Episode 93 – Saylor’s Strategy – A MicroTragedy

Saylor's Strategy: a MicroTragedy Crypto Critics' Corner

Today Bennett and Cas discuss Michael Saylor's reckless behavior, his departure as CEO of MicroStrategy, the tax fraud charges he faces, previous run-ins with the SEC for making up quarterly numbers, and why everyone should have seen this coming. This episode used clips from Laura Shin's wonderful podcast, Unchained, which you can find here: https://youtu.be/cuRRVo2Cmsc We also used clips from John Vallis' Bitcoin Rapid-Fire: https://youtu.be/hIZIXKTicw4 This episode was recorded on Monday, September 18th, 2022 and edited by Bennett Tomlin.

In this episode Bennett Tomlin and Cas Piancey discuss Michael Saylor’s past and present.

This episode was recorded on September 20th,, 2022.

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English Transcript:

00;00;05;06 - 00;00;13;07
Cas Piancey
Welcome back, everyone. I am Cas Piancey and I'm joined, as usual, by my partner in crime, Mr. Bennett Tomlin. How are you today?

00;00;13;13 - 00;00;16;19
Bennett Tomlin
I'm doing well. How are you Cas?

00;00;16;27 - 00;00;48;10
Cas Piancey
Breathing heavy in trying to set this up here at home. And it's been not the simplest procedure. It probably won't sound beautiful either, but my new recording studio is taking longer than expected. So we'll make do for now. Today we're talking about Michael Saylor MicroStrategy. Not only has Michael gotten into a bit of hot water in relation to his taxes, but MicroStrategy is really not been doing very well over the past year or so.

00;00;48;11 - 00;01;01;16
Cas Piancey
I don't know. There's a lot to talk about, the history, the current situation and why, in a sense, a lot of this could have been seen when the buying of BTC started. So why don't you go ahead and get us started?

00;01;02;12 - 00;01;33;17
Bennett Tomlin
Well, I was going to say that I think the most logical place for us to start is probably with the part about Michael Saylor that our audience is going to know the least about, which is his encounters with the SEC and with MicroStrategy earlier in the 2000s. And you wrote an article about that case. So could you actually give us a little bit of background and Michael Saylor's history before we get to the part of the story where he begins buying absurd amounts of Bitcoin with leverage?

00;01;33;23 - 00;01;56;28
Cas Piancey
There's a longer version of this, so I'm going to go ahead and tell the short version because I think the shorter version can get us started and can get us to a place where the the more thorough explanation of what happened can be understood. But basically, MicroStrategy was formed in the late 1990s and was a premium stock during the dot com bubble.

00;01;57;12 - 00;02;28;13
Cas Piancey
I not exactly sure what the exact number was, but it did multiple and I think it went up to something like 350 $400 a share from I think it IPO'd it at $6, something like that. There we go. Now I have it. It went all the way up to $333 a share from its IPO price of $6. So it shot up it rocketed up in price, which was a pretty common theme in the late 1990s, early aughts.

00;02;28;13 - 00;03;00;16
Cas Piancey
Unfortunately, what occurred with MicroStrategy and Michael Saylor was that after this huge uptick in their price, there was accounting fraud, which is a common theme when it comes to the dot com bubble and 1990s, late 1990, stocks in general, accounting fraud was rampant. You look at Enron, you look at WorldCom. This was PWC PricewaterhouseCoopers. And honestly, they played a bigger factor and role in this than MicroStrategy.

00;03;00;25 - 00;03;34;18
Cas Piancey
Nonetheless, the price plummeted back down to earth after that, and a lot of the issues were attributed to Michael Saylor's kind of reckless behavior. What they did was they misstated their profits and their margins in general during the 1999, uh, quarterlies, and it deeply affected their stock. And up until that point, I believe it was the largest single day stock loss in US history that has been surpassed now, I think by Meta actually.

00;03;34;18 - 00;03;40;19
Cas Piancey
But in in terms of value lost. But it was one of the largest losses ever.

00;03;40;19 - 00;03;57;02
Bennett Tomlin
We've talked about, like when we did our Enron episode with David Z. Morris It's about how part of what Enron was doing was getting real tricksy with how they recognized their revenue rate to try to recognize revenue that was not as guaranteed as they wanted to pretend it was. And that was part of what Michael Saylor was doing as well.

00;03;57;03 - 00;04;34;03
Bennett Tomlin
Right, is that they were recognizing revenue from deals that it just immediately been inked and even deals that had not been completely signed yet in order to try to maintain the illusion that they were this profitable enterprise during the dot com bubble. And I think this is important now in the context of MicroStrategy in 2022, we talked about this a little bit when Francine McKenna was on is that Michael Saylor had another little run in with the SEC recently surrounding his accounting treatment of his assets, again, where the SEC had to tell him that the way MicroStrategy was trying to report their Bitcoin holdings was not appropriate and that they were going to need to mark

00;04;34;03 - 00;04;56;29
Bennett Tomlin
them to market. And so like right now, today on September 20th, we're looking at MicroStrategy having mark to market losses on their Bitcoin of about $1.5 billion. And so I think that it's important to start with that part of Michael Saylor, his history, his accounting shenanigans back in the dot com bubble, because the SEC seems concerned that he might still be up to some accounting shenanigans.

00;04;57;01 - 00;04;57;08
Bennett Tomlin
I mean.

00;04;57;08 - 00;05;30;18
Cas Piancey
We might as well get specific about what he did in the late nineties. He left contracts blank so that he could fill them in later and basically reached quarterly estimates. He would count sales for service as sales for software and he would do barter transactions as sales. So all of this stuff is, you know, legally well, one, not allowed, but two, I think it's understood accountants should know better than to allow that kind of stuff to happen.

00;05;30;18 - 00;06;03;24
Cas Piancey
So that that's what happened in the nineties. They forced MicroStrategy to correct those quarterly earnings. Once they were restated, they were restated significantly lower and got rid almost instantly, got rid of all of their profits. And that nearly bankrupted MicroStrategy. It definitely wasn't illegal enough to say force Michael Saylor to never work as a the CEO or executive of any form for a publicly traded company.

00;06;04;02 - 00;06;39;22
Cas Piancey
It did harm the MicroStrategy name, and then they had to sell junk bonds to cover the fines and all of that stuff. So it wasn't good. It was very reckless. And when I wrote my piece three years ago, two or three years ago now, my my point was not that anything Michael Saylor was going to do anything illegal, but that he clearly had a reckless drive, that he was willing to make careless, reckless kind of decisions to reach whatever goals he deemed necessary.

00;06;39;22 - 00;07;13;17
Bennett Tomlin
So in the context of Michael Saylor being the kind of person willing to bet it all to reach whatever goals he thinks are necessary, let's talk about how he has transformed what's ostensibly a business intelligence corporation into a leveraged investment vehicle for Bitcoin, where he has converted all the spare cash in his companies treasury into Bitcoin and has now taken out multiple bonds through multiple different subsidiaries and stuff to continually double down on this bitcoin bet currently mark to market down about $1.5 billion.

00;07;13;17 - 00;07;27;20
Bennett Tomlin
But that didn't stop Michael Saylor today from purchasing another $6 million worth. It's unclear how much a $6 million purchase is going to help against 1.5 billion in losses. But Michael Saylor will persist until the heat death of the universe.

00;07;27;20 - 00;07;44;12
Cas Piancey
Yeah, he's been making some pretty amazing comments over the course of this all. He also clearly does like a quote, a day where he he takes from his quote a day calendar and just inserts the word Bitcoin into the quote, which is annoying.

00;07;44;12 - 00;07;49;20
Bennett Tomlin
But to be fair, he doesn't have very many original thoughts. And so taking it from the calendar helps.

00;07;50;18 - 00;08;18;28
Cas Piancey
Well, I mean, let's be fair, though, originality. I, I do think that what he has decided to do with MicroStrategy is original. It's true. It is unique. I don't know if it is a good idea. It's essentially I mean, as you said, I think MicroStrategy has become more or less a Bitcoin ETF. It's it's it doesn't know one cares about its business anymore.

00;08;18;29 - 00;08;41;04
Cas Piancey
I was trying to make this point to some Bitcoin maximalist today. A person who's taking their excess individual excess funds that they've been saving and decides to put them into Bitcoin and is willing to hold on to that Bitcoin, let's say forever that they're going to pass this on to their children or their children's children or whatever. That's fine.

00;08;41;08 - 00;09;19;08
Cas Piancey
Like, I'm not going to tell someone. It's like somebody who it's like Peter Schiff in his gold bet, you know, it's like, okay, like if your only concern in life is inflation or whatever, I guess you can do whatever you want. I'm not going to tell you how to spend your money, but when you're a business and you and you make this decision to purchase an asset and hold it indefinitely, obviously the goal then is that this asset needs to appreciate in value either so you can take out loans against it, or so that you can sell it, make a profit, and use the money to reinvest in your company.

00;09;19;18 - 00;09;27;13
Cas Piancey
But essentially what Michael Saylor, I mean, he's taken out debt against his company, but the value of the bitcoin is not appreciated.

00;09;27;13 - 00;09;49;16
Bennett Tomlin
Yeah, yeah. It's a little bit like we talked about with Frank Muci in El Salvador with the Bitcoin band, where for a while they talk about having LaGeo the local small electricity provider, be the issuer of the band and take on this bitcoin. And what it ended up doing is fundamentally transforming Leo's balance sheet. And so it effectively became this weird Bitcoin thing instead of really an electricity provider.

00;09;49;23 - 00;10;15;16
Bennett Tomlin
And that's what Michael Saylor has done with MicroStrategy. He's transformed it into this leverage bet on Bitcoin that isn't an ETF, doesn't follow the same regulations as an ETF, isn't a registered like fund or that is ostensibly a business that has clients and sells software and pays employees. But its balance sheet is overshadowed by this massive leveraged bet on Bitcoin.

00;10;15;16 - 00;10;27;20
Bennett Tomlin
And Saylor, from the position of CEO, has basically argued this was our only choice. We couldn't reinvest in our business because obviously Bitcoin is better than our business is effectively what he said. Emotions Unchained Podcast.

00;10;27;21 - 00;10;45;07
Michael Saylor
Our business is two pieces. Your right hand, your left hand. The right hand is your piano. Your left hand is your balance sheet. Okay, so you can grow the business by growing the PNL 20% a year or 30 or 50 or 100% a year. If you're a genius, that's that's hard. But I mean, you can do it that way.

00;10;45;21 - 00;11;09;13
Michael Saylor
You can also accumulate shareholder value by growing the balance sheet by ten, 20, 30% a year. If you told me Bitcoin was going to grow by 20% a year, I would think if you're going to grow by 20% a year and you have $2 billion on your balance sheet, then you're going to generate $400 million in an vestment income or or shareholder wealth in the 12 months.

00;11;10;23 - 00;11;30;04
Michael Saylor
That's a lot easier than doubling. Well, if we doubled the revenue of the company, we still couldn't do that. Right? Right. Like we would have to increase the revenue accompanied by a factor of five. Yeah. Okay. So, you know, you can compete that way or compete the other way. I mean, some people, you know, some people kind of get hurt.

00;11;30;04 - 00;11;33;19
Michael Saylor
Like it's like you're cheating by making money an easy way.

00;11;33;19 - 00;11;44;21
Bennett Tomlin
So it would have hurt our shareholders for me to try to use this money to grow MicroStrategy because I can't grow MicroStrategy, but bitcoin is never going to. I don't see Bitcoin is having a downturn is another thing he said.

00;11;44;21 - 00;11;52;00
Michael Saylor
About an 80% downturn. I don't think it's a speculative asset and I don't think you can you can quote unquote, take money off the table.

00;11;52;14 - 00;11;56;25
Bennett Tomlin
And so I see it as going like up and up and up forever. And so when you think like that.

00;11;56;25 - 00;12;14;04
Michael Saylor
Technically superior asset class compared to the dollar, the euro, the peso, the bolivar compared to a stock index compared to gold compared to silver compared to everything you can conceivably buy, it is technically thermodynamically superior as an asset.

00;12;14;09 - 00;12;27;05
Bennett Tomlin
And when like Saylor, you have enough shares to vote things however you want, you end up transforming your publicly traded business intelligence company into a levered bitcoin thing. And that's weird.

00;12;27;05 - 00;12;35;29
Michael Saylor
Bitcoin is the best crypto asset. Okay, what's the second best? There is no second best. There's no second best crypto asset. There's a crypto asset. It's called Bitcoin, right?

00;12;36;02 - 00;12;54;24
Cas Piancey
And not only is it weird, but as I as I stating again, like businesses need cash flow, like to be a successful business, you need cash flow, you need cash in and cash out. Like even if you're like a lot of companies operate at a loss for a significant period of time, right. But what they're doing is they're making sales.

00;12;54;24 - 00;13;29;18
Cas Piancey
They're doing things that are bringing in money, even if they're costing them money to to bring that money in. And if you're giving up on your primary cash flow and your new purpose is as a vehicle for a, let's say, a commodity, right? We'll call it a commodity. A vehicle for a commodity. It kind of hogtied you and it and now you're depending on that commodity to go up in value, because not only are you spot buying this thing, but you are making levered bets, as you said.

00;13;29;18 - 00;13;34;18
Cas Piancey
Right. Because he is taking out bonds to accomplish these purchases.

00;13;35;22 - 00;13;59;09
Bennett Tomlin
Yes. Yes. And like we talked about this a little bit when James Seifert was discussing the Bitcoin ETF where like the the SEC's failure with MicroStrategy has effectively become like at multiple levels. Right. Like Saylor didn't get a D&O ban in 2000. And so because of that, he's still able to be a director and officer of this company.

00;13;59;09 - 00;14;27;12
Bennett Tomlin
Right. And do all these things. The SEC has not approved a spot Bitcoin ETF, and so MicroStrategy becomes a more compelling option for investors who want spot exposure to Bitcoin, despite the fact that it's a dumb way to get that investment right. And so like because the SEC has been trying to use the Bitcoin ETF as leverage so that they can get surveillance agreements with all the exchanges and gain de facto regulatory control over the crypto industry.

00;14;27;20 - 00;14;55;02
Bennett Tomlin
They have allowed MicroStrategy to take this strange position and suck up this part of the market. Well, still allowing Saylor with this history of dubious accounting practices to continue to operate in that way and so, yeah, Saylor says while there is no second best things and Saylor does dumb things, but our current regulatory and enforcement apparatus has created an environment where Saylor doing those things is good for Saylor and possibly good for MicroStrategy.

00;14;55;11 - 00;15;20;11
Cas Piancey
And while not necessarily good for consumers, it is providing something to consumers that there is otherwise no way for them to necessarily have access to. Not that I would ever. If you want exposure to Bitcoin, that would be the last way I would suggest you try to seek it out. But for traditional finance folks, it might in some sense look attractive.

00;15;20;11 - 00;16;04;05
Cas Piancey
So it is it is a big regulatory failure. That's absolutely what it is. And I hadn't necessarily considered that aspect of it, but but it absolutely is a regulatory failure. And it sucks that yeah. The way that traditional finance people have to seek out any exposure to this, whether on the upside or downside, is to is to invest in either companies like MicroStrategy, which have pivoted from a small but at least defined business to a commodity holding company or like, you know, blockchain mining companies which seem to fail all the time.

00;16;05;13 - 00;16;33;27
Cas Piancey
So you have to basically constantly be buying, but have to sell high and not sell low. It has made it incredibly difficult for traditional consumers to have that exposure that they would want. I guess there's more options now with things like Robinhood and the gamification of finance, allowing people to have exposure to just Bitcoin or Ethereum or these other other things without having to buy an ETF or whatever.

00;16;33;27 - 00;16;42;00
Cas Piancey
But you can't I would assume you wouldn't want to have a large position on Robinhood or whatever.

00;16;42;03 - 00;17;05;04
Bennett Tomlin
Yeah, I certainly wouldn't it. And yeah, before we move on from some of these Bitcoin bets, I just want to really pause and emphasize for a moment how strange it is that the chief executive officer at the time, an executive chairman of a corporation, said the best way for us to return capital to shareholders is not to do a stock buyback.

00;17;05;04 - 00;17;29;25
Bennett Tomlin
We don't think MicroStrategy is undervalued. We don't want to buy more of our own stock. It was not to do a dividend, was not to give this cash directly back to consumers, was not to invest in growing MicroStrategy. He explicitly said he wasn't sure that was a worthwhile thing to do and was instead for him to go out and purchase Bitcoin to effectively trade the entire corporate nation's balance sheet.

00;17;29;26 - 00;17;30;04
Bennett Tomlin
Well.

00;17;30;17 - 00;17;53;11
Michael Saylor
Well, we have cash. We're going to have cash. You can't use cash to grow the company anymore. What can you do with the cash? You can either buy the stock back, you can dividend it back to the shareholders or you can invest it. What are you going to invest it in? Well, how about an asset inflation hedge that you can't make any more of?

00;17;53;19 - 00;17;55;03
Michael Saylor
Pure monetary energy.

00;17;55;24 - 00;18;25;09
Bennett Tomlin
Was the best way for him to return capital to shareholders is effectively what he said in the Unchained interview. And that is a very strange thing for an executive to say about the corporation they run. Like when you really get down to it to say that our ability to produce things to earn value is less than the ability of this asset to accrue value that no matter how hard we work, we are worse than this asset is a telling thing for an executive to say.

00;18;26;10 - 00;18;32;17
Cas Piancey
Well, I think what it boils down to is his these are convictions that this guy.

00;18;32;24 - 00;18;33;27
Michael Saylor
There is no second past.

00;18;34;07 - 00;18;59;28
Cas Piancey
Giving him essentially the benefit of the doubt by saying this is to suggest that he is religious, he is a religious zealot about bitcoin. And, you know, faith is absolutely blind to you. And so I think the things that come out of his mouth from, you know, mortgage your house and buy Bitcoin to.

00;19;00;26 - 00;19;03;01
Bennett Tomlin
Bitcoin is a cyber hornet's.

00;19;03;01 - 00;19;39;08
Cas Piancey
All of it. And then and then to continue to say this stuff while you're being charged with tax fraud, it's just it's just kind of crazy to me. And the amount of essentially it's financial advice, like I don't know how else to describe it other than it's basically financial advice. What he's suggesting. And yeah, like, like you said, it's, it's a guy who says, my business is not as worthwhile as this religion that I follow.

00;19;39;08 - 00;19;53;19
Cas Piancey
It's like he doesn't want to be in the publicly traded business world anymore. And who knows, maybe with the continuing devaluation of Bitcoin, that could be a very real possibility.

00;19;53;19 - 00;20;00;05
Bennett Tomlin
Well, he is no longer the chief executive of a business intelligence company, right? He does. But I want.

00;20;00;05 - 00;20;20;28
Cas Piancey
To talk about that. I want to talk about that because I don't think he I don't think that I don't think he stepped down in in I don't think it was because I think the reasoning at the time was that he didn't need to be there for day to day operations anymore, but suspiciously that happened to three weeks before the tax fraud.

00;20;21;10 - 00;20;21;29
Bennett Tomlin
I went into.

00;20;22;04 - 00;20;42;01
Cas Piancey
That thing was announced and, and yeah, I just I just I'm curious if he knew I'm curious if he knew what was coming and decided it would be best if he did that, if he stepped away as CEO. But I also know that he's still he's the chairman of the board and holds all the controlling interest of this company.

00;20;42;01 - 00;20;43;11
Cas Piancey
So it really doesn't mean much.

00;20;43;11 - 00;21;33;12
Bennett Tomlin
No, it really doesn't. And let's talk about the alleged tax evasion for a moment, because it is a fun story. So recently, the the Washington, DC attorney general announced that they were going after Saylor for possible income tax evasion. And what's really interesting about it is that it's based on a whistleblower or tip someone in Saylor's social circle or something like that determined that he was not paying income taxes in D.C., but was spending more than half of his days there, which means he's supposed to be paying his income taxes in DC and this person who knows Saylor and heard Saylor brag allegedly about trying to evade these taxes reported him in order to get

00;21;33;12 - 00;22;05;14
Bennett Tomlin
the whistle blower rewards. And so now Saylor is looking at having to explain why he hasn't paid any income taxes in D.C. in the last decade. And the additional wrinkle is that there's a whole bunch of other Silicon Valley and other billionaires who have moved to Florida recently and a lot the same way Saylor has. And I wonder how many of them are spending at least half of the total days of the calendar year at their Florida houses?

00;22;05;14 - 00;22;29;29
Cas Piancey
Yeah, you got to have some serious enemies for people to be willing to to take you out for something like that. It's so strange to me because because we keep talking about this, like if you're going to do something illegal. We talked about it with with the North Korea. What's his name? Thank you. Virtual Griffith. We talked about it.

00;22;30;12 - 00;22;52;11
Cas Piancey
We've talked about it just just for all the criminals that we talked about it with, Reginald Fowler. And it's just it's just embarrassing that these people do these incredibly illegal things and like the one thing you don't do is brag about the illegal things you're doing. So don't brag about it. Just don't talk about it. And instead they have to talk about it.

00;22;52;11 - 00;22;52;21
Cas Piancey
They have.

00;22;52;21 - 00;22;56;21
Bennett Tomlin
To. It's like that part in the wire about the the paper trail is.

00;22;56;21 - 00;23;06;18
Stringer
You taking notes on a criminal fucking conspiracy book? Is you thinking like that?

00;23;06;18 - 00;23;23;20
Bennett Tomlin
They all feel compelled and like we can go back to Silk Road. And we talked about it with Nicholas Weaver. Right. Is that he had this entire log on his computer describing all of his illegal actions and like who he was doing them with and what timestamps for all the illegal things he did and like there were other problems with that prosecution.

00;23;23;20 - 00;23;35;22
Bennett Tomlin
Let's not pretend it was perfect, but like there are a shocking number of these individuals who, for example, brag about their new house in D.C. will claiming to tax authorities they live in Florida.

00;23;35;22 - 00;23;46;24
Cas Piancey
And another great example was like Razzlekhan with her bag that was labeled burner felt like you can't remember that it's your burner phone. That's not something you can't just remember.

00;23;46;24 - 00;23;49;23
Bennett Tomlin
I mean Ziploc with nine cell phones in it was.

00;23;50;23 - 00;24;13;28
Cas Piancey
Oh you know so so that's right criminals are clearly sloppy or at least I guess the ones that get caught are sloppy. We don't know how many are actually doing a really bang up job of not announcing their criminal actions and then not getting caught for them. So so maybe there's plenty of that going on, too. And most of those people who can shut their fucking mouths.

00;24;13;28 - 00;24;34;12
Bennett Tomlin
Kind of do, because every few years one of their law firms end up having a bunch of their files turned over to the ICIJ. And then we go, Oh my God, all these people are silently committing tax evasion and all these other financial crimes, but they were getting away with it because they were silent and they continue to get away with it because our society is structurally better at prosecuting that kind of thing.

00;24;34;16 - 00;25;12;28
Cas Piancey
Right. I think MicroStrategy and Saylor are a fascinating example of like how how history doesn't repeat, but it certainly rhymes and that you didn't need to be a genius to look at the way Michael Saylor conducted himself and his business before all of this Bitcoin buying happened. To realize that there's probably going to be some issues down the road here, even if God bless there weren't any.

00;25;14;24 - 00;25;23;06
Cas Piancey
The way he goes about doing that business is is incredibly reckless and that that's proven true.

00;25;24;03 - 00;25;54;21
Bennett Tomlin
And I just want to emphasize that I think Michael Saylor is a really bad thing for Bitcoin, like even ignoring the fact that he's concentrated this much at the stake. He's become such an important figurehead and he says such shockingly dumb things like we talk about a little bit back in episode 21, the reason you and I found Bitcoin interesting and still continue to find Bitcoin interesting is that there was this compelling and somewhat unique vision of this censorship resistant transfer of value, right?

00;25;54;26 - 00;26;16;13
Bennett Tomlin
And that's a thing that not a lot of other things can claim they've got the ability to do. And Bitcoin's not flawless in that regard, but that's what makes it interesting and valuable. But Michael Saylor, in interviews and stuff, tells people who like says that he doesn't care about that anarcho capitalist stuff and he thinks that they should celebrate all these institutions coming in, all.

00;26;16;13 - 00;26;38;13
Michael Saylor
The crypto anarchists will be freaked out that there are some regulation and all the people and BlackRock and PIMCO and Fidelity that have more money than God will say, okay, what's safe now? We might as well buy 100 billion of it, right? You know, what I say to the crypto anarchist is why don't you just get along with the institutions and the corporations for now, hold your nose.

00;26;38;13 - 00;26;45;08
Michael Saylor
And when you've made billions of dollars or tens of billions, take all your money, buy an island, start your own country and do it your way.

00;26;45;10 - 00;27;06;08
Bennett Tomlin
And that they're benefiting from Wall Street owning more and more of the Bitcoin. And it just seems so antithetical to all of the things that make Bitcoin interesting that all all the things that make Bitcoin potentially worthwhile. Michael Saylor stands opposed to basically all of them except tax evasion.

00;27;06;08 - 00;27;14;02
Cas Piancey
He'll probably start being opposed to more and more stuff as these charges get move forward. Maybe.

00;27;14;10 - 00;27;17;21
Bennett Tomlin
Maybe he'll go full Patrick Byrne and start tweeting about the Deep State.

00;27;17;28 - 00;27;45;04
Cas Piancey
I, I hope so. I hope. I do. I hope, I hope that is true. But I don't know what the commentary is here other than we. We have never done a full episode on Michael Saylor. I don't think either one of us expects him to, you know, do jail time or expect him to. I don't even think he necessarily I don't think he necessarily bankrupts MicroStrategy or anything like that.

00;27;45;14 - 00;27;56;07
Cas Piancey
He brings a lot of attention to himself and it's always for kind of questionable decision making. I think.

00;27;56;07 - 00;28;23;14
Bennett Tomlin
Listen, the shit is cyclical. There's a good chance Bitcoin will go back up. MicroStrategy will be back in the green and they'll be okay. Or alternatively, it's like, as we mentioned, Michael Saylor has the controlling shares. They have enough assets. They can push their liquidation price down into the three thousands if they need to. If Michael Saylor stays in control and stays committed to Bitcoin,

00;28;23;14 - 00;28;23;23
Michael Saylor
There is no second best.

00;28;23;23 - 00;28;58;13
Bennett Tomlin
he can ride it. And as long as it doesn't hit that liquidation price, he might make it out okay. It is just, I think, fundamentally stupid to transform a business intelligence firm into this weird special purpose entity thing for investing in Bitcoin. It is like too early, not how that type of thing is supposed to be structured and as a business it is often the interests of the thing you're holding can and will often run counter to the interests of growing the core business.

00;28;58;25 - 00;29;05;10
Bennett Tomlin
And so it's just stupid. It doesn't mean it's not going to work. Stupid things work all the time. It doesn't mean they're not stupid.

00;29;05;16 - 00;29;33;05
Cas Piancey
It speaks volumes as to, like you said before, his confidence in his own company, which is to suggest he doesn't have any confidence in it. That's why he's gone and made it something completely different than what it it has been for 20 plus years. I would say you're right in that maybe it maybe one day it has to go private or maybe who knows what ends up happening to it in the end.

00;29;33;05 - 00;30;07;13
Cas Piancey
But you can't, as a publicly traded company, have that same low time preference that Bitcoiners always tell, tell everyone else they need to have, like, oh, who cares if it's trading at 20,000 right now? When in ten years it'll be worth a million or 10 million or 100 million? Well, when you're a business and you have to pay employees, you have to pay down debt and you have to literally take care of business every day, not all of your time preference can be about what's going to happen in a decade for you as an individual.

00;30;07;13 - 00;30;32;04
Cas Piancey
It can, but this is why centering your business around an asset that is supposed to be the new gold, it's not viable. Really. This is a very dumb decision. It's not viable. I don't know, having some gold or some some bitcoin or some whatever, some some asset in reserves for a company, I guess as a hedge could be fine if it's a very small percentage.

00;30;32;13 - 00;30;39;15
Cas Piancey
But that is not that is not at all what is happening here. And yeah, it hasn't worked out so far.

00;30;39;19 - 00;31;01;15
Bennett Tomlin
So listen, like square slash block whatever you want to call Jack Dorsey's company, they put a small percentage of their balance sheet in Bitcoin. They are working on Bitcoin. I don't know that it's the best corporate decision ever, but I think it's a totally defensible one. Right. Tesla putting their money into Bitcoin a bit more dumb and a bit less defensible.

00;31;02;04 - 00;31;14;24
Bennett Tomlin
MicroStrategy, like you said, isn't doing that. They are selling millions and millions of dollars actively trying to sell another half a billion dollars in bonds so that they can continue to just walk their balance sheet.

00;31;15;10 - 00;31;30;14
Cas Piancey
Yeah, it stinks. You know what it stinks of? It's kind of like a three arrows capital supercycle call bullshit number has to go up and because of that faith, it will go up. And that, unfortunately, isn't how markets actually work.

00;31;30;28 - 00;31;42;16
Bennett Tomlin
And like in the so in the Laura Shin interview that Michael Saylor did back in at the beginning of 2021, he said like he couldn't even imagine Bitcoin going through an 80% drop.

00;31;42;16 - 00;31;44;25
Michael Saylor
I don't expect an 80% downturn

00;31;45;04 - 00;32;06;24
Bennett Tomlin
And we peaked this cycle at what, 64 and we've already hit a low of like 18, which is like what, a 70% drawdown. Like he clearly is not structurally thinking. He's not thinking clearly and coherently about the risks and about the about how things could go wrong. And that's just clear by the amount of embedded leverage he's creating.

00;32;07;24 - 00;32;34;15
Cas Piancey
That's it. Yeah, that's the difference. That's the big difference. And I think that the advice of really unless you know exactly what you're doing and you know how to hedge, and that's the reason you're using leverage and options, trading, then okay, that's fine. But if you're just using leverage to gamble, it's the same advice I would give to any person, which is, don't do that.

00;32;34;15 - 00;32;59;23
Cas Piancey
So I think that the same advice would go for MicroStrategy. It's like there's no need, there is absolutely no need to do this. We'll see what happens. I get bad. I get bad juju about about the future for saylor and microstrategy. It's going to be a bumpy ride, I think there's no doubt about that. Who knows? Who knows if it's a winning ride or not, but it's going to be a bumpy one.

00;33;00;02 - 00;33;25;04
Cas Piancey
Join us again soon. When I leverage my entire life savings on some Bitcoin to keep this podcast going because we have no way of doing it, otherwise I am just going to be doing a highly leveraged bet of a minimal amount of money and crossing my fingers for the best. Hopefully SBF buys some. Buy some bitcoin. Please buy some Bitcoin.

00;33;25;05 - 00;33;28;01
Michael Saylor
There is no second best.

One response to “Episode 93 – Saylor’s Strategy – A MicroTragedy”

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