I dive into evolution of Michael Saylor alongside his company, MicroStrategy, illustrating Saylor's rise from humble beginnings, the establishment of MicroStrategy driven by his tech foresight, and the challenges he faced post an accounting scandal in 2000. I consider Saylor as a visionary who deftly navigates through adversities, embraces innovations like Bitcoin, displays skin in the game, and always a willingness to risk it all.
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"I can't hedge [against the probability of future problems]. I'm going to go to extremes. I have $50,000 in the bank, $7 [million] to $8 million in the company. Either we're going to make it big or lose it all,"
“The lessons are that people are capable of accomplishing great things if they set their mind to it and that we should not allow ourselves to be hijacked by a small goal or a pedestrian thought”
"The first few million is important. You can buy a nice house. The rest gives you credibility to approach people to ask them for things. When you're worth a certain amount, you get the attention of everyone in the room."
..your anti-technology tendencies are exactly what the establishment wants, because every financial provider is taking advantage of you, every medical provider is taking advantage of you, every standard vendor is taking advantage of you in the current status quo"
"I'd rather lose $100 million and take my shot at greatness than sell out and become a millionaire." - Michael Saylor
All opinions expressed by Andrew Flattery are solely his own and do not reflect the opinions of Flattery Wealth Management, a registered investment advisor. This podcast is for informational and entertainment purposes only and should not be relied upon as investment, tax, or legal advice. Clients of Flattery Wealth Management may maintain positions in Bitcoin and the securities discussed in this podcast.
FULL TRANSCRIPT
Lightly edited for clarity. Audio clips are presented as transcribed.
THE ORIGIN STORY
Andrew Flattery: "I signed up to change the world," Saylor likes to say. He compares himself to Thomas Edison, Henry Ford, Andrew Carnegie, and John D. Rockefeller. "The way we've played this business and the way we have played the game at MicroStrategy is unwilling to hedge — ever." Saylor says he will not sell his firm to a larger competitor, no matter what the offer. "I can't hedge against the probability of future problems. I'm going to go to extremes. I have fifty thousand in the bank, seven to eight million in the company. Either we're going to make it big or lose it all. I'd rather lose a hundred million dollars and take my shot at greatness than sell out and become a millionaire."
Andrew Flattery: That is a quote from my notes on early Michael Saylor — Michael Saylor in the eighties and nineties. What I'm going to share with you today, I'm calling it the origin story of Michael Saylor, using some articles from the nineties that I could find on the internet and a great interview with Charlie Rose from 2000.
Andrew Flattery: Here it is. The origin story of Michael Saylor.
Gentleman Speculator — Standard Disclaimer
My name is Andy Flattery and I'm the owner of Simple Wealth Planning, a registered investment advisor. All opinions expressed by me and my guests are solely our own opinions and do not reflect the opinions of Simple Wealth Planning. This podcast is for informational and entertainment purposes only and should not be relied upon as investment, tax, or legal advice. Clients of Simple Wealth Planning may maintain positions in Bitcoin and the securities discussed in this podcast. And full disclosure today — we're going to be talking about Michael Saylor, the founder and chairman of MicroStrategy. I have been a shareholder of his company, ticker symbol MSTR, since May of 2022 and started buying the shares at $167 a share.
Charlie Rose, PBS (2000)
Michael Saylor is President and CEO of MicroStrategy. He founded the startup in 1989 at the age of 24. Since then, the company's focus has evolved from consulting, to software, to e-business. Today, it is best known for helping large companies sift through their vast databases for valuable analysis and information. It has doubled in size every year and grown into a multi-million dollar company. From the beginning, it has been driven by the vision of its leader, whose mission has been nothing less than to purge ignorance from the planet. Having said that, I am pleased to have him on this program.
Andrew Flattery: That is Charlie Rose introducing Michael Saylor in the year 2000, back when Saylor was still very much a tech darling — part of the dot-com boom of the 1990s, and decades before he would become the most prominent voice in the Bitcoin space in corporate America. What I want to understand today is the origin story of Michael Saylor. Where did he come from? What were his upbringings? Who was he in the eighties and nineties?
Andrew Flattery: I'll leave all the links for the pieces that I used for the notes in the show notes so you can read this for yourself. But what I found is several articles and pieces on Saylor back when he was — and correct me if I'm wrong, I wasn't around back then paying attention — but it seems to me that he was kind of viewed in the same class as your Larry Ellisons and your Steve Jobs and maybe even your Jeff Bezoses, back when these pieces were written.
ROOTS AND FAMILY
Andrew Flattery: Going back to the beginning, Michael Saylor was born in Lincoln, Nebraska. So we're going to claim him as a Midwestern guy, as one who lives in the Midwest. His father was in the Air Force, so it sounds like they spent some time when he was younger on military bases, but largely he was raised in Fairborn, Ohio. They lived in a government-issue, aluminum-sided duplex, shopped at a commissary, rode the bus, and stuck to a twenty-dollar-a-month recreation budget.
Michael Saylor, Interview
When I was three years old, my first memory was standing in a room and it was like a Sunday afternoon after my parents went to church. And the Sunday afternoon ritual was people come over to the house for a potluck supper and they all bring a dish. And so I was three years old and I'm standing there in the foyer and I know that the kids are supposed to go in the backyard. The adults with the food are supposed to drop it on the, you know, in the dining room on the left and the adults without the food are supposed to go to the living room on the right. And so I'm standing there directing traffic and people come in and I'm pointing 'em toward the left, the right or telling the kids go in the back. And then there are some adults that are ignoring me. And all I can think is what's wrong with these people? Why don't they know that I'm in charge here? I know what's going on.
Andrew Flattery: Family was vital to his own development. Saylor frequently mentions his mother, Phyllis. She used to work days and nights as a department store clerk to help support the family. On Sunday morning, she would wake up at 5:30 AM to help her son deliver newspapers.
Andrew Flattery: Saylor was quoted saying: "If your parents tell you, you will do great things — you will do great things. I was lucky enough not to come out of high school with a lot of angst. It helps in this process not to lack confidence."
Andrew Flattery: What strikes me about this is just how normal that is. Saylor seems to be from an all-American background, and I don't mean that as some sort of rags-to-riches story. As we've talked about on this podcast, legacy matters — and it doesn't have to be monetary legacy. In fact, the best sort of inheritance you can receive is usually not money. And it sounds like that is what Saylor received. Although he was not from money, the seeds were certainly planted with his family.
Andrew Flattery: "My father taught me character," Saylor says. "My mother taught me charisma." His dad is the one who told him he had to do things. His mother told him he could do anything he wanted because he was brilliant. In seventh grade, he was named Paper Boy of the Year. His mother pulled him aside and whispered in his ear: "You're going to grow up and do something great for society because you've got lots of gifts and you're very smart. So make sure you use all of them."
Andrew Flattery: A couple of things here — not to compare myself to Michael Saylor — but my brothers and I were all paper boys. We think fondly of that period, we have a lot of laughs about it. It's kind of sad that that job doesn't really exist anymore, or what the 2024 equivalent is of paper delivery as a twelve-year-old at 5:30 in the morning.
Andrew Flattery: "My father was the typical disciplined military sergeant. If you're going to do something, do it right. The kind of guy that was absolutely 100 percent straight. I can't remember a single time in my life where my father ever said an untruth or tried to slide by with half an effort on anybody or with anything. Which is kind of interesting — you don't realize how unique that is until you grow up. And then you realize that people are always sliding by, a negotiation or something, but my father never cut a corner — ever."
Andrew Flattery: For starters here, I just want to say that it's refreshing to hear someone speak well of their father. I saw this thing on Twitter recently — I think it was from Charles Coulombe, the historian. He said something to the effect of: every boy should think of their father as the greatest man who ever lived. How countercultural is that? You don't hear a lot of people praising their fathers in that way.
A VORACIOUS READER
Andrew Flattery: Another thing to mention about Saylor's childhood was that he was a voracious reader. He used his money to buy comic books and said, "I must have read a hundred books in one summer — just lots of books." His mother knew something was up when she took him to the pediatrician around that time and the discussion between her second grader and the doctor turned to the Isaac Asimov novel they were both reading. He says he had read hundreds of books by the sixth grade. "He had a book with him all the time, reading after school and on weekends. I became a science fiction freak."
Andrew Flattery: He said he took as his intellectual mentor Robert Heinlein — Kansas City native, by the way — the sci-fi author best known for Stranger in a Strange Land. Saylor, who says he had read all of Heinlein's books twice by the time he was eighteen, scoffs at the mainstream work. His favorite was Have Space Suit — Will Travel, wherein a high school senior wins a space suit and gets hauled off to Pluto in an alien ship, then to the spiral arm of the galaxy where he saves the human race from a bug-eyed monster, then returns to Earth and gets a full scholarship to MIT.
Andrew Flattery: "So it stuck in my mind that really cool people go to MIT to build spaceships."
Andrew Flattery: With regards to reading, Saylor would later say that the lessons of these pulp novels are that people are capable of accomplishing great things if they set their mind to it, and that we should not allow ourselves to be hijacked by a small goal or a pedestrian thought.
Andrew Flattery: One of the themes that we've brought up on this podcast before is the celebration of boys' pulp fiction — or maybe just pulp fiction in general. Maybe it doesn't even have to be for boys. Certainly Saylor wasn't just reading "boy books." But for me it was Tom Swift, the Hardy Boys, the Three Investigators series. I think these are great. If you can get boys into some of the aspirational pulp fiction to get them dreaming and certainly to get them reading — it's cliché to say just get kids to read. The response to that should always be, "well, read what?" But I think it's okay if it's pulp fiction, some of this great science fiction, or even some of the boy books.
MUSIC AND HIGH SCHOOL
Andrew Flattery: Another theme from his childhood was music. He's a guitar player. He loves to sing. He sang in the choir of a Southern Baptist church and in school and in pickup rock and roll bands. He learned to play the guitar when he was seventeen because he didn't get a role in The Sound of Music at his high school — which I think is hilarious. The orchestra director said he needed someone who could play both trombone and guitar. Saylor already played trombone and taught himself guitar in six weeks. Apparently back in the nineties, he was inviting friends over for karaoke. And if I ever have a chance in my life to go to a Michael Saylor karaoke night, that would be a bucket list item checked right there.
Andrew Flattery: Saylor played in school bands and marching bands and jazz groups. He listened to Van Halen and Rush and The Police and Styx, Pink Floyd and Genesis. He was known for imitating John Travolta at dances and asking cute seniors to dance when he was a nerdy freshman. "I'm not sure he ever got a date with one of them," a friend said.
Andrew Flattery: Saylor was valedictorian at Fairborn High and was voted Most Likely to Succeed. "He always read more than the rest of us," the friend said. "He was always putting things in the context of the Greeks and the Romans." Which is totally hilarious if you listen to Bitcoin podcasts — he's doing that constantly. Listen to the Saylor series with Robert Breedlove and there's hours and hours of talk on the Greeks and the Romans. It's so funny that he's been doing that since he was a teenager.
MIT AND THE DREAM OF FLIGHT
Andrew Flattery: That brings us to MIT. If you think about his science fiction background, it seems to me that he really did think he was going to be the one launching rockets. He was a tech optimist in the same way that you might say an Elon Musk is today. At MIT he studied aeronautical engineering and the history of science. The aeronautical degree taught him basic engineering and made him want to fly jet planes. The history of science became his true love and prepared him to change the world — that's in his own words.
Andrew Flattery: He joined the Air Force Reserve Training Corps to help pay for college and was selected to the Corps' prestigious jet pilot program. "I loved it. That was my life. This was the time of Tom Cruise and Top Gun. And the best thing you could do in life was to be a jet pilot in the military. You were built up to be the king among kings," Saylor said.
From Top Gun (1986)
Commander: You think your name's gonna be on that plaque? Maverick: Yes, sir. Commander: That's pretty arrogant, considering the company you're in. Maverick: Yes, sir. Commander: I like that in a pilot.
Andrew Flattery: Saylor was a strong-willed, politically conservative debater who was a devotee of George Will. His senior thesis was on a theoretical model of issues in political theory having to do with the classic city or nation-state of Plato.
Andrew Flattery: One of the things that strikes me about all these various interests of Saylor — even now, but certainly throughout his life — is the Charlie Munger latticework-thinking idea, where you need to be well read in many different disciplines. Munger, as the investor, talking about how being well read is an advantage. Some have even called investing the last liberal art — where if you're able to think laterally, think in many different disciplines, it's a way to remove yourself from the silos that everyone else lives in. No one is a lateral thinker anymore. No one has a real liberal arts background anymore.
Andrew Flattery: So the foreshadowing here is that Saylor is not going to be a one-dimensional, managerial-class, play-by-the-book CEO. He's going to be able to pivot many times throughout his career because of the vast array of knowledge he has across all these different fields. And he's going to do things by his own book, because he thinks of himself as a great man in history.
Andrew Flattery: A routine physical exam crushed Saylor's dream of a career as a pilot. During the physical, the doctors detected a benign heart murmur. The military grounded him, and when defense cutbacks sent him to the reserves rather than active duty, Saylor found himself with no job, no plans — just two months before graduation.
Andrew Flattery: He found a job consulting with a software integration company focusing on computer simulation modeling, which was his college minor. He lasted just more than a year with the startup, and then he was out on the New York streets at the age of twenty-three. He considered himself a failure, by the way, at twenty-three. He said, "This is kind of embarrassing. I was voted most likely to succeed. I was the valedictorian of my high school. I couldn't go home. I was five thousand dollars in debt, living in Manhattan. I was a wreck."
Andrew Flattery: But Saylor's luck soon changed. He had one business card in his pocket — that of a DuPont executive and former client. After hearing Saylor's story, this DuPont executive brought him to DuPont. Saylor worked there as an internal consultant, developing computer simulations that would help DuPont plan for the future in its key markets.
Andrew Flattery: One of the things we've talked about on this podcast before is the ethos of tinkering, or greatness without goals. The grand plan is not always going to be a straight line up. To achieve great things in life, it takes small stepping stones, and the plan is not always apparent right away. Anytime someone has had success, they can look back and the path, in retrospect, may have been clear — but often it's a winding path of achieving small goals, attaining skills, and jumping on opportunity when it presents itself, not always in the way you think it's going to.
THE BIRTH OF MICROSTRATEGY
Michael Saylor, Interview
And after about 18 months of doing that, at the DuPont Corporation, I realized that I wasn't going to be CEO of DuPont any time soon. And they really wanted me to just keep working while they spent the money. And I decided maybe I should go back to school or start a company. Those being the two things you do when you're 24 and you're disenchanted with your current career path. So I went to DuPont. I said, I quit. I'm starting a company. I will build your global multi-user networked war game if you want me to, as a contractor. Please give me money.
Andrew Flattery: Now we're finally getting into the origins of MicroStrategy. While he's at DuPont, he's apparently working on some sort of early version of business analytics. There are several stories about how he predicted a 1990 recession in many of DuPont's markets after doing computer simulations. "I basically got an education in software on DuPont's money because they were too stubborn to admit that a recession was coming." Eventually, Saylor's software acumen so impressed DuPont executives that they hired him as an independent contractor — which was basically the seeds of MicroStrategy.
Michael Saylor, Interview
They gave me a quarter million dollar contract. I said, I need a hundred thousand dollars in cash up front. And they said, well, we never give 24-year-old kids a hundred thousand dollars in cash because you might waste it or skip off to Brazil or something. And I used this one negotiating strategy. It only works once in your life, but it worked for me. I looked at them and I said, you have to give me the hundred thousand dollars because I have no money. It's like holding your breath until they give in. And they looked at that and they had to agree. I did have no money and so they gave me the 100,000 and then they gave me free office space and computer equipment and incubated the business. Then they gave me four more contracts. And MicroStrategy was born.
Andrew Flattery: So the DuPont Corporation — the company he was working for as an employee, and then as a contractor — was essentially the venture capitalist of MicroStrategy. They initially launched in 1989 as a consulting and services firm and introduced their first software product in 1991. A year after that, the company stumbled into a ten-million-dollar contract with McDonald's — they agreed to build applications that would help the fast food restaurant chain analyze the effectiveness of its promotional campaigns.
Andrew Flattery: That is the origin story of MicroStrategy — started when Saylor was twenty-four years old. He had two co-founders, Sanju Bansal and Thomas Spahr. Saylor has been the largest shareholder throughout the company's existence and has always controlled the most voting shares. I think even today he controls over fifty percent of the voting shares, which is important — it's basically allowed him to maintain control of this publicly traded company throughout all this time, which is extremely unusual. But I get ahead of myself.
SELLING DATA BEFORE IT WAS COOL
Andrew Flattery: Let's talk a little bit more about what MicroStrategy was doing in the nineties. Saylor throughout his career always has these big ideas, these grand visions for how he wants to change the world. One of the ideas he was talking about in the nineties — I think this was 1996 — was: "Nobody has really grasped yet the great wealth that can be made by selling data over the web." That sounds so prescient now, and a little Orwellian. He realized that companies were wasting the information that they gathered about customers and sales. MicroStrategy quickly became a premier data-mining firm, extracting intelligence — a favorite Saylor-ism — from "swamps of undifferentiated data." MicroStrategy famously helped Victoria's Secret discover that women in New York buy more black bras and that Midwestern women buy larger bras, causing Victoria's Secret to change how it stocked its stores.
Michael Saylor and Charlie Rose, PBS (2000)
Saylor: Well, if you have a hundred thousand items and you have a thousand stores, you have a hundred million combinations of inventory, buckets of inventory, every day. And it's likely that, you know, you find people go and there's not enough in one bucket, and there's too much in another bucket. And if you have the wrong inventory mix, you lose a lot of money on merchandising. Up until about 1995, the traditional approach of merchandising was I have exactly the same assortment of items in every store. The same types of lingerie, the same sizes of lingerie. Whereas — Rose: The people in New York may want different things than the people in California, than the people in North Carolina, than the people in Texas. And the reason that you were of value to them is that you determined from the data they already had in their company databases that this was the reality of their sales patterns. Saylor: You could think about what we create is a large information refinery.
Andrew Flattery: What's so interesting hearing him say this is how obvious it sounds now. This is the primary way the internet was monetized ten to fifteen years later, when free social media websites like Facebook would gather all of our data and then sell it to companies. Saylor was saying this back in the nineties.
Andrew Flattery: "It occurred to me, this is kind of stupid," he says, jabbing at his salad as if he's trying to kill off old business practices. "Why try to guess what the consumer is going to buy next year? Why not just ask them, ask the customer. So you get the system like Blockbuster and you say, what is your favorite movie star? What is your favorite actor? Who is your favorite director? What type of movie? What type of movies would you like to buy when they first come out? Who's your favorite musician?" And by the way, it's interesting that he says Blockbuster. Now that's exactly what Netflix does — they show you what you want to watch because they know your preferences.
Andrew Flattery: I have, by the way, a whole set of Titleist golf balls from the nineties — one side has the MicroStrategy logo, the other side has the Blockbuster logo. If anyone knows where these came from, please let me know. Interesting that Blockbuster, once a great brand, didn't make it — superseded by Netflix. But even today, MicroStrategy is still around, albeit in a different iteration.
THE INTELLIGENCE REVOLUTION
Michael Saylor, Charlie Rose, PBS (2000)
I'll give you an example which impinges upon government policy and the consumer, and illustrates, I think, pretty well how intelligence technology is going to change the world. And that example would be the traffic system. In Northern Virginia, we have about 250 billion dollars in a traffic machine. And that machine is used 800 million hours a year. And 280 million hours of it are congestion. Which means if you do the math, it only works 65 percent of the time. 35 percent of the time, it's clogged. Now, you can solve the problem of traffic in two ways. One way is the 20th century way, which is I pay 30 billion to build more highways, and I make everybody mad because I'm ripping up the road, and it takes me 10 years, and at the end of the 10 years, the traffic system is 10 percent better. Or, the other way is, I can collect a catalog of 5 million people's traffic demand, where do they want to drive, and I can look at how fast the traffic is moving. And if I have a road like Route 66 and it's about to clog, I can pick the 15,000 people in Northern Virginia at their desk about to get on that road, send them a message to their pager or their telephone and say, you know, you might want to take a different road because this one's open, that one's clogged. Or everything's clogged, sit where you are, surf the web, talk to your mother on the phone, or have a cup of coffee, because you ain't going nowhere. Now, the truism with traffic is, if I can move you from 105 percent utilization to 95 percent utilization, the rate of speed on the road goes from 5 miles an hour to 60 miles an hour. You de-bottleneck the entire system, you free up the congestion, and that network starts to work more efficiently. Now here's the punchline. Instead of spending 30 billion to improve the effectiveness 10 percent in 10 years, you could spend 100 million and improve the effectiveness by 10 percent this year, now, and get all the benefits and do it for one one-hundredth the amount of money.
Andrew Flattery: Here he's talking about traffic, which is another theme that comes up from time to time in these early Michael Saylor interviews. I wanted to share this because it's almost like he's describing an alternative universe we could be living in. You could totally imagine this technology available to us, but it just never really happened. I think it's a good example of how good ideas don't always come to pass. Just because we have the technology doesn't mean it's going to happen. Today, traffic is still a problem. We've overbuilt on infrastructure we can't afford in 2024, and it doesn't seem like technology has fixed that yet.
Andrew Flattery: I also want to mention that I know there are some Debbie Downers who will talk about how Saylor, when he's doing this sort of big-idea vision casting, maybe sounds a little unhinged — and I get that. You should always be skeptical. But he's done this so much that it's clearly just who he is. The guy is brilliant. Sometimes he's right. Sometimes he's wrong. He's probably more often right directionally than not. A lot of financial people criticize him for making grand claims. I kind of like the idea that there is a financial person who is himself and is okay with speaking like a human being — like someone who enjoys science fiction, who enjoys the Isaac Asimov novels. Don't take everything Saylor says as financial advice, but I enjoy that about him, and just recognize that some of the things he says so boldly might not pan out the way he would envision.
Michael Saylor, Charlie Rose, PBS (2000)
And then you free up 200 million hours of time every year to go and invest or read or be with your kids or live a better life. And so I think that this is a revolutionary point in time because people are used to spending a lot of government money on concrete and steel. They don't really think about spending government money on intelligent networks. You know, we have a bridge in D.C. called the Wilson Bridge. Okay, it's a 1.3 billion dollar project to replace that bridge, and 500 million is just to make it a 12-lane bridge instead of a 10-lane bridge. And you know, they only need the extra lane for 500 million bucks because 15 minutes a day, people are not smart enough to get off the bridge. And so if they could de-bottleneck that bridge with intelligence, they could afford to buy everybody a cell phone in the entire state.
DIGITAL SCARCITY AND URLS
Andrew Flattery: Credit where it's due — one of the things Visionary Saylor was so right about in the nineties was URLs. He recognized that there was going to be digital scarcity on the internet in the form of dot-com URLs. Saylor was one of the very first to recognize the digital scarcity of literally acquiring the names of URLs. He's bought tons of them and still owns them to this day. He owns hope.com, which is now a Bitcoin website. Strategy.com is the MicroStrategy website. Saylor owns michael.com, which is his personal website. And I think famously a few years back he sold voice.com for thirty million dollars.
Andrew Flattery: If you're looking for proto-Bitcoin Saylor intuition, that was definitely there — recognizing the digital scarcity of these dot-com domain names, which today are very hard to come by.
Andrew Flattery: With these visionaries, you can't have it both ways. You can't have someone who is a grand visionary who isn't also maybe a little bit crazy — who doesn't sound a little bit mad at times. There's that Seneca quote: "There is no great genius without a tincture of madness." I think the way you can vet this is just by paying attention to what he's been doing over the years. We have a long enough track record with Saylor to recognize there's something worth paying attention to here.
TRUST, TECHNOLOGY, AND THE BANKING SYSTEM
Andrew Flattery: In the vein of a proto-Bitcoiner sentiment, there's a really interesting section of this Charlie Rose interview from 2000 where Saylor is talking about trust and the banking systems. He's responding to the critique — which now we know is a very valid critique — that perhaps I don't want some technology company to have all of my data. Perhaps I don't want to trust them with my medical data. Perhaps I don't want to trust the company to run the traffic on software. What Saylor is making the case for is that you need to have trust with these companies, and these companies need to prove themselves as worthy of trust. He makes the point that if the banking system doesn't have trust, you can't have an economy.
Andrew Flattery: Which is super interesting today, because now we're talking about a banking system where trust is minimized. We're not emphasizing the need to have trustworthy institutions. We're talking more today about developing technologies which are trustless — or which minimize the need for trust.
Michael Saylor, Charlie Rose, PBS (2000)
Trust. Trust is the core issue. You have to trust this deposit of information. And I would say that trust is central to the development of our entire Western civilization for the past 2,000 years. Now, if we roll the clock back, I would offer as a metaphor the bank. What is a bank? A bank stores information that people have about their personal wealth holdings. In order for a bank to work, we need to trust the banking system. And the way we do it is, the government defines a currency. I can sell my pig, and you can sell your land, and she can sell her seed corn for money into a market. I get the money back, and I have to trust the currency, because if I sell my pig for 10, and I gotta buy it back for 100 next week, I'm not going to trust the markets. That's why inflation kills the banking system. If I do have a government that has a stable currency, then I can trade all my assets for money. Money is information. I can put the money in a bank and the banker is a database guy holding a ledger of everybody's name and their money and protecting their interest. Now along comes a guy that has a lot more time than he has money. He wants to start a farm. So he borrows money, flips a note back, takes the money, buys land, gets pigs, gets some seed corn. Plants, creates the farm, sells that stuff in the open market, pays off the interest of the bank. The banker passes back that interest to the depositor. Everybody with assets gets interest. Everybody without assets gets a loan.
Andrew Flattery: Another thing I find interesting about the argument Saylor is making — and I don't know if I agree with it or not, I just find it fascinating to consider — is he's correlating skepticism of these ideas of trusting technologies with an anti-technology bias.
Andrew Flattery: There's a quote where he says: "The perverse observation here is your anti-technology tendencies are exactly what the establishment wants. Because every financial provider is taking advantage of you. Every medical provider is taking advantage of you. Every standard vendor is taking advantage of you in the current status quo." He's talking about disrupting the current status quo. "What we're talking about here is an intermediary that's a union, that's just as powerful as they are, that's as smart as they are, that fights the information war with them all the time. And if you trust me primarily rather than them, that's really the war."
Andrew Flattery: Some of this has panned out. I would say in some ways conventional mainstream media being disrupted by podcasts and Twitter is probably for the better. But in other ways, it's been a lot of winner-take-all, where there's a lot of power concentrated in the hands of large platforms. I think it's fascinating. I don't know what the answer is. There's an anti-technology bias at play, but also we've sort of seen some of the results of this, for better or for worse.
IPO, HUBRIS, AND THE ACCOUNTING SCANDAL
Andrew Flattery: In 1996, Saylor was named Washington's High-Tech Entrepreneur of the Year. Then in 1998 came the IPO — the initial public offering for MicroStrategy — which would make Saylor a billionaire at a young age. Around this time he was quoted saying he rarely thinks about getting rich: "The first few million is important. You can buy a nice house. The rest gives you credibility to approach people to ask them for things. When you're worth a certain amount, you get the attention of everyone in the room." He planned to be running MicroStrategy for thirty years and had refused buyout offers. The largest was for a hundred million dollars, and he said if someone were to offer him ten billion dollars, he would still refuse: "I have an ethical obligation to the people who work for me."
Andrew Flattery: The foreshadowing there: Saylor stepped down within the last couple of years as CEO of MicroStrategy. If we do the math, he was CEO for at least thirty years. In some sense he still controls the company, but he's no longer CEO — he's the chairman and founder. That's pretty unbelievable for a guy like that to control a company like that for as long as he did. You don't see that very often. In fact, now it's the exact opposite — those who come up through the venture capital path are often very focused on exiting the company. Sometimes you'll see the cringe thing on LinkedIn where someone says they're a "three-time founder" or "five-time founder," which I always think is a bit of a red flag. You want to be the guy like Saylor or Bezos, where they found a company, it works out, and they keep the keys to the kingdom.
MicroStrategy Super Bowl Commercial (January 2000)
Hello, Cathy. Stock Alerts. MicroStrategy software is creating a new generation of one-to-one e-business. Rintek merger has declined. Where's that idiot stockbroker? No, I don't want his voicemail. 40%. We need merger! E-business solutions through web, wireless and voice. Oh, nothing. Just another merger. MicroStrategy. The power of intelligent e-business.
Andrew Flattery: So here we are in January of 2000, and what you just heard was the MicroStrategy Super Bowl commercial for that year — which symbolizes peak MicroStrategy. I think they spent around eight million dollars on that commercial, and this is going to be the beginning of the downfall. The stock price between the 1998 IPO and the peak in 2000 went up roughly ten-fold. But here's what I want to get into — to the extent that I can — this accounting fraud, which is going to be the scandal that rocks MicroStrategy, that rocks Michael Saylor, and takes him down a peg from a darling of the 1990s to someone with questions in his background.
Andrew Flattery: It's hard to find the real story, but I did find a good piece that seems pretty fair-minded, by an author named Cass PNC, who wrote a piece on Medium called "MicroStrategy Before Bitcoin."
Andrew Flattery: The beginning of the end of the internet bubble is sponsored by a slew of auditing firms that aren't just being criminally negligent but often committing outright fraud. These firms go from being known as the Big Eight to what's today known as the Big Four. Everyone remembers Enron, WorldCom — that was Arthur Andersen at the time. But MicroStrategy engaged with PricewaterhouseCoopers, PwC, who of course is still around today. In March of 2000, MicroStrategy was forced to restate its accounting numbers for 1998 and 1999. That's huge. The stock, which went from six to 333, was sent back to Earth — it fell 91 percent in about a month.
Andrew Flattery: Here's what happened. The SEC alleged that MicroStrategy, through a series of shady accounting practices, made their books look better than reality. Some of these practices included: leaving the date blank on contracts so they could be signed right before the end of the quarter to beat earnings; recognizing revenue from unsigned contracts to meet end-of-quarter earnings estimates; counting sales for services as sales for software; and recognizing barter transactions — for example, trading five million in software for five million in hardware and counting it as sales.
Andrew Flattery: There was a settlement. Saylor, his co-founder Sanju Bansal, and Mark Lynch neither proclaimed guilt nor innocence. They paid fines and MicroStrategy paid a large fine as well. The defendants were also ordered to cease from ever engaging in any activity like this again and were more closely monitored for an extended period. But maybe the larger story is that the role of the auditor played an even bigger role. PwC ended up paying a 51-million-dollar settlement — much larger than the fines paid by MicroStrategy and Saylor. It would later be discovered that auditing firms giving the thumbs up to pretty much everyone were playing a huge role in the financial bubble.
Andrew Flattery: Quick aside: you've got auditing firms playing a role in this financial bubble, and another thing often downplayed in these discussions of every financial bubble — but certainly the dot-com boom — is monetary policy. It's never talked about. This was the Greenspan era, loosening monetary policy. Today for shorthand we call that debt-binging or printing money. Easing monetary policy does help lead to these financial bubbles, and the shame of it is there are often good ideas in things like technology booms. The dot-com boom had good ideas that came out of it, but because they're part of a bubble, they're smeared in the media, smeared in financial markets. You make a joke about Pets.com, but there are good ideas that come out of it — and they get soured by financial bubbles that are often exacerbated or even initiated by government or central bank monetary policy.
Andrew Flattery: To get back into it — MicroStrategy and Saylor clearly took advantage of auditing games between 1998 and 2000. The extent of it becomes clear in a New York Times article. First, a troubling bit: a large portion of the fine was paid to the SEC in MicroStrategy stock. Paying off SEC fines in company shares feels like a conflict of interest on every level. Second, most companies that face fraud charges and a subsequent massive downturn in stock price attempt to alter their board of directors and definitely remove the executives accused of the fraudulent acts. In this case, perhaps because Saylor is the number-one shareholder, neither of these events took place. Saylor was able to keep his throne — a major advantage of controlling the company.
Andrew Flattery: The article makes its conclusions: "It's fair to make the assessment that these fraud charges are from two decades ago. Since then, MicroStrategy and Michael Saylor haven't been accused of anything nefarious. Additionally, considering the company hasn't gone bankrupt and the stock price hasn't gone to zero, it's probably fair to say that MicroStrategy, while fudging the numbers between 1998 and 2000, wasn't a straight-ahead scam."
Andrew Flattery: Saylor, during this period, was never really going to come super public with what happened — at least as far as I can find. The comments we do have line up with this idea that I don't think Saylor ever thought he was doing anything morally wrong. Maybe he was being aggressive, maybe he was pushing the boundaries of the rules as he understood them. But in terms of putting a moral implication onto this, I don't have enough intimate knowledge to say.
Andrew Flattery: Some of the quotes from Saylor at the time: he said he had been the victim of what he called "bean-counter sophistry" from PwC and from "the jackals in the press." For a while he was refusing to apologize on the record, although he did end up making a formal apology, which I think was good — it sort of saved the stock price for a period.
Andrew Flattery: "The 35-year-old Saylor, who owns 56 percent of the company, has seen ten billion dollars — two-thirds of his paper fortune — disappear since the stock price peaked two weeks ago. You would be phased at losing six billion dollars in a single morning. You would fret if your company were pilloried for dubious accounting practices. But tyro billionaire Saylor seems utterly unaffected and largely uninterested. He insisted that his company did nothing wrong and he moved on. 'I signed up to change the world,' Saylor likes to say. He compares himself to Thomas Edison, Henry Ford, Andrew Carnegie, and John D. Rockefeller. When you are changing the world, who cares about a few billion dollars here or there?"
Andrew Flattery: Even Saylor admits he's a zealot. He sees the edge, but he likes it: "The way we've played this business and the way we have played the game at MicroStrategy is unwilling to hedge — ever. Going to the limit with the idea that it's better just to risk it all, all the time, than it is to play it safe. I am doing stuff right now that risks it all."
THE BITCOIN PIVOT AND LEGACY
Andrew Flattery: As we know, a couple of decades later, he's going to risk the company yet again by adopting the Bitcoin strategy for MicroStrategy in 2020. This is just who this guy is. He has no problems taking major risks — that's in his DNA.
Andrew Flattery: I will say it does seem like the company was managed fairly conservatively for a couple of decades after the dot-com bust. When they adopted the strategy in 2020, their debt was pretty reasonable — if they had any at all. They had a lot of cash on the balance sheet, which is why they adopted the strategy in the first place. Saylor basically needed something to do with it. He was skeptical of doing acquisitions, which is the playbook — that's what you're supposed to do if you're a big tech company. Acquisitions keep you relevant, keep you growing, and make Wall Street happy. But it doesn't always work out, and a lot of times failed acquisitions are the demise of these companies.
Andrew Flattery: I think it's interesting that although he risks the company, he also might have given us a playbook for how we can do growth reasonably — how we can make growth sustainable. He isn't trying to force the issue. He's saying, "Hey, we're going to put our treasury in Bitcoin. We like that asset. We think it's going to do well" — as opposed to rolling the dice on some acquisition that may or may not work out.
Andrew Flattery: As we wrap up here, I'm going to share a few of my takeaways from the early Michael Saylor story. The one thing I think he's told us about this period that still rings true today is: he's still here. He's still himself. He's still the same guy. He seems to have the respect of his employees, shareholders, and the regulators. He's had skin in the game at every step of the way.
Andrew Flattery: One of the things I recall reading about this period was there was a 125-million-dollar line of credit that one of the banks had floated to the company and was going to pull during the financial problems. Saylor personally guaranteed the line of credit himself — basically unheard of, but he's had skin in the game at every step.
Andrew Flattery: There's this quote by Thomas Sowell: "It's hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong." Saylor has personally paid for every decision he's made, as far as I can tell.
Andrew Flattery: There's a wealth manager that I respect, a guy by the name of Anthony Deden. He has a company called Edelweiss Holdings. I have a highlight from one of their journals: "While there are risks that we cannot afford to take, there are also risks we cannot afford not to take. Principal among them is that of deploying our savings alongside like-minded business owners and managers of an enduring endeavor. Like-mindedness is that state where one shares certain characteristics, motivation, incentives, and time preference. Among such traits is the right owner's ability to adapt to change, his customer orientation, his sense of identity, and strong corporate cohesion. We also share similar views as to being stewards."
Andrew Flattery: I think it captures the best of what we can say about Saylor. I mentioned earlier that at the time of most of what I'm talking about here, Saylor was probably seen as one of the potential next great American CEOs. You'd have to say that the transition of MicroStrategy from a company that had the promise of Apple, Amazon, Facebook, or Oracle is both a retreat and a home-run swing. Who knows? Maybe MicroStrategy basically becoming the best Bitcoin ETF for that period before the ETFs were approved — and perhaps still today — is going to mean they'll have a second act and an ability to realize that promise.
Andrew Flattery: I remember when they first deployed the strategy — my initial impression from reading the headline cynically was, "Oh, this is just a gimmick by a publicly traded company trying to jump on a trend and use the headline to their advantage." Now I think I see the wisdom in it. Why do acquisitions like every other tech company only to put your company at risk and potentially decrease shareholder value?
Andrew Flattery: In a sense, Saylor has transitioned from a true entrepreneur to more of a financial engineer — although he's always been a financial guy. By being the best Bitcoin ETF when the SEC was not approving Bitcoin ETFs, by issuing new shares to buy Bitcoin, by buying debt to buy Bitcoin — that's the speculative attack. At the same time, financial engineering is how the game is played today. This is the world he's playing in, and he's doing it well, on his own terms.
Andrew Flattery: I should also point out that Saylor has established the Saylor Academy, a nonprofit organization that provides free online university education. This seems to be largely his vision for his legacy. Saylor Academy seems to be his public vision for what generational wealth looks like for him — a free, university-level education presumably funded for centuries by this billionaire. Perhaps there is a way for him to realize his promise yet as a visionary. Time will tell.
Andrew Flattery: That will do it for me. Hope you enjoyed this episode — me sharing some notes and various thoughts about young Michael Saylor. I'm going to share most of the sources I used for this podcast in the show notes, so make sure you look for that. If you want to shoot me a note — send me an email. Baby number four is due for us any day, so it might be a minute before I get the next podcast out. I hope you enjoyed this. That's it for me. Thanks for listening.
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Key sources for this episode include the Charlie Rose interview with Michael Saylor (PBS, 2000), Cass PNC's "MicroStrategy Before Bitcoin" on Medium, and various newspaper and magazine profiles of Saylor from the 1990s. Links to all sources are available in the show notes.
Gentleman Speculator is produced by Flattery Wealth Management.
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Andrew Flattery is a CERTIFIED FINANCIAL PLANNER™ and Principal of Flattery Wealth Management. He serves affluent families in Kansas City and nationwide. Flattery is the host of Gentleman Speculator, a podcast on legacy, investing, and the life well-lived. When he’s not helping individuals build wealth, you can catch him playing rec sports, writing children's books, and spending time with his wife and four children.
