Operation Saylor - Episode 22/120

Hi again and welcome to another episode of the Operation Saylor. This is update number 22, corresponding to April 2024.

If you are reading this for first time, you might want to check Episode 1, where my plan and details are explained. That will get you in context.

Hello again, and welcome to a new episode of the series.

Time flies and we are approaching the second anniversary of Operation Saylor. I spent the last anniversary to reflect a bit on the performance of the operation. One of the ideas I brought up is how this operation can be assessed from many angles and with a lot of metrics, which makes it a bit hard to answer the question "How is it going?" in a simple way. This is a topic I have dedicated significant amounts of brain energy, because I believe it deserves thorough attention. Otherwise, you risk getting blinded by the fact that are sitting on a lot of assets, downplaying the fact that you are also sitting on a lot of risk.

So, in anticipation to the second anniversary, I've decided to let you into my brain. I'll be dedicating this and the next few episodes to discuss in depth my ideas on how to assess the success of Operation Saylor, and we will close the year with some figures.

Let's start somewhere we can all agree on: we save value today so we can spend it in the future. If we save value, and then in some point in the future, we can't spend it for any reason, we have failed big time: the sacrifice was pointless to begin with. There are many reasons and many things that could go wrong and could prevent us from enjoying the value we saved. We could be rugpulled by fiat or crypto means. Someone could steal our savings. We could lose access to them.

Risk is unavoidable. Nothing is guaranteed. Few things are more sad than looking in the eye at the poor fiat normies that think that keeping their money in regular accounts in the bank is safe (maybe they would be better off if they read this masterpiece by bitstein: https://bitstein.substack.com/p/everyones-a-speculator). But not all saving vehicles come with the same risk, nor do all courses of action do. The balancing factor here is return. The more return, the more risk we are willing to accept. Operation Saylor is an example of high risk, high return.

Risk and return are commonly studied and discussed in the investing domain, but I see no difference with pretty much any decision around normal savings that would prevent us from borrowing those ideas. And, in my mind, Operation Saylor looks more like saving than investing. If someone borrowed British Pounds to buy Dollars, you wouldn't call that an investment, would you?

The big point I want to make here is that all courses of action and results should be judged simultaneously for risk and return. Any assessment that only looks at one of them is flawed, for it's easy to have small risk or great return by sacrificing the other. It's easy to look at Operation Saylor and point the finger at the nice number going up, while ignoring the things that could (and still can) go wrong.

Another factor that needs to be taken into account is that this Operation lives throughout time, and I also think this should also be reflected in our judgements.

Imagine two fictional scenarios: the easy-peasy and the plot-twist.

In the easy-peasy scenario, Bitcoin boomed the day after I began the operation, and stayed stuck at the same price for 10 years. For 10 years, I enjoyed sitting on a massive asset value compared to my liabity towards the bank. By the end of the 10 years, and after paying out the entire loan as planned, I'm left with 1 Bitcoin worth 1 million dollars.

In the plot-twist scenario, Bitcoin barely sees any price action after I began the operation. Loan installments slowly erode the Operation's Bitcoin stack, with the Operation stack value and the amount owed to the bank closely tracking each other. By the time the 10 years are coming to an end, there's only a bit of sats left. But, a miracle happens, and in the last month, Bitcoin's price suddenly flies to 10M USD/BTC. I still have 1 million sats left, so the end story is I have 0.01 Bitcon worth 1 million dollars.

In both scenarios, I've made all the payments to the bank and I'm left with a stack of BTC worth 1 million dollars. If you only look at returns at close, there is no difference measured in fiat. But, let me ask you, would you consider both scenarios equally good?

I don't. I would clearly prefer the easy-peasy scenario. The reason is simple: for a longer period of time, I was sitting on little risk. The assets I was holding were much more valuable that the liabilities that I was facing. Should I had had to sell due to some catastrophic personal situation in the middle of the operation, it wouldn't have hurt much. Or should I have had to reconsider my asset allocation due to some radical change in the worlds circunstances, I would have been sitting on a lot of value to reallocate. Had any of this happened in the plot-twist scenario before reaching the final miracle, I would have been screwed. Left with a debt to a bank and little to no assets.

My point for you here is: it's not only the end result, but also the state of things over the entire life of the operation, that determines if the operation was successful.

Finally, some people in the past have tried to compare the performance of this operation to the performance of having DCA'd all the installment payments. One could naively think: if DCAing the installments into Bitcoin leaves you with more BTC at the end of the operation that the loan option, then the DCA was better.

It's an interesting exercise, but it's flawed. You wouldn't be comparing apples to apples. The reason is that the DCA option implies that you have a nice cashflow that allows to add funds to your stack every month. Operation Saylor, on the other hand, is self-sustained (for as long as the Bitcoin stack doesn't run dry and forces me to pay the loan installments out of my pocket).

If anything, what would be a fair comparison is to compare the DCA plan to running Operation Saylor, but paying the installments with my personal cashflows instead of shaving off a few sats every couple of months from the Operation stack. This makes a fair comparison: both scenarios commit 366.20€ per month, either to buying Bitcoin or to paying to the bank. I might explore this in our upcoming episodes.

I'll leave it here for today. I hope these ideas set some foundations and help you see, as I do, that there's more nuance to judging Operation Saylor than just looking at the total value held. As always, thanks for reading and I'll see you next month.