FORMATTED TRANSCRIPT: TESLA, AI, BITCOIN & THE FUTURE WITH CERN BASHER

Opening Quote

"All this new stuff that we see with AI and robotics - not only is it going to demand a new system, it just can't operate on the old system."

Introduction

Well, hey everyone. Welcome to Pushing The Limits. Today I'm super excited to have my friend Cern Basher back on the show. Welcome to the show. You're a repeat offender.

Cern: Hi Lisa, it's great to be back. Thanks for having me.

Lisa: Fellow Kiwi - I'm claiming you as a Kiwi. You started life here, so why not? You were very popular when you were on the show last time. That one got a lot of views and a lot of people appreciate your insights as a chartered financial analyst and someone who's really specialized in some of the disruptive technologies that are out there and disruptive companies.

So I wanted to get you back on because a lot has happened since then and now. We had a couple of sessions - we talked about Bitcoin, we had one whole presentation (please go and watch that if you haven't) on Bitcoin and why Bitcoin, and then we did one on Tesla. And today I thought we'd mix it up with a bit of Bitcoin, Tesla, and a little bit on Micro Strategy. And just talk about where you think this whole AI stuff's going - is there a bubble? Is there not a bubble? There's just this constant bubble, not bubble talk.

But I thought we'd start off with Tesla. You went to the meeting recently. Tell us a little bit about that. What was that experience like? That would be pretty cool.

Inside Gigafactory Texas

Cern: Well, it was a pretty amazing experience, Lisa. First of all, to see Gigafactory Texas up close and personal and actually get a factory tour was something really special.

One of the things that really struck me with the factory tour was how clean it was, how quiet it was, and just how clever they've put the factory floor together. There were Model Ys - we started at the end of the assembly line where the Model Ys drive themselves out of the factory. No human drivers, the cars just drive themselves out.

So we started there and we kind of worked backwards a little bit along the production line. But at one point there were cars in front of me, behind me, either side of me, and above me.

Lisa: Wow.

Cern: I mean, it's just amazing how these vehicles kind of weave through the factory and get built. There's a paint shop in the factory, of course. And it's my understanding that there's about a 24-hour drying and cure process. So depending on how many vehicles they're making per day, you can imagine that up in the attic of the factory are all these cars that have been painted that are just waiting to be put together. Didn't get to see that, but that would be kind of interesting to see.

And then from there, we walked down the Cybertruck line, which is a very different process. And we also got to see at the end a conception of how they're going to put this new Cyber Cab together. And basically it'll be built in four different pieces and then it'll all come together at once. The four pieces just kind of push together. Right. So no longer do you have to move the shell of a car all around the factory to add parts to it. You put the two sides together, you put the front, you put the back together. So you're moving a lot less mass around the factory. So it really is going to be a game-changer.

Production Speed

As it stands right now in Shanghai, I believe they're making a Model Y about every 35 seconds, maybe 40 seconds. Elon's talking about getting the Cyber Cab down to 10 seconds and maybe even every 5 seconds.

Lisa: Yeah, it's insane. Like a car in 5 seconds.

Cern: Yeah. And so just being on the factory tour and seeing what I saw, they're already at state-of-the-art with how they produce vehicles now. And they're looking to really extend that - almost by a factor of 10, but not quite. It's just phenomenal.

And I think most people just don't appreciate what an amazing manufacturing company Tesla is. We know them as a car company. They also manufacture these big battery storage devices and do so quite efficiently in both the US and China now. But we're going to see them start to manufacture robots at some point in the not too distant future.

The Robot Manufacturing Vision

And Elon is talking about in California they're going to build a 1 million annual capacity robot manufacturing line. That sounds like a lot. And then at Giga Texas, he's going to build a 10 million annual capacity line. And then he was talking about, "I'm not sure where I'm going to put the 100 million annual capacity line." You're going to need a big factory for that one. And then he also kind of joked about one day needing a billion annual capacity production facility or facilities. So he's got some big plans, some long-term visions, that's for sure. He's always 20 years ahead in the future from where the average human being is.

Tesla: More Than a Car Company

Lisa: When we talked about Tesla last time, and the reason we're talking about Tesla is it is one of the most interesting companies in the world because of the integration of everything. A lot of people think of it as a car company, and yeah, it is that. But it's also an AI company, it's data collection, it's robo taxis, it's Optimus, it's robo trucks, it's Cyber trucks, it's Megapacks, it's in future perhaps lithium production plants or semiconductor production plants.

There's a vertical integration into this stack that is mind-blowing once you see it and once you sort of understand it. And that's just the Tesla part of Musk Industries, as we've talked about before. You've got your SpaceX and your xAI and X and all of these other things - the Boring Company and Neuralink and all the other sort of things - and the interconnectedness, the collagen that keeps it all sort of connected even though they're separate companies. And the visionary leader behind it obviously - just phenomenal.

How do you see the future of Tesla? You were at the meeting, you also know the results of the shareholder meeting and all of that sort of stuff. What were your takeaways from the vote that went through and what happened from that? And then the meeting that you were at as well where you got to hear Elon actually speak?

The Compensation Plan

Cern: Yeah, there's lots of different things there. But certainly the main message I think is that his compensation plan was approved, and that wasn't a surprise to me. It's a no-brainer in my opinion in terms of voting for a compensation plan like that. There are probably no other CEOs on the planet that would be willing to subject themselves to that kind of compensation plan. The objectives in the plan are absolutely enormous.

Everybody focuses on the market cap milestones. That's actually something that Elon has no control over. But there's some operational milestones that he has control over, and some of them are pretty staggering. Not the least of which is the $400 billion in earnings. That is a staggering amount of money for a company to earn. And so for Elon to receive all of his plan, he's going to have to reach that level. And that's going to be essentially moving heaven and earth to get there.

Lisa: Doing the impossible.

Cern: Pretty much doing the impossible. And again, there's no other CEO on the planet, I think, that would subject themselves to that kind of plan. But the beautiful thing is that Elon I think is energized by this. Now he has a clear pathway to getting the compensation that he desires. It's really more about making sure that if he's going to build this robot army, some investors couldn't just remove him from the company that easily.

He's trying to get to 25% ownership of Tesla. And even at that level, there's no guarantee he can't be removed. And he's always said that "I want enough control to make it difficult to remove me, but not so much that you can't remove me should I start doing crazy things." And so that's nice. Now that plan is now in place, the die has been cast. He's now super focused on getting, you know, meeting the results of that plan.

Building Their Own Semiconductor Facility

In addition to that, he's been talking about some other crazy ideas lately, and you just mentioned one of them is building their own semiconductor manufacturing facility. This is staggering when you think about it. Elon is now telling us that the world's largest semiconductor manufacturing companies, TSMC and Samsung, will be producing these chips in four factories around the world, and it's not going to be enough. And therefore it may force Tesla to make their own semiconductor fabrication facility, which is not easy, which I might add is not a small investment.

Lisa: It's going to be $50 billion or something.

Cern: It could be $100 billion to ultimately build the one he needs.

Lisa: Wow. Wow.

Cern: Right. So that part of it is enormous.

AI Data Centers in Space

And then the other thing that we have learned - Elon is clearly thinking about putting AI data centers in space.

Lisa: Yeah, I heard that one.

Cern: He's come to the conclusion that we're not going to be able to generate enough energy on Earth to meet the needs of the AI data centers that he envisions building. And he used the example in the United States - it's about 460 terawatt hours of energy produced a year, and he thinks that they'll need about 100 terawatt hours for AI. And so he said, "We're not going to be able to build that. That's such a massive increase in energy generation capacity. Good luck building that on Earth."

Now he said, "Wouldn't it be handy if I had a rocket company?" Right. And so SpaceX - if we plan that out - and there's only one other human on Earth that has any chance at meeting that, and that's Jeff Bezos.

Lisa: Yeah. He did well last week, didn't he?

Cern: Yeah. And so I'm not sure that Jeff really has the aspirations to do that. Or perhaps he has the aspirations, but I just don't know that he can move at the speed that Elon moves at.

Lisa: Yeah. Yeah. He's too busy running around on yachts and things, probably.

Elon's Work Ethic

Cern: Yeah. Elon's sort of 16 hours a day. I listened to an interview with one of the people that was in his very tight 20-person team that he has around him, basically doing all the things every day. And he said the speed, the amount of work that he does - he would have one-on-one meetings with him at midnight and 1:00 in the morning on the daily. He's just constantly working and then he's on to the next set of companies the next day and the next set of companies the next day.

This was a young man and he said, "I can't go and keep up with him." It was really tough to just be able to keep up with him. But he's got a very focused immediate team around him that really know him and can only escalate what he needs to know about. They really know how he thinks and what he wants done and execute on those plans. So he's got a very top team around him that enables him to do that. Plus, he's absolutely dedicated to the whole mission.

The Marathon Analogy

Cern: It's interesting, Lisa, because when I reflect on that, I think back to my competitive running days, and I think you can probably relate to this as well. You're training for an event, and you're solely focused on this event, and you dedicate your life to it, and you get up at whatever time of the morning you need to get up to get the work done to train for it. But then that event is over and you probably shut down for a while. You need to rest and recuperate.

Elon's not doing that. He's operating at that intensity all the time and has done so now for years. And he shows no sign of slowing down. Lately we've been hearing about how he's been designing the new AI5 and AI6 chips. And he's personally had his hand in doing that. It's not like he just delegates this to a team of people. Elon mentioned that he can see in his mind the design of the chip. He dreams about it. He could sketch it on a piece of paper. So he is involved in every single detail, and again I think that makes him very unique.

Lisa: Yeah. And just the size of the brain, the capacity to understand all of the complexity. I mean, his business is the most complex thing that you could - this is at the cutting edge of every aspect of the world and he's across them all. It just absolutely blows my mind.

Withstanding Attacks

And then you have to withstand the attacks from the media and the attacks - which we can get into later about Micro Strategy is the other one I wanted to talk to you a little bit later. Another visionary leader with Michael Saylor. It seems like tall poppy syndrome, which is well alive here in New Zealand, that we often talk about - anybody puts their head above the parapet gets it shot off. And it seems to be a worldwide phenomenon.

The people that are doing extraordinary things are going to be - especially because they're in disruptive industries that are disrupting the incumbents, that are pushing the world forward, that are pushing technology forward. And this is not to be pro-Elon or whatever, but we do have to recognize that I mean, this guy for the last 30 years has made a billion-dollar company something like every six months. It's just - you have to take your hat off to that. You have to acknowledge the incredible work and the attacks that you have to withstand to go through that. I don't know how he does that. I couldn't personally go anywhere near that. But yeah, I think that's quite incredible.

Creating Value, Not Taking It

Cern: Absolutely incredible. I found it very interesting with this whole debate around his compensation plan that people would try to knock it down by saying, "We should not pay any human being a trillion dollars. No human needs that amount of money." But in that comment, it fails to recognize what he's doing. He's not taking a trillion from anybody else.

Lisa: No.

Cern: If he gets paid a trillion dollars, it's because he's created wealth that wasn't there before. He's put things into this world that will make us all better off. Autonomous vehicles will make our roads safer and allow people to do other things with their time besides try to stay awake while driving their vehicles or try not to be distracted by their cell phones. And humans are not doing very well at this. We're all very distracted by our mobile devices, and the data shows it.

In the United States, 40,000 people die every year on the roadways. I think worldwide it's something like a million.

Lisa: Wow.

The Societal Benefits

Cern: Not to mention all the accidents and the injuries that occur from vehicle accidents. And so here's somebody that's trying to make a dent in that and make the world a better place. Yes, sure, Tesla will become a massive company and be hugely profitable. But that's a good thing. If Tesla does that, then that means they put something into the world that everybody benefits from.

It will also drive down the cost of all kinds of things. If we can reduce the cost of transportation, eventually also with robo-trucking, that reduces the cost of everything that we buy at the grocery store and every other product that we purchase. Well, that's a good point. So society's going to benefit.

And not to mention of course too that Tesla employs over 100,000 people and growing. So there's those people earning a wage and paying taxes, there's the company itself paying taxes on its profits, there's Elon eventually when he does have to exercise or receive these restricted stock awards, he's going to have to pay a massive tax bill. So absolutely everybody benefits from Tesla's success, whether or not you are a direct shareholder or not. Because if they're successful, that means society has benefited in some way. And that's true, by the way, of almost every other company.

But yet, there seems to be this misconception. It's kind of like the corporate world is taking from the people, and that's not really the way it works. I mean, there's definitely some bad actors out there in the corporate world. Absolutely.

Lisa: Oh, yeah. Oh, yeah.

Humanoid Robots and Aging Populations

Cern: But in this case, and particularly too when you look at humanoid robots, we have aging populations around the world. Who's going to take care of all these people?

Lisa: Yeah. Like I said to you last time, I need an Optimus now in my house to help me with that. My day is consumed 24/7 with looking after her. If I had an Optimus robot - I know that seems like, "Oh, that would never happen" - I'll tell you it will happen, but it's a little bit late for me. But in 10 years' time, that could exactly be where we could be deploying these robots. And that would be fantastic because we have that coming at us.

The Worker Shortage Problem

Cern: Yeah. And I know a lot of people are worried about job losses. But the problem we have right now actually is there's a shortage of workers worldwide for many jobs. So there's a lot of jobs that people just don't want to do. They're not that fun. They're pretty repetitive. They're pretty boring.

Walmart here in the United States has something like 60 to 70% annual turnover in their workforce. So that tells me that if you can't stay on the job for at least a year, it's probably not the most enjoyable job. Mind-numbing.

And there's of course all kinds of jobs too that aren't safe. There's all kinds of jobs that aren't good for people - you're around hazardous chemicals or they're dangerous in some way, working in a factory. So the idea of replacing that with robotic labor to me seems really smart. And in the process, you're driving down the cost. And anytime you drive down the cost of something, we all collectively benefit from that.

The Big Economic Question

Lisa: Let's double-click on that a little bit because this is where this is going to have the worldwide economic impact. Say Optimus is out in the world and all the machines, the robots, are starting to take the menial jobs, the repetitive jobs, the dangerous jobs. And if that starts to happen, then companies are going to become more profitable. How can we take that profit and give it back to the human population?

That's the big question, I think. Everyone's talking about UBI. Is that the best way to do it? I'm not sure. There's going to have to be some sort of way that the government or somebody either taxes the robots or some sort of form of taxation on the robots or the companies that are using it, that are getting more profitable, that are laying off employees - that that money actually ends up back. I don't know how, and I'm sure there'll be a lot of corruption and stuff that goes on in that process.

But if we could crack that code and people don't have to work in these shitty jobs, difficult jobs - who wants to clean toilets all day? I don't. And we've got a whole generation of young people who are highly educated who can't get jobs now, maybe because of AI and other things. So there's a lot of societal changes coming from these technologies.

We Can't Stop Technology

But we're not going to be able to stop them. I was listening to a podcast somewhere last week and someone was saying, "We got to stop AI and stop them from coming in." I've forgotten the industry now - it was some industry in Los Angeles. And it's just like, you're missing the point. We're not going to stop technology. It's always happened this way. Technology does advance. It does make our life easier. It does make more abundance.

And people go, "I haven't got abundance." I'm like, well, if you compare yourself to say 300 years ago, how we were living, we do have abundance. Even when you're economically not feeling as if you've got enough money to survive, it doesn't mean that the pressure of society is less. I think that's more. I think we're running around doing multiple jobs to try to maintain our standard of living. I know I am.

AI and Productivity

Those sorts of problems come from this. But I don't think there's actually - going into AI, I don't think AI is going to take jobs in the white-collar workforce. But also in my own little business, I see that actually I'm more productive. I can do more, but I have to do more. So is it going to actually make me work less and earn more, or am I just going to be busier trying to control more agents in my workflow and actually still having to work crazy hours and do stupid things?

The Messy Middle

Cern: Right. And I think there's some time elements to this. Elon talks about making work optional at some point. Now the question is: when does that happen? Clearly that's not happening today. Although for a lot of people, I suppose they're already there.

But the way I think about it is this: if it's easier to kind of look at some kind of end state where let's say, for example, we've got - pick a number - 30 billion robots on the planet, and those robots can do everything that the current human workers can do and more. So they've replaced all the labor force in the world, and we have more robots, and it costs less, and they can produce more goods and services than we can currently with 8 billion people on the planet.

Okay. So in that case, from a supply perspective, we have an abundance then of everything because these robots and other systems are producing everything that we need and then some. So the question is then: how do we get from where we are today to that end state? And that's the messy middle. That's the "here be dragons" situation where on the map it's like, "Okay, we're not quite sure how to go from here to here, but we're just going to have to try to figure that out as best we can."

The Global Arms Race

And one of the things that I would say for people that say "we need to stop AI, we need to slow it down" - the problem is this: not every country in the world gets along with each other. We have enemies in the world. Not everybody is friends. We're not all nice people. We're not all nice from a country perspective. And so we are in a global arms race.

Do not forget that AI is a weapon system.

Lisa: Absolutely.

Cern: As are robots. All these technologies can be weaponized in some format, unfortunately. But that's just the nature of it. The good that came out of nuclear technologies - it's created all kinds of great things. The negative is that we can annihilate the globe multiple times over. Right. And it's a race to see who can get the technologies first. And unfortunately, that's the case here.

Why Elon Changed His Mind

And so the idea of slowing it down - and Elon was in this camp for years, he wanted to slow it down. And then he realized that this is not what you have to do. You actually have to accelerate. We have to make sure that we win this battle. And it's just an unfortunate thing. It's just reality.

And so I think if people look at it through that lens, then it's just a matter of then making sure that we create AI systems that are the best they can possibly be for humanity.

Lisa: Yeah. Got guardrails somehow.

Twitter and Truth-Seeking AI

Cern: Well, yeah. And this for me is where it sort of ties into why did Elon purchase Twitter. Elon talks about the importance of an AI system being a maximally truth-seeking system. And here you have Twitter, which is kind of a global town square of sorts. And prior managers of Twitter were silencing people and it wasn't free speech.

Lisa: No.

Cern: And people have accused Elon of doing that. Although again, the code, the algorithm, is publicly available. People can look at it in terms of how it operates now. That wasn't the case before. So that to me makes sense now. Because if you have an AI system that is somehow controlling what people see, what people have access to, what people think, that is quite dangerous because then that means that somebody somewhere is then in control of that.

Lisa: Yeah. It's called mainstream media. It has been up until now, until recently.

Cern: And that's dangerous. Whoever controls the narrative controls the people because they control what they see. And we saw it really strongly during the COVID crisis.

Censorship on Other Platforms

Lisa: And I mean, I was listening to Elon last week and he was saying the other social media companies are still shadowbanning, are still controlling, are still censoring. And I know this - on YouTube, if I try to promote this and get more views, I get banned. They'll allow it to go on the free channel, but they will not let you advertise to it. If I talk about certain medical procedures or anything like that, that will get blocked. Absolutely get blocked.

So we have other alternatives now like Rumble or X where we can actually talk openly and have open debate. That's all I want is the freedom of speech. And X has preserved that. And unfortunately, a lot of the others haven't taken that cue that we shouldn't be controlling what's seen.

What Elon Found

And I was listening to him - what he actually found when he went into Twitter and went into the algorithms and went into the shadowbanning and all the control - just how bad it was. It's mind-blowing.

You're not going to agree with everybody in the world, but if we all have an opinion and that opinion is allowed to be talked about, and you've got Community Notes, and you've got the truth-seeking missile that is Grok, which is really powerful - when you're trying to distill all this information, which is overload a lot of the time, and you can get a truth-seeking missile to actually find out: "What's the sentiment on X on XYZ? Where does 50% of the people lie? What is the...?" You can find out much more balanced views.

And I'm sure we're still getting echo chambers because we follow certain people and we do certain things. I don't know what the answer is for that. But freedom of speech is absolutely crucial that he bought Twitter. I can't - I hate to think where we would be if he hadn't.

The Data Advantage

Cern: Yeah. And it's also interesting too, because now it has the added benefit of these AI systems need a lot of data to train on.

Lisa: The data. Yeah.

Cern: And now he has ownership of data.

Lisa: The data. Yeah. Yeah. Yeah.

Cern: Right. And that's proving to be very important.

Lisa: Yeah. Absolutely.

Tesla as an Investment

No. So from an investor's perspective - because we're about self-sovereignty and health and wealth - Tesla is one of my main companies that I'm very interested in and invested in. And thanks a lot to your work, actually, is what really made me aware of just how big the total addressable market is for things like Optimus and robo-taxi and where this is going to go.

Where are we going soon? And what is the outlook looking now that all of these key things have happened and the votes have gone through? Where do you see the company going now? Is it all full steam ahead now? We haven't got the political sort of dramas that we had a few months ago with Elon being in the White House and all of that sort of jazz. Do you see anything good on the horizon as far as where Tesla's heading to next?

FSD: Full Self-Driving

Cern: Oh, I think there's a lot of good things on the horizon for Tesla. Currently the one that's right in front of us right now is the FSD autonomous driving system. I have the latest -

Lisa: They've got it down here in New Zealand. I don't use it fantastically yet, but...

Cern: Yeah, it's in New Zealand.

Lisa: It's crazy.

Cern: There's folks in Europe that are suffering because they haven't.

Lisa: Yeah.

Cern: And that software has gotten remarkably good. My truck now, at the push of a button, backs itself out of my garage, takes me to my destination, parks, drives me home, pulls into my garage. Like, I literally don't have to do anything anymore.

Lisa: Wow.

Cern: It's amazing. Now, of course, it's not perfect. Of course, there are going to be issues, and they will never really be done with the software. They will always be improving it. But there comes a time, there comes a point when the software is provably better than the average human driver. Yeah, it's provably twice as good as the average human driver, and then eventually 10 times and 20 times and so on.

At some point, it would be criminal not to let the software operate freely in the wild and give people autonomous rights. And so I believe that Tesla is already past the point - well past the point - where FSD is safer than a human driver. And most of us now are freely admitting that FSD is better than we are. We've all had experiences where it has seen things and done things that we didn't see and would not have done. Everybody that has FSD has those kinds of stories now.

The Transportation Revolution

And so we're on the cusp then of releasing this into the wild en masse. And that will be a profound change in the world in terms of reduced accidents, deaths, injuries. But also you're going to drive down the cost of transportation. So everything that we buy has an embedded transportation cost in it, because when you buy something, it's been made somewhere and it's shipped across the ocean, shipped across the country to where you purchased it. You had to go there yourself - there was probably a transportation cost for you to go to the grocery store and get those items or whatever they were.

And so if you can drive down the cost of all that over time, that makes everybody that much better off. It frees up money in everybody's budget to buy other things or do other things with that. And so that's a good thing. And so for Tesla, we're on the cusp of that. I think that 2026 is a major year in that. The only question now is: how quickly can they ramp? We're already seeing that they're going to be entering multiple cities, and again the question is: how many vehicles can they apply to those cities? What's the rate?

The Cyber Cab

The factories are gearing up to make more vehicles and eventually, starting in April next year, to make the Cyber Cab, which is a vehicle with no steering wheel, no brake pedal, no accelerator.

Lisa: Oh. Oh, really? In April?

Cern: So even if you want to drive it, you can't. It's not a car you can drive. It'll drive you.

Lisa: Wow. Wow.

Cern: Yeah. And so they'll gear up and they'll start ramping up production throughout 2026 for that vehicle.

Regulatory Challenges

In the United States, we need I think some better legislation to sort of nationally allow or approve autonomous driving. A number of states have already proactively done it, but it's kind of a patchwork of regulations. So it would be nice to have a national standard. I think it would make sense to have a national standard. And the only question is: how quickly can governments act? But the longer they drag their feet, the more people will die. It's that stark.

Lisa: Wow.

Cern: Right. And Tesla has the data now to prove it. They can show regulators exactly how the system is operating.

Lisa: Was it 6 billion miles or something?

Cern: 6.5 billion miles right now.

Lisa: Billion miles. Wow.

Cern: Yeah. There's about 15 million miles a day being driven on FSD right now.

Lisa: Amazing.

The Irrational Response to Accidents

Cern: And so that's collecting all the data. And as soon as there is one accident though, are they going to go, "We got to ban it because somebody died"? Do we ban trains when somebody fell off a train or fell in front of a train or had a train accident or a plane accident or an airplane crash? There's going to be still accidents. That's the other thing that we have to get our heads around. It'll be less than with humans involved. That's the key factor.

Lisa: Yeah.

Cern: And this is the weird thing about humans - we're not particularly rational when it comes to this. Tesla will have the data on their side. They will be, in time, given enough autonomous rides - there will be accidents and injuries and deaths. Absolutely. But they will be at a rate that's much lower than human drivers. And I would say provably so.

But if we allow ourselves to ignore the data and if we allow ourselves to be swayed by some crazy accident that could have happened anywhere (and they do all the time, they just don't get publicized) - for some reason, as a society, we're okay with so many people dying on the roadways. And the reason I think that we're okay with it is because there was no alternative. We had to get to work. The economy has to run. We have to accept a certain number of people dying. It's just the way it is, and we've kind of grown numb to that.

But now we have an option.

Optimus Robot Production

And the same thing with the Optimus robot, which also is going to begin production next year, maybe more towards the latter half of the year. We'll have a robot that will be safer. It can replace the jobs that some workers do that are very dangerous. Make that a lot safer. There are a lot of people that are injured in the workplace every year.

Lisa: Yeah. My heart - deaths as well, right? So my son is a firefighter. I don't know if we'll be getting Optimus to fight fires in the next few years in New Zealand, but...

Cern: Yeah, an Optimus works. It's an absolute no-brainer for jobs like that, to still - you still need firefighters perhaps, but don't put the firefighters right in the middle of the most dangerous place.

Lisa: Yeah. I mean, at the moment, they already stick water things in and get the hell out. You know, that's already a robot of sorts. So we're already using a lot of these things. They just haven't taken the form of a humanoid.

China and the Robot Race

I've just had a friend come back from China and he was just blown away by how advanced China is. I think we're - I mean, I think Tesla and the Optimus is probably the most advanced, the robo-taxis, the electric cars, EVs - nobody can really hold a candle to Tesla. And then people say, "Well, BYD and other Chinese..." They may be producing even more, but a lot of those companies are running at massive losses. How many - they're backed by the government, they can run losses for a long time perhaps.

But they are very advanced, and I think we underestimate China. We underestimate how many robots China is already putting out into the Chinese world. Do we want Chinese robots or do we want Optimus robots or I don't know, Boston Dynamics or whoever? We've got to think from a national security perspective. These robots are cameras. They're spyware. They've got a whole lot of things in them, chips that can do things. We've got to also understand we need to be producing these robots that are in a safe supply chain so that none of the parts are coming from adversarial nations.

Reshoring Manufacturing

Cern: Well, this is the beautiful thing, and I totally agree with you on that. But the beautiful thing for the United States, countries like New Zealand, Australia, Canada, other nations that have pretty much shipped off the manufacturing of almost everything to China and Southeast Asia - they did so because the cost of labor was so low, among other reasons, but that was one of the main reasons.

So now then we have a form of labor that's even cheaper than what those countries can offer. And so New Zealand then in theory could reshore manufacturing of almost anything it wants to.

Lisa: I hope someone's listening from New Zealand.

Cern: Right. And so here's an incredible opportunity to take control, to have security of your own resources, have security of medical supplies, security of whatever is important to New Zealand, to be able to make that around the corner from where people live - at scale. You don't have to make it at massive scale anymore because you've reduced the cost so much with the robots. The manufacturing process itself may be more expensive, but the total cost perhaps is less. And this will be something that will evolve over I think a couple of decades. But this is the opportunity I think for all countries - is to now have true security of supply and not be so reliant on a couple of other nations.

Lisa: Yeah.

COVID's Lesson

Cern: And this is just so crucial. I mean, again, as we saw in the COVID times when the shipping was blocked and everything was stopped and our whole construction industry went belly up and we had no supplies coming through. And then we've got to start - America is reshoring some of this manufacturing capacity. We're not going to be able to do everything over here, but when we if we do get to a point where we can have these robots and lower the cost to produce a lot of these things within our nation's borders, that is a conversation we need to be having now.

And I've had people reach out to me after hearing our conversations last time about wanting to get conversations in this direction going for our country. And that to me is very positive outcome from just from our conversations. It's just sparking the thought process to get the powers that be, the politicians, the captains of industry, to be thinking along these lines. Can we attract investment down to New Zealand? Can we build our own data centers? Can we build our own LLMs, our own AIs, our own robots, our own all of these things in the future so that we can protect our country and have a sovereign nation that is semi-independent? Because we're going to need to be, otherwise...

The Competition for Robots

Cern: Yeah. And I think the question is - we're tiny.

Lisa: Yeah.

Cern: Well, the question is: do you want to maintain a sovereign nation? And if the answer is yes, then you have to do all those things.

One of the things, Lisa, that I've been talking about and I've been pretty vocal about for a couple of years now is here in the United States - we've got, let's say Walmart is competing against Target. There are two big retail companies, okay? Think about what could happen if Target gets a million robots before Walmart gets any. They can massively drive down the cost of the business. They don't have all the turnover that Walmart would have. The cost savings are huge, and I've run some numbers and I've presented them on X and on a show with Herbert.

So this is becoming, I think, a comes down to the survival of a company. If you have a CEO that's forward-thinking and says, "Okay, I have two options. Robots are going to come into this world and I can build them myself." Okay, what does it cost to build these robots? Oh, I need to spend billions of dollars on an AI model. I need to build my own data centers. I need a top-notch AI team. Oh my gosh, good luck doing that. Those people are already spoken for. Mark Zuckerberg is already paying people $100 million to go work for him.

Lisa: Yeah.

Getting in Line

Cern: So unless you want to play that game, then the next option is: okay, who can I partner with? If these CEOs don't make sure that they are, if not first in line, in the front of the line - it will take a while for companies like Tesla to make hundreds of millions of these robots. They're not going to be just on store shelves day one. They're going to be severely supply-constrained for years.

And so these industry leaders need to be forward-thinking and say, "Okay, I can't build it myself. Let's go partner with Tesla. And not only that, we want to be a development partner with them. We want to help them develop the robot. We want the robot to train on our data, on our systems, on our production plants, so that day one, these robots are ready to come work for us."

Lisa: Yeah. New Zealand, we need to go and stand in the queue and get contacts in Tesla now, right?

Cern: And it's not only that. It's not just being in the queue. It's actually proactively saying, "Okay, we're prepared to put our money where our mouth is and actually help the company develop this." We actually will give Tesla a billion - you know, factories over here.

Lisa: Yep.

Cern: Attract investment down here. Make it easy for you regulatory-wise. All of these things need to be put in place now if we want to be anywhere near the top of the queue when these things are happening.

Lisa: That is 100% my opinion too. And I know people have reached out to me that have that idea as well. And I hope we can actually get some conversations - I mean, not that I can make that happen, but it is about starting that conversation here and getting that sort of thinking going. And for indeed for all the nations, for Australia, for other places, to be doing the same thing for them. Because even between Australia and New Zealand, if Australia gets robots and Australia goes the technology route and we don't, we're going to be disadvantaged against our brother Australia. We've got to start thinking in a competitive framework for these sorts of things because they are going to happen.

A New Zealand Example

I was speaking at a conference last week in Wellington, and I was speaking for a company that does spouting in construction. And the CEO - we were talking about Tesla, we were talking about robots, and we're talking about - his factory is all fully automated already.

Cern: Mhm.

Lisa: He said it was a huge investment, massive risk for him, medium-sized company. But he knows that if he's not doing it, someone else will be doing it. And so he's invested that - now that's paying dividends already and his company's doing well and it's growing. And I was like, "Wow, that's pretty damn cool that we do have CEOs - medium-sized companies and smaller companies - that are actually trying to be at the forefront of things." And this is really powerful. So well done to them.

No Upper Limit to GDP

Cern: It's interesting too, Lisa, because Elon talks about how there's really no upper limit to what GDP could be. Now, GDP isn't really, in my opinion, the best measure of an economy. World of service.

Lisa: Yeah.

Cern: I mean, GDP counts - if you dig a hole and then fill it in, that adds to GDP, and that's silly. It doesn't count really productive efforts. So it's an imperfect measure. But the point is that there really is no upper limit to what GDP could be for any nation.

And so this is really a truly - let's talk about New Zealand - it truly is an opportunity for New Zealand to take a big leap forward in a major way. If there was a national effort or enough people in the country realized the significance and the opportunity here, you could leapfrog Australia. You could leapfrog many other nations. You could become known for X, Y, or Z. That could be an incredible opportunity.

Certainly building the robots in New Zealand would be an incredible thing. If you were one of the first countries to have a robot factory, you would have a leg up over virtually everybody else.

Lisa: Yeah. Wouldn't it?

Cern: Right now. Clearly, that's going to happen in China. It's going to happen in the United States. The question is: who's next?

Lisa: Yeah.

Falling Behind in Technology

Cern: And how do we get - because when I was growing up, when I was about 16, 17, we were the first country to have EFTPOS, and we were at the cutting edge when I was a teenager, a long long time ago. But since then, we've not stayed at the forefront of technology.

I had Dr. Simon Collins on - who is co-founder of Lightning Pay in New Zealand last week - and he was just lamenting the fact that we are so far behind. Our banking system is so far behind, our payment systems are so far behind. And technology, we're just so far behind. And we need to really start embracing these future technologies if we want to survive.

We were talking about Lightning Pay in that instance and Bitcoin and all of that story. But I think right across the board - because that actually comes to the next topic that I wanted to talk to you about: Bitcoin, AI, the agents - they're going to use Bitcoin, right? AI, Tesla - it's an AI company, xAI, all of that sort of stuff - is Bitcoin and Tesla and Micro Strategy all a part of a similar type of - I don't know how you say it. They're related. They're connected tissue.

Can you explain the connective tissue? I mean, these are why these are my biggest investments. Micro Strategy is not doing too well this week. We'll get into those reasons perhaps why. But the connective tissue between those three - can you sort of lay that out? Because you did it so well in one of the interviews and I thought, "Ah, that's brilliant."

AI and Bitcoin: Two Sides of the Same Coin

Cern: Yeah. Here's the way I think about it - a couple of things. So I view AI and Bitcoin to be sort of two sides of the same coin, so to speak. And here's why.

So if you think about a world where we have AI agents doing things for us, AI agents are going to want to find the most frictionless way, the fastest way to execute transactions. And there may be plenty of things that the AI is doing where speed is important because if you're competing against somebody else, whether it's stock trading or foreign exchange conversions, there's a competitive element to it. You want to be quick.

So just like water finds the fastest way downhill - you can put up barriers, but the water is going to flow over, around, through whatever obstructions you have - AI is going to do the same to the existing system that we have. That's one way to think about it. So AI is going to find whatever is the best system. Whatever system allows AI to convert a billion dollars from US dollars to New Zealand dollars on a Sunday afternoon with no friction, AI is going to find that.

Lisa: Yeah.

You Can't Put a New System on an Old System

Cern: Right. So that's sort of one way to think about it. The other way I think it's important to think about is as Tesla puts all these products and services into the world, more and more of what we do is going to be powered by AI. We're going to take humans out of the loop in more and more things.

So it's kind of silly to think that if we're creating a new system where humans are not in the loop, why is our monetary system that we have today going to persist? I mean, you're not going to put a new system on top of an old system. So all this new stuff that we see with AI and robotics - not only is it going to demand a new system, it just can't operate on the old system.

Lisa: Yeah.

Cern: The issues that banks have and the roadblocks that they put up - here in the US, for example, we're still seeing that they're debanking people that are involved with Bitcoin. And that's fine. You can try to slow it down if you want, but ultimately AI is not going to stand for that. It'll find its way around that. So that's kind of my quick perspective on that.

The Archaic Banking System

Lisa: And the whole banking industry is archaic. Again, I had Simon on last week and he was talking about the way that you send money overseas - if you're doing a remittance and it goes through 15 banks or something, or Visa and Mastercard, it's a credit transfer, it's debt transfer. And there's just so many points along the way. And it takes days and it takes fees all along the way. The merchant's paying a percentage, the consumer's paying 2.5% on every transaction. All of that's gone just with Lightning Pay. You know, it's just direct.

And we've got a company over here called Aahu which I've been trying to get my head around, and they're coming into the banking system. And there's going to be new ways for us to do it. The banks are kicking and screaming. They don't want any of this. I get blocked every week. My card gets blocked when I'm doing investments and stuff. Every week I'm having to ring the bank to say, "Why did you block my card?"

"Oh, we're protecting you from fraud. We're protecting you from..."

Oh, rubbish. Absolute rubbish. You're trying to control where people spend their money - their money. How long are we going to stand for this?

Time Is Not on the Banks' Side

Cern: Yeah. And the challenge is the banking system is not going to go down without a fight, and the banking system is a pretty powerful cartel. So this is not going to be an easy thing. But time is not on their side, so to speak.

Technology is going to advance to such a point where it's going to demand it. The banking system is not going to work. For example, if we have AI agents and we have micropayments for certain things, the banking system can't handle a tenth of a cent payments a trillion times. It just can't handle it. So fundamentally, we need something else, and we need it really quickly.

And so this is coming. And again, it's going to be messy. It's going to be - it's going to look like the banks are winning, for example, and then and then they aren't all of a sudden. The good news, I think, is there are now more and more people in government that understand this, and so hopefully we'll start to see some change at that level too.

Lisa: Yeah. In America. Yeah. But the rest of us...

Cern: Well, it will come, and hopefully sooner rather than later. But again, there's nothing stopping AI, and AI is going to demand a new financial system. Yeah, that's kind of my operating thought now. Again, there's going to be all kinds of challenges and issues as we go through that transition. It's not going to be smooth.

Stablecoins and CBDCs

Lisa: I mean, you've got the situation in America now where you've got the government going really forward with the stablecoins, right? Stablecoins are coming in. That's really going to be beneficial for the Treasury, for the US bond market, which has been having trouble selling some of the bonds because they weaponized the system against Russia and other things that they've done to weaponize against other countries.

The stablecoins might be a temporary fix for that, but it's certainly shaking up the European Central Bank and China, who are trying to push forward their CBDCs quicker. I mean, China's already got a CBDC, but nobody's using it. They're trying to now push that because these stablecoins are a threat to that system. And the same with the European bank. They're trying to get their CBDCs. I think it's been pushed out to 2029.

And these are Orwellian spy coins. They can control everything. The people need to understand this. They can control everything that you spend your money on. They can say, "You're too fat. You can't buy chocolate biscuits." That sounds ridiculous, but that's exactly what they can do when you're in that central bank digital currency system.

Stablecoins are throwing a wrench in the works. How do you see that playing out? It's a pretty big deal. And is it going to support the US government short-term but not long term? Because is that going to cause a sell-off of dollars in other parts of the economy? How do you see it all playing out with stablecoins? I'm still trying to get my head around it.

Near-Term and Long-Term

Cern: Yeah. No, I think in the near term, I think they're important. And I think we're going to go through some years where it's going to be very messy, and there may be a crisis or two along the way. Again, if we look out to some endpoint, Elon mentioned this actually at the annual shareholder meeting, and he said at some point, "What is money?" And basically he said at some point, money really is just simply energy.

Lisa: Energy. Energy.

Money Is Energy

Cern: Right. Everything that we produce, good or service, has a certain amount of energy that's gone into it. And even the labor can be measured in calories, or you can look at kilowatt hours of actual electricity use. So it actually may make more sense to price everything in terms of energy.

And that also helps answer the question about what does that future look like when we have this robotic workforce? We all may get some kind of allocation of energy. Instead of receiving money, we get energy, and we can spend the energy in any way that we want - energy content of food, energy content of a house, energy content of transportation. All that can be measured as energy. And eventually that may replace GDP as a measure of an economy.

Lisa: That's revolutionary thought right there, Cern.

Cern: There is no poor nation in the world that has a ton of energy and is still poor.

Lisa: Yeah. Yeah.

The Global Energy Race

Cern: Right. So in the end, it's a global race to see who can produce the most energy. And if you can produce energy, then you can do all kinds of wonderful things with that energy - build things, power AI, etc., etc. And so for me, that's kind of more the end state that we're headed to. Again, that's still a little fuzzy as well. But to Elon's comment about, you know, "What is money one day?" - I think he's right about that.

Lisa: Well, what is Bitcoin? I mean, proof of work. It's a store of energy.

Cern: Store of energy. It's a store of energy that you can transfer over time. It doesn't lose its value over time. And then why it's such a good store of it. That's why we - against the fiat currency system where you've got drunken central bankers who are printing money like no tomorrow. And they're all just ledgers at the end of the day. But one ledger is controlled by the central banks and the governments who can print as much as they want of it and steal from your future. And the other is algorithmically, mathematically, cryptographically protected and cannot be mucked with.

Which one do you want? We've grown up with fiat. We've grown up with the New Zealand dollar and the Canadian dollar and the US dollar and all these things. That doesn't mean it's the one that's being - and we're at a turning point. We know, we all know, we can see it all breaking. And as it breaks, that's the big question: what sort of Fourth Turning are we going to go through? Is it going to be a war? Or can we avoid war? Can we - is AI going to help us avoid war? Because we can settle this in other ways.

These are all the massive questions of our time that nobody really has the answer for yet. But I'm just hoping we can avoid a physical war, and I think we've got a good chance of that. But there's going to be massive disruption.

Mutually Assured Cooperation

Cern: The beautiful thing about Bitcoin is it's mutually assured cooperation. The more people that are on the network, the better the network is, the stronger it is. It benefits everybody. The more people that buy Bitcoin, the better it does, etc. So that's one thing.

But this transition that you're talking about is so unclear in terms of where we're going. Now if you think about this idea that money is energy or money is backed by energy, we actually have that today in the United States. The world's oil is basically priced in US dollars. We have the petrodollar.

Lisa: Right.

From Petrodollar to Solar Dollar

Cern: And so the United States already kind of enjoys that. But the interesting thing is we're moving away from fossil fuels. So oil is becoming - over time will become less and less relevant. So there'll be a natural transition as that plays out. Sure, we can price oil in US dollars to the end of time. But you know what? Oil is not going to matter as much anymore. So it's going to be replaced by solar. And Elon's talking about putting massive solar generation in space - now to power AI data centers, not necessarily to beam that back to Earth, but some of that could happen.

So we're going to have a natural sort of change in the way that money is valued or based, away from the petrodollar to this more energy-based money - solar, I guess really solar-based money.

Lisa: Yeah.

US Strategy with Stablecoins and Bitcoin

Cern: And the way that US governance is going with stablecoins, with embracing the digital money and Bitcoin, the SPR - all of these things - is that eventually going to be the backbone?

I've heard the theory - of course you've probably heard it too, going around on X - Mark Moss has been talking about the price of gold going up, then revaluing the gold, then using that money as a budget-neutral way of then getting Bitcoin. All of these sorts of things.

And then you've got - at the moment, Bitcoin's been down against all expectations. We were all expecting at this point in the cycle to be blowoff tops and good times, and we've gone the other way. Gold's been going up in the debasement trade. There's some shenanigans going on, I think, behind the scenes. Is it the big players coming in, the institutions coming in wanting to get it cheaper?

I mean, we could probably speculate till the cows come home. But there's definitely something going on. I just believe that the long-term view on Bitcoin is positive, and I'm investing what I can into Bitcoin because it's going to go up. And I do think there's institutional players that are pushing the price down to get in so we can go higher.

But then you've got OGs selling because the core thesis of Bitcoin is being corrupted by institutions, and you've got all that sort of carry on. Which I just think this is the natural progression of Bitcoin. But yeah, what's your take on all of that?

The AI Bubble Narrative

Cern: Well, it's interesting, isn't it? And we've got all these different narratives. And I think you covered that well in terms of Bitcoin. The other narrative that's out there is we're in some kind of AI bubble.

Lisa: Yeah.

Cern: And so as ridiculous as the narrative that Bitcoin is history or Bitcoin is going to zero - as ridiculous as that narrative is - this idea that we're in an AI bubble...

So let's just talk about that for a second. In my view, the analogy is: we've just electrified all the gas lamps in a city, and now people are on the streets saying, "Okay, we are in an electricity bubble." And this is before you put electricity in factories and in homes. All the streets now are now lit, and people are saying, "Okay, we've overbuilt. We don't need this as much anymore."

This is where we are with AI. We've just begun to apply AI to things. And if you're using any large language model, if you're using ChatGPT or Grok or Gemini, you can see that they're not perfect. They have a long way to go in terms of doing useful work. Now, it's improving at a rapid rate. It's crazy actually how quickly things are progressing here.

Every Device Will Be an AI Computer

My long-term thesis is that - and Jensen Huang of NVIDIA talks about this, this is not my thesis, but my understanding of what he's talking about - is that every single computing device in the world will become an AI computer.

Lisa: Mhm. Yeah. Yeah.

Cern: And the implication of that means that instead of preloading your phone with apps or your computer with apps, the AI creates what you need on the fly.

Lisa: Wow.

Cern: So goodbye app store. You don't need a weather app and this app and that app. The AI just does the computing for you on the device in real time. And this is also behind Elon's Macro Hard endeavor - the opposite of Microsoft, where again, you don't need Microsoft.

Lisa: Have a laugh with a sense of humor. It's great. Yeah.

Data Center Transformation

Cern: But that's the world that we're headed to. And so right now, we're so far away from that future. There's absolutely no way there's an AI bubble.

The second thing that Jensen talks about is that all the data centers in the world, which is something like a trillion, a trillion and a half dollar investment that are all full of CPUs, they're all going to get replaced with GPUs because it results in a much faster, more efficient computing platform just in those cloud computing service providers - the AWS and Google and Microsoft and so on.

So there's different layers to this, and we're just beginning that investment. Now, there may be some dips along the way. Maybe there's a company that gets over its skis and takes on too much debt and can't meet those payments. But that's going to be more of a one-off thing than I think an industry-wide issue.

Lisa: Yeah, I agree 100%. Yeah.

Off-the-Charts Demand

Cern: And the demand is off the charts. Nobody can keep up with the demand. We're going to have to - as you said, Elon might have to make his own semiconductors and things.

Lisa: Yeah.

AI Breakthroughs in Healthcare

Cern: And the breakthroughs that are coming from AI - it is like that time when we got electric light bulbs, but then we had to build out the infrastructure for the entire world to have power lines and all of that. And it's going to take huge capex. And a lot of those companies - if you think even during the internet era, which people keep referring to like the dot-com bubble - it's different. We were way overvalued then. We're not as overvalued now.

And if you still think about the change that the internet had for humanity, it was huge. And it did need a huge lot of investment. It just took time. Some companies went bust. The ones that were originally there are no longer there, and other people have taken - or other companies have taken their place. But at the end of the day, internet revolutionized our world, and this is the next exponential on that.

Lisa: And from my perspective in the health side of things, we're getting some pretty amazing breakthroughs coming. What looks like oncology breakthroughs and cancer research and things that are probably in the next 18 months, which I'm super excited about. I hope the regulators don't stop it all and fuck it all up for everyone, because I've seen them do that before.

But hopefully some of these breakthroughs that the AI is doing - because it's compressing timelines like no tomorrow. They can test millions of molecules against things. They can do incredible things. And we're this close. I think the biotech industry next year is going to be a big narrative, and it's going to take off when they get a few of these breakthroughs in and we start to see some of these cancer drugs come online to clinical trials and things that would normally take 20 years happening in 18 months. That's AI. And people writing AI off because it spat out some hallucination or it did something wrong here - but you're not seeing what the actual models can do behind the scenes, what the models that they're using for the science labs. They're not the ones that consumers are seeing. ChatGPT - the behind-the-scenes models are just way better than what you're getting because they're constrained by compute and energy.

Lisa: Mhm.

Cern: So we're not seeing the tip of the iceberg of what this thing can do, what AI can do.

This Is Just the Beginning

Cern: No, we're just scratching the surface. This has just begun. Some people say this is like the internet in 1995 or 1996. I'm not even sure that's right. I think this is like the internet in like 1970.

Lisa: Exactly. Yeah.

Cern: It's going to go somewhere. It's going to go somewhere. And there will be capital expenditure done stupidly and over, and there will be booms and busts within sectors maybe and even single companies. But the Mag Seven are all going for it. And I think they have to because it's existential for them if they don't. And it's going to shake things up in the next few years.

Micro Strategy Explained

But the last thing I wanted to talk to you about, because I want to respect your time because I love chatting to you and I could talk for hours - but Micro Strategy, previously. This is for those who don't know, sort of a leverage play on Bitcoin. It's a way of having Bitcoin exposure, but it's - the last few years done really, really well. We've done well investing in Micro Strategy. Last couple of weeks have been very rocky.

You've also done presentations a couple of weeks ago on the One-Share Podcast about the preferred shares and what they are going to mean for the financial plumbing, the future financial plumbing of many - not just for this. This is a new product that Saylor's come up with that really - well, it's not even new product, but he's using Bitcoin, that's the new part of it. You've got the STRC, which is probably the most important one, STRD - strike, strive, all of those. Strife and stretch and all of that.

Can you just walk us through Micro Strategy, why these products are particularly interesting for people to invest in? Secondly, the rumors that Micro Strategy's being attacked by JPMorgan - rumors, I don't know - that they're trying to get them delisted off the MSCI index, which of course would put massive downward pressure on the price. It seems to be yet another visionary leader being attacked.

What's your take on Micro Strategy? Are you still bullish on the stock or sort of stay out and wait to see what this war turns out to be? And how is this - the banking sector, what appears to be the banking sector, going after Bitcoin again in another way, shape or form, right?

Overview of Micro Strategy

Cern: Yeah. This is something that's going to continue to play out over time. This is the latest iteration of it. So let's first of all start perhaps with an overview of Micro Strategy just for those that maybe aren't on the same page as we are right now.

Lisa: Yeah.

Cern: So Micro Strategy was a company that had a software business - business intelligence software. They've been around for a long time. They were actually one of the internet darlings back in the day. And Michael Saylor was famous I think for losing like a billion dollars a day because when the internet bubble burst, the stock went down and so on.

So they've now repurposed the company into what's being called a Bitcoin treasury company. And this started in 2020, and they were the first one. And they decided to, instead of holding cash, they were going to take all the cash on the balance sheet and buy Bitcoin.

Since then, they've turned into a machine that does almost weekly buys - more Bitcoin. How do they do it? Well, first of all, they issue debt. They used to issue convertible bonds - sell the bonds, buy Bitcoin with the proceeds. The bonds had very low interest rates. Periodically, they would pay some interest, and then hopefully the stock would go up enough, those bonds convert into stock, and they wouldn't have to pay the bonds back. Okay.

The Problem with Convertible Bonds

They've since discovered - and there's some issues with convertible bonds - when you sell them, the bondholders typically short your stock. So it's not an ideal situation to hedge the risk.

Preferred Securities

So now they've come across - and this has just happened this year, this is less than a year old - these preferred securities. Preferred stocks have been around for hundreds of years. This is not a new invention, but I think Micro Strategy's using them in a fairly novel way.

The beautiful thing about preferred stock is it's not debt. So when you sell preferred stock, it never needs to be paid back. It's permanent capital on the company's balance sheet. The nice thing for investors is the preferred stocks offer a nice yield, a nice dividend.

And Micro Strategy now has several different flavors of preferred. And rather than get into it here, just understand that there's different types of preferreds for different types of investors - somebody who's looking for short-term versus longer-term, somebody who's looking for guaranteed payments or is willing to take a little bit of risk that a payment might be skipped. There's different flavors, but generally they have yields of, let's say, 10%.

And in the United States, at least, and most other developed countries, we don't have yields on bonds anywhere near 10%.

Lisa: No.

Cern: At this point. And so it's starting to attract a lot of capital. One of the preferreds they issued this year was the largest IPO of the year in the United States. So they've had a lot of success, and of course it's gotten the attention now of Wall Street. And if you're a bank, you're probably starting to worry about what happens if this takes off and my depositors leave my bank where I'm paying them next to nothing and they're going over here and getting 10%.

So as a banker, I'm getting worried about that. Okay, I'm not a banker. I'm just saying if I was a banker, I'd be worried.

JPMorgan's Attacks

And so the first angle of attack for JPMorgan was to increase the - or decrease the amount of margin that they would offer people who own Micro Strategy stock. And that forced some selling. Went from 50% to 95%.

Then one of the other things that they did was they don't follow the company, but they wrote a report - a negative report, what you would typically call a short report that a short seller would issue. Again, kind of a cruel thing because JPMorgan does not cover the company. There's no reason for them to write a report on Micro Strategy stock.

Lisa: Wow.

Cern: So that was kind of negative. And then, of course, as you mentioned, MSCI maintains these indexes, and they create the criteria for which companies are included or excluded. And they're thinking about revising the criteria to say if you have more than 50% of your balance sheet in Bitcoin, you don't meet the criteria anymore - we're going to take you out of the index.

And of course, that would impact Micro Strategy and all the other Bitcoin treasury companies.

Lisa: All the Bitcoin treasury. Oh, wow.

The Goodwill Hypocrisy

Cern: Now, the crazy thing is MSCI, the company behind this, which used to be, by the way, owned by Morgan Stanley - it's been spun off, there's a banking history there - their biggest asset on their own books is Goodwill.

Lisa: Yeah.

Cern: So you think Goodwill is a better asset than Bitcoin? I don't think so. Maybe they should look at themselves first before they start going after the business models of other companies. But they're effectively saying that Bitcoin as a form of capital is somehow less than cash.

Lisa: Right.

Cern: So it's - we're seeing all kinds of different angles of attack.

Lisa: Yeah.

The Goal of the Attacks

Cern: Attack on Bitcoin, an attack on Micro Strategy. The idea is to try to hurt the company in some way, even perhaps force them to liquidate some of their Bitcoin, which would destroy their reputation.

Lisa: Yeah.

Cern: Now, Micro Strategy basically has a fortress-like balance sheet at this point. There's nothing really that would force them to sell their Bitcoin unless Bitcoin dropped 85% and stayed there for a period of time. But just this little volatility that we've seen in Bitcoin lately is not going to cause really any harm to Micro Strategy other than short-term volatility in their stock.

Understanding the Leverage

And because they are kind of what you would call leveraged to Bitcoin - now, not leveraged in the way it's debt, it's just like amplified - they have an amplified exposure to Bitcoin. So that will help them do really well on the way up, but it also hurts them more on the way down. And it's important for shareholders in Micro Strategy to understand that dynamic.

And this is one of the reasons too that they've issued these preferred stocks. If you don't like that extra volatility in the stock, you can buy the preferred and get exposure to Bitcoin without all that volatility.

Lisa: Yep.

Creating a Yield Curve for Bitcoin

Cern: So they're trying to create - they kind of think of it as like a yield curve for Bitcoin. And that's kind of one of their unique developments in terms of the level of risk that you want or the level of exposure that you want or the level of leverage that you want.

Lisa: So Micro Strategy does - you get more Bitcoin sets per share as they buy more Bitcoin. But the MNAV at the moment is below one, I believe. Is that a concern that it's below one? It's been there before.

Cern: Depending on - if you count the preferred stock, it's still above one. If you take the preferred stock out, it's below one. But depending on how you measure that. It's reflective of the market's concerns, I guess, over the company. And now, as an investor, you have to judge: is that a buying opportunity or is that a risk?

Lisa: Yeah.

Cern: Same thing when Tesla, for example, went down over all the issues that Elon's encountered. When Tesla dropped 50%, was that a buying opportunity or was that...?

Lisa: That was a buying opportunity, that one. Yeah, hard.

Cern: Yeah, exactly.

JPMorgan's Power

Lisa: But JP Morgan is a massively powerful company. They're right in the middle of the power play of all - of the central banks of central banks. And if they started exerting such powers against a company, that could really rock the boat.

And then there's some background in rumors too, which I don't quite get, but the Fed versus the government - Trump's government maybe trying to get more control over using the Treasury and not the Fed. Is that also playing into it? Can you explain that connective tissue there?

The Fed Protects Banks

Cern: Yeah, I mean, the Fed is there to protect the banking system. That's really the Fed's primary goal other than what they say in terms of controlling inflation. It's really there to protect the banking system. Let's be honest about that.

Lisa: Yeah.

Cern: At the end of the day, that's what they do. Certainly, Trump and his administration, I think, is more crypto-friendly in general. They haven't done everything that perhaps the Bitcoin community has wanted. But, you know, these things take time.

Lisa: Yeah. Exactly.

The David vs. Goliath Fight

Cern: And so again, if we're moving from one system that's controlled by banks and the Fed to another system, you're going to start to see these skirmishes. I'm a little bit surprised by the way that JPMorgan has been so sort of kind of open about this attack because they've already - now it's kind of become this David versus Goliath situation.

Lisa: Right.

Cern: There's now people in the Bitcoin community that are rallying behind Micro Strategy and saying, "We're going to support you," and people saying, "We're going to leave JPMorgan. We're going to take our money out of JPMorgan and put it somewhere else where it's treated better."

Lisa: Right.

Cern: So yeah, the fight's already kind of public. To me, it seems like JPMorgan should have been more careful about taking the fight to Micro Strategy publicly about it.

Lisa: Yeah. Yeah. Yeah. They might have shot themselves in the foot. Hopefully they have.

Years of Attacks on Bitcoin

Cern: Yeah. Hopefully. And I think the banking system, by the way, has been trying to attack Bitcoin over the years. So this is not anything new.

Lisa: Yeah.

The Future Without the Fed

Cern: And is there going to be a real massive change then in the way - like the Fed is already partly impotent. It doesn't have as much power as it used to have. You've got this big fight between Trump and Powell. They obviously hate each other. And you've got a new Fed chair coming in next May. You've got [Scott] Bessent in there. You've got some big changes.

And we can discuss whether there is any Fed independence anymore. Have we basically got a shadow Fed chair anyway? But really, the Fed has no place. When you look through history and how it came about and what it's actually done and the trouble that it's caused to the world and America throughout the years - do we need it? Do we need the Fed?

In our current system we do, but I believe that we can move to a better system. And if we have a system that's more where money is more tied to the energy output of a nation, then you don't need the Fed. Then it's tied to something that's very clear and very measurable. And people can focus on that rather than trying to manipulate the money supply in some way. So I'm hopeful that all these skirmishes are leading us down this path of getting us towards this better system.

The Messy Path Ahead

Lisa: Yeah.

Cern: But my eyes are open enough to realize that it's going to be a messy path. It's going to be - there's going to be some bloody streets.

Lisa: Yeah. Yeah. It's going to be. So let's hope good wins out. And that's just in America. And then you've got Europe and all the other stuff. And we won't go there today.

Closing

Cern, I want to thank you for taking so much time today because we've probably gone a bit over time. But I wanted to sort of squash all of those Tesla, Micro Strategy, Bitcoin stories and the stuff that's occupying our minds at the moment and the changes that our society's going through and will be going through, to give us a bit of a heads-up - maybe heads-up - from the investing point of view. Also a heads-up on the way to think about these things and the technologies that are coming. And you do a brilliant job of that. You're an absolute rock star. So thank you so much, Cern, for sharing all your insights today.

And can people follow you on YouTube channel and where else can they find you on X? Because you do some brilliant posts on X.

Where to Find Cern

Cern: Yeah, I do have kind of a nascent YouTube channel. I started a kind of a clips channel. I haven't yet found the time to produce my own videos. Perhaps one day I'll get a chance.

Lisa: Yeah.

Cern: And I'll have to have you on as a guest when I do that. But the best place to find me is on X, and it's just simply CernBasher, my first and last name.

Lisa: Yeah. Brilliant. Yeah. So go and sign up to the YouTube channel. I will put the link in the notes and the X. And then you've got Brilliant Advice if you're in America. It's just for US citizens. If you want to work with him and his company, you can reach out to brilliantadvice.net. Is it?

Cern: That's correct. Yes.

Lisa: Yeah. Hey, I remembered. Awesome.

Well, thank you, Cern, for your time today. It's been absolute pleasure.

Cern: Thanks, Lisa. I really enjoyed it. Thank you.