in database you might put your data in data warehouse but you needed to find that data in a business manner uh that is secure that's scalable and that a business person come in without knowing SQL or knowing how to code accessing that data and making decisions out of it. What happens in the world of AI? The need for business definitions of data that are secure and scalable increase uh a millionfold. Right? You'll have a thousand uh agents making a thousand decisions a day. Over time, you'll have a million agents making a billion decisions a day. All needing to access data that is informed by business language and that's secure and that's scale. And so that's what we're doing. We're building out a universal semantic layer that we've been doing for the last 30 years and making accessible to every AI agent, every potential user. We call it mosaic. And this is the unlock. This is the unlock, right? Because other companies are doing it at the data level, which is fine, but an agent wants to access it at the business level. Uh, and that's what we're doing. And I think there's a huge growth opportunity there. And we're able to focus on this because we have Bitcoin uh as our our our sort of um our as our invisibility cloak, if you will, to let us run our business, our software business the way we want to. It's just another advantage of Bitcoin. There are so many advantages of of of sort of adding Bitcoin to your balance sheet as a company. This is just another one.
>> And I what you mentioned there is actually important distinction, the agentic level and the data level. what I do is at the data level helping clients get to that that next level. And that's one of the reasons why I become so um very, very bullish on the potential for what strategy can do because you don't need to become Microsoft. You don't need to become Palunteer. You don't need to you don't need to be that big. You can scale several several orders of magnitude and still not be that size and still have a disproportionate return on that that investment. And I think that that is something that uh people are really really underestimating and it's one of the reasons why I always say have a longer term view. The focus right now is the Bitcoin business obviously but I think that in the coming years and this is just my naive personal view. The business analytics business is going to become more and more important as this AI buildout um takes place. And I mentioned that to get into this. I know that we talked briefly mentioned briefly about how big can the preferreds get. Let's take it a step further. It's what we 2025 right now. It's 2030. You and I are sitting down either here or wherever else and we're having another interview. What would be your dream state? Let's go fully optimistic because you're fully you're you're optimist. Let's go let's go that route. Where will the BI business be? And I don't mean dollar amounts. Where will the BI business be in terms of scale, in terms of market share? Where will the Bitcoin side of the house be in terms of market share? not necessarily numbers but just in terms of overall impact and overall growth of the company and overall trajectory of the company. I know you want to grow but I'm sure you have some general idea of how much you would like to grow in in the next 5 years.
>> Yeah. Um, you know, the the the the funny thing will be is if we're moderately successful in 5 years, our Bitcoin business will be go from being worth a h 100red billion to a trillion. Moderately successful. And if we're moderately successful on a software business, it'll be go from being worth two billion to 20 billion. And the question I'll get from everybody, I get the question now from our software folks. So you have a, you know, $2 billion software business and a hundred billion total enterprise value roughly. Do you care about software? And I say, of course, we care about both. Like they're both important. One is less material than the other to our shareholders. And 5 years from now, I'll have a 20 billion software business. I'm a trillion dollar enterprise. Uh, and everyone will ask the same question. And then when we're a10 trillion dollar enterprise, however, X many years from now, and we're running uh $200 billion software business, we'll still have the question. And all of those are questions I welcome and are good problems to have. But I think these markets are huge. I I I think the Bitcoin market, the Bitcoin backed credit market especially, is a massive market that we can go address. And I think the enterprise software and the AI enabled enterprise software market are massive markets and they're both great. Uh, they're complimentary to each other uh for a variety of reasons. People related um capability related and structural and and that's why it's fun to work in both areas. It's it's a great opportunity. It's a great privilege.
>> Yeah. And so coming with regards to the um preferred coming back to that you just reminded me of a question in terms of the scaling of the preferreds. One of the questions that I I've I got I want to say about a week ago someone wanted me to ask and I think it's I think it's a a fair question. Is there any concern that the preferreds have taken away some interest from the common or do you see it more along the lines of having the diverse investor base that will serve you more in the long run? And I I say that because as I mentioned many people have come to me saying that they don't have any exposure to MSTR. They only have exposure to preferred. Do you think that that is a risk or do you think that is something that you'll have to balance that will balance out naturally as the preferred scale and as the company scales and as this model scales out in the future?
>> I'll start with that. I don't think a Bitcoinbacked uh equity market competes with what people generally use preferred for, which is a Bitcoinbacked uh credit market, right? Uh it's it's like, you know, I own MSTR, I own some of our preferreds, I own a house, I have money in a money market, which I'm moving as much as I can into preferreds. Uh, and so I have different uh, securities and different investment vehicles uh, depending on what my needs are, right? And I think it's okay if someone owns MSTR and STRC. And frankly, I think it's okay if you own an MSTR, STRF, STR, D, STRC, F, STRK. I think they're different products for different people. We were talking about the phone. You have an iPad, you have an iPhone. Like, should you have both? That's your call. You probably have a a Mac too, >> right? Like and so there now should Apple have a hundred products? No. Do they have 10 really good products? Yes. Do we need a 100 different securities? No. Do we need probably 10 or whatever that number is? Yeah. Because I think there's audience that want uh different products. Now what's great using Apple as an analogy is their ecosystem of products support each other, right? like an the AirPods, which you probably own too, and and the watch, right? Wouldn't really work if it wasn't for the phone, right? What our preferred do is they support the common. Ultimately, it's the common MSTR, the sort of the alpha of our securities. Uh, and then we have other products that support them, right? What's going to make, you saw this happen with our convertible bonds while we're in that market, right? They created leverage. They allowed us to buy Bitcoin with less dilution upfront and it helped the equity, right? They also created more volatility, helped the equity, right? The more we see these preferred work, the more it's going to help the equity, right? What happens initially is if we're able to issue, which we did $2.5 billion of stretch, the first thing we did is we turned around zero dilution, right? So 100% accretive to Bitcoin yield and we about $2 and half billion dollars of Bitcoin that helps the equity right and it actually helps everything that's senior to it and you know so it also helps stripes so stripe price up as a result of that. So the preferred are all part of a capital stack. And by the way, when we go and turn around and buy two and a half billion dollars of Bitcoin, not only does it help MSTR because it's 100% accretive to BTC yield, it also helps Bitcoin, right? Uh because it creates more demand. It helps the entire Bitcoin treasury company ecosystem because they're all like, "Oh, there's a non-dilutive way upfront non-dilutive way to acquire Bitcoin. Now it's harder for them to enter the preferred market because they don't have the scale. they don't have the history of execution. Uh they don't have the management team as an example. But I don't think, you know, it's it's uh you know, Michael and others will say it's the tyranny of the or MSTR or STRC. I I say this to my kids all the time and my wife, they're always, do you want to do this or that? C can we do both? You want me to do well in my test or you want me to clean my room? Why is it an or? It's an and. And I I think MSTR and STRC and STRF and STRD and STRK together create an ecosystem that will allow us to be more successful in our for all of our shareholders.
>> And um that's actually a model that I've used the ecosystem model. I've said that strategy is built on an economy around Bitcoin. And I think that's a very, very apt u model, but it's a model that economies of scale are called that for a reason. They have to scale. And I think it's going to take time for it to scale. And um that brings me to my next question. Let's talk about Bitcoin. Now, just in the last 18 months, Bitcoin has gone through what I like to call a transformation. You have the um the ETFs that got approved. You have a, you know, presidency that seems to be far more appreciative of of crypto and Bitcoin. I like to separate the two. Um you have all kinds of legislative barriers that existed in the past that seem to be falling to the wayside. And Bitcoin has been ranging at 100K around that range for quite some time now since like May I believe. I am curious about what your thoughts and feelings are on where Bitcoin is going. And I don't mean like a price prediction. It seems to me that we've hit like a watershed moment in terms of Bitcoin adoption and that that curve is going to slowly tick up now, especially with ETFs, especially with Strategy being a trailblazer, especially with the Bitcoin treasury companies that exist. Where do you see Bitcoin going in terms of adoption? Do you think that we've cleared those final hurdles and it's now just a matter of, you know, quote unquote orange peeling enough people or do you think that there's still other hurdles that may come in Bitcoin's future in terms of broader adoption, in terms of hitting that escape velocity that we all think and and hope is coming?
>> Yeah, I think um I think you'll know Bitcoin's time has really come when you speak to uh that person on the plane and they're like, "Oh, I know what Bitcoin is and I know why it's important and I can purchase Bitcoin on my um Wells Fargo bank account and I can custody Bitcoin through Wells Fargo and I get yield on my Bitcoin when I custody it with Wells Fargo. uh just as an example. Uh and I think that's why the ongoing legislation, the Genius Act, the uh Clarity Act, perhaps the Bitcoin Act are so important because when Bitcoin is introduced to the masses via traditional banking, when Tradex with Bitcoin is when we'll see that big next wave of adoption. And I don't think we're that far off, right? I I I think uh each of the traditional banks entering the stable coin market uh which we've already seen. I think society general all a French bank uh announced the first US dollarbacked stable coin recently. I think that's the banks waiting into the digital asset space. I think the next step will be for traditional banks to offer Bitcoin and digital asset custody services as a huge unlock. They're starting to think about it. They there there are still a lot of un uh certain or undefined legislative and regulatory uh actions and clarity to be created. When that's created and you see JP Morgan Chase, City Bank, Bank of America, Wells Fargo, the largest uh uh retail banks in the US offer custody services. And I don't think we're that far up, one to two years out. Then when they can custody Bitcoin that essentially means one a company like strategy or any large institution for that matter can turn to a counterparty that has uh that's much you know that that's a a a traditional US bank provides lower risk profiles to custody their bitcoin but an individual retail uh owner of of US dollars and checking the savings accounts can now say oh you know JP Morgan Chase allows me to put Bitcoin uh on my balance sheet essentially. Uh and then they offer custody services. Then they offer yield services. Then they offer loans that are Bitcoin back. I think that's I don't think we're that far off. Two years ago, I would have thought we were really far off. Now we're not far off. And when we cross that barrier of traditional finance intersecting with Bitcoin back banking, uh I think that's going to be a huge unlock. and you're already seeing some initial signs of that. Uh, and I think when that happens, yeah, it's about more people getting exposure to Bitcoin, but it's about a a pretty large class of citizens in the US that won't even touch the asset category. Uh, and I don't think we're far off from that and that's pretty exciting.
>> I think you're correct. Um, one of the um benchmarks that I've mentioned on in several conversations now is, and it's funny you mentioned JP Morgan Chase. when I can go into Chase, take my Bitcoin custody with them and get a loan against it. I think that moment is going to be very, very transformative because when when you have an entirely new asset class, it's not as if you're you're doing the buy, borrow, die approach that people do right now. They have a bunch of equities. They go into, you know, Fidelity, whomever, and say, I want a loan against this and they pay the interest on it and then they just roll that in perpetuity. That's a very common thing that but it's not very, very well known. Bitcoin is very well known by the average citizen. When the average citizen is exposed in my view to that kind of a reality where they have their asset where they have their that digital commodity that they can go into a bank and borrow against it, I think it changes what we can do in terms of um broad adoption in terms of market perception. And with regards to the risk profile that you mentioned, and this isn't me slandering anyone, this is not like a BlockFi or an FTX kind of a situation. It's going to be in a highly regulated environment. I think that truly is a moment that will be very disruptive, but in a good way. That said, I'm going to put you on the spot with one thing. Bullish predictions. Do you have any for the future in terms of Bitcoin? Um, everyone's talking about what the price action is doing right now. I I'm not really interested in that. But, you know, Michael Sailor has mentioned that $13 million number. Um, people have mentioned I I call it the stairway to heaven that we can get to a million dollars in a stairstep fashion in the next 8 to 10 years. Do those seem still realistic for you? And along those lines, what do you think you're going to feel when that moment actually hits? I know that you probably own Bitcoin personally. I know that strategy obviously owns hundreds of thousands or will own hundreds of thousands more by that point. What what do you think that's going to mean for you in terms of one validating your approach and two personally because for me I know it would mean that all the ups and downs of the cycles and all the money I've put towards it have been worthwhile. You guys have been trailblazers that are taking a lot of knocks. I think in that moment it it would have to be
A moment of massive vindication.
Yeah. You know, it's it's to me life isn't above vindication. I I I've been alive long enough and had successes and failures and a wife and kids and all those types of things. So, it's it's not about proving someone right or proving someone wrong. Um it's about uh advancing in many cases in my career technology for the good of others. That could be your employees, that could be your shareholders, that could be your customers, that could be uh the broader community, that could be broader society, could be governments.
Um, I do think we'll hit a million. Uh, I don't really think it's a matter of if or when. Uh, sorry, it's not a matter of of if, it's a matter of when. Uh, you know, hitting 100K was was a big milestone through a big party and we moved on, right? Like it's then how do you get to a million? I'm sure when we get to a million it'll be how do we get to get to a billion or get to 10 million I guess probably after a billion.
Um and you know my bold prediction isn't one of price it's the next milestone. I I think a large bank will offer Bitcoin back custody services by the end of 2026. And that's important for the asset class, but it's important for individuals, right? Today, you know, it's it's I we live in a little bit of a bubble, but when I meet somebody who doesn't know what Bitcoin is, I convince them to buy Bitcoin. Their next question is, how do I buy it? And the answer shouldn't be so complicated as, well, you could go on Coinbase or you can buy it on Robin Hood, but you're not really owning the Bitcoin if you buy it on Robin Hood. And if you would want to consider, you could do an ETF, but they charge high fees. And then you could buy MSTR, but I can't advise you to buy MSTR. So, uh, I don't know, right? Like, there's no great answer. And then I could say, well, you could self custody and buy a hardware wallet and let me explain to you like how that works. And they're like, do I have to remember my password? Cuz it's just so complicated. It's way too complicated. And here we are, right? Bitcoin price is over $100,000 and it's still not easy to buy for somebody who is afraid of the asset class.
Someone brand new. Yeah. Someone brand new and someone who primarily listens to a lot of FUD about it, which is what's out there. So, I think being able to buy the asset class through a bank that you already have a relationship with and it's easy as going onto your app and transferring it from your checking account to Bitcoin, like the experience of of of, you know, Square's cash app, right? Or like the experience that you might have uh if you're buying Bitcoin or or or an ETF via you know your Fidelity account like something as seamless as that experience but for the 98% of people who primarily operate through a traditional bank checking account. So I think that milestone next year I think that will lift the asset class up significantly and put us well on our way to to a million dollars.
I that makes that actually does make sense in terms stop focusing on price but focus on milestones. I think that that really does make sense. Um because when the ETFs launch for example, everyone was focused on well are we going to rip to 100k right now instead of focusing on the fact that BlackRock, Fidelity, all these massive institutions um adopting Bitcoin open up the floodgates for all sorts of adoption. And um I think you're right that perhaps it shouldn't be about the the price, it should be about the different milestones. But with that said, those are my last questions. I only have one more. If you had to give a message to the strategy investor community in terms of someone like myself that's been in a little bit longer or someone that's coming in now and they're they're wrapping their head around the prefers, they're wrapping their head around the leverage Bitcoin and they may have concerns about volatility or they may have concerns about, well, if I buy in now, is strategy going to be a company that's going to be doing this in the next 5, 10, 15, 20 years? What what can you say to them?
Well, I start with thank you, right? The reason I became interested in Bitcoin was only part partially and in small part because of its price action. I became interested in Bitcoin because of the underlying technological uh capabilities and macroeconomic capabilities of the asset class. Uh and and I've heard you talk a lot Adrian, you you fundamentally understand the asset class. And so with MSTR or with any of our preferreds, my suggestion is to understand the underlying dynamics of the asset class, not just looking at our price, right? Uh you know, it's it's truly value investing and understanding what is the value of what you're buying, not just the price action of what you're buying. And if you do that, what do you see? You see a company that has a history 35 year history of innovating every 5 to 10 years and you know a true zero to one invention right and every decade since our inception right what else do you see you see a truly visionary uh executive director and founder Michael Sailor who is extremely creative uh and can learn through first principles everything from software to finance uh to you know macroeconomics to aeronautical engineering to the history of the world. You see heard him like you have somebody there who is a truly visionary leader who knows how to execute too. And then you have underneath it a team of 1500 people who uh want to win like nothing else. And you come visit us. You can go meet our folks and and then on top of that you have the first and largest by far 10x Bitcoin treasury company and you have a track record of execution through the last 5 years and conviction we did not sell Bitcoin in 2022 right like and so as you start to look at the underlying characteristics of not the asset class but the company MicroStrategy not strategy right you're going to see uh someone who's extremely transparent is very very convicted who has an amazing founder, who has an amazing executive team and execution and team capable executor. And then you say to yourself, is that what you want to invest in? And then you stack that up against all your other potential investments. Like I like to say strategy, right, is the Bitcoin of not just Bitcoin treasury companies, but strategy is the Bitcoin of technology companies. And our goal is, you know, to become the Bitcoin of public companies, right? And and if you stack the two up side by side, you create a little spreadsheet, you look at why do I like Bitcoin, right? You might realize that each of those have a parallel with why you might want to like strategy. Uh and then you say, if you're that convicted, what do you do with Bitcoin? You buy as much as you can, as often as you can, and you never sell. I'm not saying that's what you should do with our equity, our preferred, but it gives you the conviction in the company, right? And and and that takes a little work, right? It's a lot easier than looking at, you know, the trailing 200 day whatever of of of our stock, but then you become a long-term holder. Uh there are a lot of folks out there who who who are young and want to make money day trading like and and and and investing. It's like people who were trying to flip houses in like 2005 and they thought they were good at it. No, you're just lucky, right? Like most people, if you're a day trader, you're basically just giving money into the large financial institutions and hedge funds or you're lucky, right? But if you're really a value investor and you truly understand the underlying characteristics of the company, what we do, what we do well, you know, then you s then you go and you just invest and you hold for a while and then you stack sats or you stack shares, whatever it is. Uh so I I suggest anybody who wants to understand Bitcoin or our company better, do the work, right? Put in a thousand hours on Bitcoin. You could probably get away with a 100 hours of strategy. Um but do the work, right? And then you'll come to a conclusion of where we sit amongst your other potential investments.
I agree. Um I I'm one of the people on X that talks about options trading, but one of the things I tell people over and over and over again that I think gets lost is if my stack is this big, I'm trading options about that much of it. And um it it really is true. No matter how smart you are that the market's going to get you at one point or another. And the best the best strategy, no pun intended, is to find good assets and hold them over the long period of time and and educate yourself on them. I think it it alleviates a lot of the stress that people feel. But with that said, I want to thank you again for having me out here. Um this was fantastic. I loved seeing uh Strategy HQ, meeting you in person again, having opportunity for us to um sit down and talk in more detail, and I'm looking forward to another opportunity to do it again in the future.
Thank you, Adrian. Thank Thank you for for all you've done for the community. you you bring a uh a very clear uh mindset in terms of investing and how to think about Bitcoin and and strategy.
Thank you very much. I appreciate that. All right, guys. Well, that's everything that I have. Um Fong and I are probably going to chat for another few minutes here, but thank you very much for joining us and this will be up probably in the next few days. Um you're currently watching it today on October 20th, but it'll be up probably by the end of this week on the True North channel um and on X. So please um like retweet retweet and share from there and we will be bringing you more content in the future. Bye.