Vlad Tenev (Part 1)

Vlad Tenev is the co-founder and CEO of Robinhood. He launched the trading platform alongside Baiju Bhatt in 2013 with the goal of making investing more accessible through commission-free stock trading for everyday investors. Under his leadership, Robinhood expanded beyond equities into options, ETFs, cryptocurrency, banking products, and private market investing, and the company went public in July 2021. In addition to Robinhood, Tenev is the co-founder and executive chairman of Harmonic, an AI-driven platform focused on organizing and analyzing business and market data. ------ Thank you to the sponsors that fuel our podcast and our team: AGZ https://DrinkAG1.com/tetra ------ Squarespace https://Squarespace.com/tetra Use code 'TETRA' ------ Athletic Nicotine https://www. AthleticNicotine.com/tetra Use code 'TETRA' ------ Lectio 365 https://Lectio365.com ------ Sign up to receive Tetragrammaton Transmissions https://www.tetragrammaton.com/join-newsletter

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Rick Rubin?

  Tetragrammaton.

• 0:23Speaker 01

  I was at this party in San Francisco in, I think it was early 2012. And this was still when we were running our second business, the software business, selling the picks and shovels to hedge funds. And I was explaining to this person at the party what we were doing. Because you know, in San Francisco, a lot of people are, you know, "tell me about your startup", sort of thing. I was like, "okay, well, we have this technology. It's really fast." Back then, we weren't competing on cost, but it was all about latency. Like, how quickly can you take a signal from the market, be able to interpret it, and spit out a trade and response? And we were talking microseconds here. So you take the signal...

• 1:05Rick Rubin?

  Michael Lewis wrote a book about this.

• 1:07Speaker 01

  He did, yes. And that book caused a lot of problems for me later on.

• 1:13Speaker 01

  Yeah, because that book was published right when Robinhood was announced and launched. Effectively, I was telling this person about my business. And, you know, we have these customers that are using our software. They're trading billions of dollars per day in volume with a small team of people. And it's really fast, and by the way, it's very efficient. They pay next to nothing, right? And this guy was like, "so you're telling me these customers, three or four of them that you have, trade tens of billions of dollars a day, and they pay next to nothing? Why can't I have that? You know, I have my Schwab account. They're charging me, I don't know, $10, $20 a trade. Can I use your software?" And at first, I was kind of like, "that's ridiculous.

• 1:57Speaker 01

  You can't use the software. You have to be a developer. It's, you know, for institutional customers."

• 2:04Speaker 01

  But you know, then then I get to thinking and I call my partner who is in New York on a sales trip. The question was, can we go after retail? Is there like a retail product here? And this guy's right, like all of the big discount brokerages are charging $10 a trade. And we kind of knew how everything worked, full stack, how you can connect with the market.

• 2:31Rick Rubin?

  They're also kind of antiquated. For young people, I don't think they thought about opening one of those accounts.

• 2:37Speaker 01

  Yeah, absolutely not. And they had high minimums. Most of them would require $2,000 before opening an account. Nobody had mobile apps. So we started thinking, we're like, oh, is there some reason why you can do this for really cheap on the institutional side, but not on the retail side? Are there additional rules and regulations? And you know, we got deeper and deeper and deeper. And we just realized there's no fundamental reason.

• 3:06Rick Rubin?

  It's just no one had done it.

• 3:07Speaker 01

  Nobody had done it. And it was kind of a new thing. I mean, every 10 or 20 years, someone comes and tries, right? But it's not very many people were trying. As a matter of fact, E-Trade, which was kind of a disruptor in a similar vein to Robinhood, started in the 80s in Palo Alto, California, oddly enough, with these two older guys. One of them was like a business guy and the other one was an engineer. And the business guy was, I think he was in his 60s or 70s, this guy Bill Porter had just gotten a Macintosh. And his idea was, I love my Macintosh. It would be really cool to be able to trade stocks on it.

• 3:52Speaker 01

  And that was kind of the genesis behind E-Trade, which which became the dominant sort of like dot com first online broker. So yeah, every every 10 or 20 years, something happens where the right people kind of get together and create something.

• 4:08Rick Rubin?

  Yeah.

• 4:08Speaker 01

  My college best friend and I, we bonded over physics. So we both came to Stanford to study physics. We both met in the physics department as physics majors. And we would challenge ourselves by taking all the graduate classes. And so we really bonded. Doing these late nights in the physics building, banging our head against the wall, trying to solve these like super difficult problems.

• 4:33Rick Rubin?

  Were they all problems that were already solved?

• 4:35Speaker 01

  Yeah, yeah. It was like, you know, homework problems, things like that. Not unsolved novel research, at least at that point. And then we both transitioned to math at the same time. Because Stanford Physics Department was geared towards creating experimentalists. And I experienced experimental physics. And these are the people that are like working on the massive colliders. And it's basically like a industrial scale project, right? And what appealed to me was one person, one mind, sitting on a couch, lying down, maybe with a chalkboard, and just taking a hundred percent of your mental energy and creating an insight or a novel idea.

• 5:20Speaker 01

  That's what I really loved about physics. And it turned out that the purest way to capture that is math. And I wasn't as interested in like the laboratory work, doing like electronics.

• 5:33Rick Rubin?

  So you liked the theoretical side?

• 5:36Speaker 01

  I liked the theoretical side. And Stanford was much more towards creating experimentalists. They had some good theorists, but if you wanted to get too theoretical, they sort of sent you to the math department. But yeah, so my co-founder and I, we transitioned to math. And then when we graduated, he was one year older than me. He stayed to get his masters in math. And then when I graduated, it was kind of like, what are we gonna do next? So I went down to UCLA to get my PhD. And he got a job in finance, kind of on a whim, at this hedge fund up in Marin County, just north of San Francisco.

• 6:18Speaker 01

  His first month on the job, my first month in grad school, Lehman Brothers blew up. And so this was the start of the global financial crisis.

• 6:27Rick Rubin?

  Two thousand and eight?

• 6:28Speaker 01

  Two thousand and eight, fall of two thousand and eight. And sort of in the wake of this global financial crisis, we decide to start our own financial company. He kind of pulls me into it, right? I was, I was a little bit skeptical, but I wasn't having that much fun in my PhD program. I think my first year of my PhD program, it sort of hit me like a ton of bricks that I entered into math with pure intentions and to be creative. But like this was a career. I was signing up for a career. And the aspects of the career that I was confronted with were really not that attractive.

• 7:11Rick Rubin?

  So would you say the financial collapse was an opportunity?

• 7:14Speaker 01

  It was a huge opportunity. But the first opportunity, we didn't get the idea for Robin Hood. It was really just, there's a lot of volatility. We can trade for ourselves, create our own trading algorithms, our own hedge fund to capitalize on that. And so that was the first business. And that didn't work out very well.

• 7:34Rick Rubin?

  Are most of the people involved in that world super brilliant mathematicians or not necessarily?

• 7:39Speaker 01

  So at that time, there was a bit of a changing of the guard. So in the old days, institutional trading was run by these big banks. You know, the Goldman Sachs, JP Morgans, they would have institutional trading desks. You imagine like a sea of people on phones. But two thousand and eight was a little bit of, there was a discontinuity there because the machines took over. And past that point, nearly all the trading on financial markets was electronic trading.

• 8:13Speaker 01

  So it was a little bit of a of a transition point. To be successful in the world of manual trading, you had to be like this aggressive football player type person. So that when you were in the trading pit, you would kind of tower above all of the people and you'd you'd be able to like take all the tickets first. You know, a lot of the football players became traders, successful ones.

• 8:36Rick Rubin?

  I didn't know that.

• 8:37Speaker 01

  Afterwards, trading became electronic and the action moved off the pits in New York and the trading floors to these data centers in New Jersey. And then it was kind of like the quants gradually took over. And so in 2009, when we when we got started with our first business, the big observation was if you were, you know, three smart mathematicians out of Stanford or MIT and you had a trading algorithm, you could deploy that and actually compete against the big guys and out compete them because they had old systems. And so we were doing that. And then we saw another opportunity, which was, hey, if this was a gold rush of algorithmic trading,

• 9:19Speaker 01

  can we sell the picks and shovels rather than panning for gold ourselves? So we created a second business, which was a software company. We we sold technology and infrastructure to both the startup HFTs, you know, the guys from MIT and all these schools, and to the big banks. And then, at that point, we became much more of a software company. So I moved back to California to hire software engineers and to grow the engineering office. Pretty soon, the engineering office became the main office. But this was a very unique time when I moved back. It was November of 2011.

• 10:00Speaker 01

  And that was right when Instagram was getting started in Palo Alto. Uber had just launched Black Car in San Francisco. So we kind of had a foot in both worlds, right? We understood a lot about institutional trading and finance from New York. And then we also got to see the birth of, you know, this mobile industry. For Robinhood, I think we were the only ones that sort of like were in a position to connect these two ideas, right? It was before fintech was a thing. It was actually like very, very hard to get it off the ground. But I think we were fortunate to like have one foot in in both worlds. To have this entrepreneurial financial experience

• 10:43Speaker 01

  in a world where to really understand finance, the typical path would be you graduate from school, you join as an analyst, you know, some kind of entry level position at a bank. They wouldn't really show you how things work. You'd have to kind of work your way through and maybe, you know, 10, 20 years later, you would make VP or partner and you'd get some visibility, but you were still very much kind of a cog in a giant machine.

• 11:09Rick Rubin?

  And typically coming from an economics background, not a mathematics background.

• 11:13Speaker 01

  Yeah, they weren't really hiring mathematicians. Actually, when I graduated with my math degree, I did apply for some jobs and I found myself incredibly unemployable.

• 11:23Rick Rubin?

  Yeah.

• 11:24Speaker 01

  You know, that was kind of my first point at which I was disillusioned by getting my math degree. That was the point where I realized, okay, this is really hard. I'm really competing against like the smartest people in the world for placement in these programs. And whenever I'm talking to these prospective employers, they're just like, can you program? You know, so like they didn't really value all this hard theoretical math work that I was doing. And this was before data science, before AI. I think now mathematicians are having much more of a resurgence. Yeah, it was disappointing in a sense, but also I think lowered the activation energy for me to become an entrepreneur because I didn't really have much to lose.

• 12:08Speaker 01

  I mean, I was in grad school, making $18,000 a year. I didn't really have a cushy job at Google. People weren't fighting over me. And so that put me in a position where I could take some risk without really worrying about what I was leaving behind. Yeah, so I was very lucky in a sense. I was kind of like climbing this treadmill of education, you know, going to the best high school, going to one of the best universities, succeeding really well and getting good grades. But then this math path was sort of like a career dead end that really gave me an opportunity to reset.

• 12:45Rick Rubin?

  Had the system not changed from the football players to the tech bros, would your idea have worked?

• 12:54Speaker 01

  I think it would have been really challenging because the football players, if every trade had to go through an actual person to get processed.

• 13:03Rick Rubin?

  It limits the number of trades that can happen.

• 13:05Speaker 01

  And it would have been a, it would have limited the cost. Like you, you probably couldn't fully automate it and, and lower the cost. We could lower the cost because everything was electronic.

• 13:15Rick Rubin?

  Yeah.

• 13:16Speaker 01

  It was all just a purely electronic transaction, which made the idea of it costing $10 kind of ludicrous. And when we'd go to talk to customers, we'd ask them, why do you think it costs this much? They all would tell us, well, it's because someone has to be doing something, right? Of course, none of the big guys were actually processing trades manually at that point. Everything had gone electronic. They were just collecting their margins, right? And they had brick and mortar stores. They had high overheads. They had like processes that were legacy that they hadn't automated. Yeah. And, and the benefit is we could kind of like start with a blank slate and it wasn't

• 13:59Speaker 01

  only the electronic trading stuff, it was mobile. We could ask ourselves, well, if we could design just for the mobile device.

• 14:05Rick Rubin?

  Yeah.

• 14:06Speaker 01

  We probably don't have to do everything because in fact, people expect a simpler experience on mobile. What's like the most valuable kernel of a thing that we could start with that could strike out a little niche for us?

• 14:20Rick Rubin?

  How much regulation did you have to figure out and get through?

• 14:25Speaker 01

  Well, and that was actually one of the big constraints that we had at first. We had to raise money. So, so you had to get a license before even marketing that you're a broker and then you can offer commission free trades, which is what we wanted to do. That was our big idea, like take the cost, cut it to zero.

• 14:46Rick Rubin?

  So before you were building the technology for that to happen, but you weren't the trader. You were selling the technology to traders.

• 14:53Speaker 01

  Yeah, exactly.

• 14:54Rick Rubin?

  So now you're becoming the trader.

• 14:55Speaker 01

  First, we became the trader ourselves.

• 14:57Rick Rubin?

  Yes.

• 14:58Speaker 01

  Second, we sold the technology to other institutions. And third, we kind of started from scratch. We, we, it turned out we could use the ideas, but the technology had to fundamentally change to support millions of customers.

• 15:14Speaker 01

  The third step was not just empowering companies to use us, sophisticated companies, but like mass market individual. We could just sign up, open an account as quickly as possible, five minutes or less, which was a huge innovation. Before we came along, you'd almost, you would have to like print out a form and fax it to your brokerage. And then they'd get back to you a couple of days later.

• 15:42Rick Rubin?

  Yeah, it was probably a vetting process. It was probably complicated in the past.

• 15:45Speaker 01

  They were moving papers back in the background. And then, you know, you'd have to wire money there. That would take some more time. So we pioneered instant investing, which is just, you download the app, you sign up, you can place a trade in one session, just like how you would expect any product that you use on your phone to function.

• 16:06Rick Rubin?

  So do you say it was like the stock trading version of Amazon?

• 16:12Speaker 01

  Yeah. I think there's some parallels. I mean, we take some inspiration from Amazon, from all of these companies. Also, Apple. I think one criticism you can give Amazon is you use the app, it feels functional, it works, you know, things are kind of in the right place, but it's not really delightful.

• 16:35Rick Rubin?

  No, it's not design first.

• 16:36Speaker 01

  No. Yeah, but we, we were always, you know, my, my co-founder and I were inspired by Apple. One of the other formative moments is the iPhone came out right when we were graduating college. 2007 was the iPhone, 2008 was the App Store. So we would get together and like watch the Steve Jobs videos of when he was unveiling things and also the iPad. And I think that also planted the seed in our minds of, oh, it would be really cool to launch a consumer product that actually individuals can use. And that was another motivating factor from going from our enterprise business to, to the consumer business.

• 17:17Rick Rubin?

  Do you think if it was not for the guy at the party who said, why can't I use it?

• 17:22Speaker 01

  Yeah.

• 17:23Rick Rubin?

  You would have still got to Robin Hood or that key random event was what led to this company?

• 17:30Speaker 01

  It's hard to say because, you know, that definitely set in motion a turn of events that led to us focusing fully on trying to make the retail business happen.

• 17:44Rick Rubin?

  So interesting how just random conversations can lead to total life changes.

• 17:52Speaker 01

  Yeah, and also at that same time, my co-founder and our head of BD were in New York on sales trips, and that was like a very bad sales trip. Like, one of our customers went out of business, and so we lost a bunch of revenue that way. Other customers were sort of like not biting. So we were at the same time having this sort of like angst or this existential question of, you know, we have a business that's making a couple million in revenue. We're sort of able to feed ourselves. Maybe if we scratch and claw, we can get to 10 million in revenue. But am I really gonna be proud of myself? Like, if I'm, you know,

• 18:35Speaker 01

  80 years old, looking back on my life, sitting with my grandchildren and thinking about what I accomplished, am I gonna be proud of myself for building this tool for hedge funds to trade and make more money? Yeah, and I thought about it, and I said, not really. This always felt like being in the gym in a sense. Like, I'm doing this to like get resources or get the opportunity to work on something else. But that other thing is gonna be what I really, what I'm really excited about. With Robinhood, that changed. And when we got the idea and we started working on it, we knew in our hearts that it was a really big idea. And if we actually brought it into the world successfully, it could change the world.

• 19:20Rick Rubin?

  Yeah. How long did it take from the idea until releasing the first model?

• 19:26Speaker 01

  Yeah, three years. So we first got the idea at that party in San Francisco in February of 2012, which was right around my birthday, turned 25. And then our app launched to the public in March of 2015.

• 19:43Rick Rubin?

  Walk me through that three years.

• 19:45Speaker 01

  So the first step was

• 19:48Speaker 01

  Once we figured out, hey, this is a really big opportunity. We should go after it. Then we had to figure out, okay, how do we reconcile this with having an existing business? That's very, very different with enterprise customers that we have to support. How can we do that? And also do this new thing? And we basically figured out that we should raise some capital to do this. So, and at that time, you know, raising capital from VCs, it had kind of a negative connotation to it. All the people that I knew basically discouraged me from it. They said, VCs are going to take your company and they're just gonna install professional management

• 20:31Speaker 01

  and they're just gonna stab you in the back. So we raised some capital from angel investors, a very small amount. I think the initial tranche was maybe a few hundred thousand dollars. And that was kind of enough for us to get going and make some initial hires to get it all set up. Building a broker isn't like building a technology startup. At that time, there was this book that was going around called The Lean Startup. It was sort of like this playbook for how to start a company in this new age of like cloud and mobile. And what it created, what they put into the public was this notion of a minimal viable product.

• 21:14Speaker 01

  Like the first product has to be a complete solution for a fairly narrow product that you spend as little resources as possible to validate. So actually, if you could validate it without building it, it's the best idea. So they created this strategy that everyone was using at the time of you just put up a landing page that describes your product, but the product doesn't exist yet. And then you just see how people interact with the landing page. Are people clicking? Are people spending time on it? Are they giving you your email address? And so every startup that didn't do this had a little bit of a harder time. So we would go and raise capital and we'd say, well, we're building this brokerage.

• 21:58Speaker 01

  First of all, do you have your licenses? No. How do you know if anyone is going to want it? Okay, if people get past that, you say, well, we're pretty sure if we can offer this thing for, that everyone else offering for 10 for free, we should be able to get some traction. And it's going to be a great product. Well, you know, you guys are mathematicians. You've never built a consumer product. Mathematicians, the ones I know, don't really build great user interfaces. So it was a lot of skepticism. And moreover, we couldn't do that landing page thing because you're actually not allowed to market brokerage services without getting your license. So there was a kind of a chicken and an egg situation

• 22:41Speaker 01

  where we needed the license to be able to market, but we kind of needed to be able to market and validate some demand in order to get our license. And the regulators wanted to see us with a million dollars in operating capital. If they approve you as a broker that's opening retail accounts, they want to make sure you have enough money to be around for at least a year. Because otherwise, it's like a mess to unwind those accounts. So they don't want to deal with that. So we were able to, I guess, negotiate a little bit and demonstrate that for a million dollars, we could run this brokerage business for a year.

• 23:16Rick Rubin?

  Was that a federal agency we're dealing with or a California agency?

• 23:20Speaker 01

  Federal, yeah. All brokers are regulated by a body called FINRA. It's called an SRO, a self-regulatory organization. So it has a mandate from the SEC, which is a federal agency to essentially self-manage the licensure.

• 23:39Rick Rubin?

  Are the people who work there government employees?

• 23:42Speaker 01

  They work for FINRA. Yeah, again, it's like quasi-government, but not formally government. Because, you know, the government agencies, they don't want to directly oversee every brokerage because there's a lot of them. And the SEC would have to get quite big. So they oversee FINRA, which regulates the brokerages. And then only the serious stuff escalates to SEC approval. So we're registered with the SEC, but regulated by FINRA. Yeah, so. We had to get licensure, which was another thing that scared people off because this was before fintech. Nobody was really getting licensed. So the solution was we just had to knock on a whole bunch of doors and not give up.

• 24:27Speaker 01

  So we probably talked to between 75 and 100 investors to raise the initial million dollars of seed capital. And yet, that that allowed us to get over the hill, get our license.

• 24:41Rick Rubin?

  Was that the first year, would you say?

• 24:43Speaker 01

  Yeah, we raised $3 million between February of 2012 and mid 2013. And we got our approval in mid to late 2013. And that was a big moment because then we could start marketing. And then we created.

• 24:59Rick Rubin?

  You still haven't built anything.

• 25:01Speaker 01

  Still haven't built anything. I mean, we started, we we ran some experiments.

• 25:06Rick Rubin?

  It's still setting the stage to allow it to happen.

• 25:09Speaker 01

  Exactly. So we built a mobile app, actually, that was sort of like a social network for traders. And we we said, OK, the plan initially was if we could create this community of traders and get them engaged, and then get our approvals and layer the brokerage on top, this would be a way to make progress during that period.

• 25:28Rick Rubin?

  Before you had permission to be a broker.

• 25:31Speaker 01

  Yeah.

• 25:31Rick Rubin?

  That's a good idea.

• 25:32Speaker 01

  Yeah, and it didn't work out super well because we were never really able to build a super engaged community.

• 25:39Rick Rubin?

  But good problem solving.

• 25:41Speaker 01

  Yeah, yeah. And, you know, sometimes I think while crypto was in our radar, what if instead we built the same functional thing, a broker, but launched with crypto first and then expanded into stocks? Would that have worked a little bit better?

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• 28:19Rick Rubin?

  When did Coinbase start?

• 28:21Speaker 01

  I think they started around that time, 2012, 2013, a few years before us. I think crypto was still pretty niche. If you were kind of like a cyberpunk sort of techno optimist person, it was very much on your mind. Like, I remember reading about Bitcoin and doing a little mining back in 2011. And I think it first hit the public consciousness in 2013, actually. Because that was when the price of Bitcoin had its first major surge and hit $1,000 a coin, up from maybe like $20. So massive, you know, it was on the news, it was on NPR.

• 29:06Speaker 01

  $1,000 a coin, people were going kind of crazy. And then it crashed back down to 60 and people were like, okay, this is a fad. And then four years later, it had its second huge run, up to 20,000 a coin. And that was when Robin Hood launched crypto during that second

• 29:22Rick Rubin?

  Cool.

• 29:22Speaker 01

  second run up. Yeah, that was the idea, launch a social network for traders while we're getting all this licensure going. And then maybe we could parlay that into a big financial community that was also trading. What happened was, you know, we tried all the growth tactics, all the tricks. It wasn't a fantastic product, to be honest. I think we were, we were just kind of experimenting. We never really figured out how to make it truly great and give you a reason to try it. And so, you know, we would struggle having 100 users, 200 users. We thought, okay, why don't we just like, reset? This is a new opportunity. When we got our approvals, we thought, why don't we simplify things?

• 30:06Speaker 01

  Rather than having, you know, a social network where you can DM and you can share news and you can maybe layer trading in. What's the essence of it? And the essence of it is get in as quick as possible, get out of the user's way and just have a button that you can buy a stock.

• 30:24Rick Rubin?

  Did it look like a ticker tape? You could watch the market on the app or no?

• 30:29Speaker 01

  No. Actually, one of the early design decisions that we made was Every other broker that was out there kind of hid your money from you. We didn't really know why that was the case, but you really had to like go into the sort of like in the basement of these sites to figure out how much money do I have? How much am I up in the day? So we thought, why not put that front and center? You know, I open up the app. I see my account balance. I see how up I am in the first day. I see my positions and the bet was that that's the most important information. We wanted to make it as easy as possible to get into that.

• 31:11Speaker 01

  And there was a bunch of trade offs involved in that, but I think that was the big bet that's survived to this day. Like, give your account balance right in front of you. Don't try to hide it. And you know, maybe we thought they wanted to hide it because customers maybe weren't doing so well. So make them go through some more effort to actually see how poorly they were doing. Not sure if that's true, but that was kind of, that was always the hypothesis.

• 31:36Rick Rubin?

  Would there be any information that would assist a person in choices of what to buy and what not to buy?

• 31:44Speaker 01

  Yeah, I mean, there, there's a bunch of stuff like this. Again, highly regulated because one of the things we've always had to be very careful with is we have to make it clear when we're making a recommendation or putting our thumb on the scale versus not. So we do make recommendations. We have some of, some of this data stuff that, you know, helps like people that have invested in this one stock also invest in these other stocks and that lets you discover other things. You can see what's moving. I mean, now we're integrating all these AI tools and a big use case for the AI tools is you can do some screening, right?

• 32:25Speaker 01

  You can be like, tell me who the AI chipmakers are, you know, and which ones have been growing revenue more than 50% per year. And so we're getting into all of this stuff while making sure we navigate the inherent complexity and, you know, on the brokerage business, making sure we're just giving information, not making recommendations, while also on the side of the business where we're a fiduciary, where we'll actually manage your money.

• 32:54Rick Rubin?

  That's a later evolution of the product, though.

• 32:57Speaker 01

  Later evolution, yeah. At first, it was just, we give you the information you need, the data, basically, the real-time market data.

• 33:07Rick Rubin?

  You can sign up in five minutes and you can buy a stock.

• 33:10Speaker 01

  Buy a stock for no commissions and no minimums.

• 33:13Rick Rubin?

  Yeah.

• 33:13Speaker 01

  So you can sign up for $5. And at this time, the competitors would onboard you. It would take a week. The commissions were $7 to $10 on average. Most of the big guys also had $2,000 minimums. So if you were, you know, a 22-year-old just out of college, started your first job, it was cost prohibitive to start investing. And so what we did was we lowered the barrier. Now you could start investing with $5 or with $100.

• 33:41Rick Rubin?

  Did the old guard of this business embrace you guys?

• 33:45Speaker 01

  No, no.

• 33:47Rick Rubin?

  What was that like?

• 33:48Speaker 01

  So for the first couple of years, it was just dismissive, like, oh, you know, our customers actually don't mind the commissions. They recognize that the service we provide is like worth it. And I think for some of the customers, that's probably true. Or, you know, these guys are taking the customers that we don't want, young people that have no money.

• 34:10Rick Rubin?

  Yeah.

• 34:10Speaker 01

  You know, short-sighted. But I think there is a tendency to explain away potential business threats or competitors, because you don't really want to have to deal with it, right? It's like, I've got my own priorities. What is this thing? It's in the interest of my sanity to be able to explain it away and not worry about it too much, which is a mistake that people make.

• 34:34Rick Rubin?

  Was there ever a smear campaign against you guys?

• 34:37Speaker 01

  You know, later on, I'd say for the first three or four years since we launched to the public, the press and everything around Robinhood was pretty universally positive. It was like, you know, we're rooting for these guys. This is like new, they're kind of young. It's kind of a David and Goliath story where they're going up against these giants. It's like, oh, amazing, Robinhood is doing well. And then 2019 came, so we've been live for about four years. And in this environment, we were basically just feeding the market, right? If you look at mobile app downloads, we had like 60% market share.

• 35:17Speaker 01

  So out of every 10 downloads in the entire brokerage space, Robinhood was six out of 10.

• 35:23Rick Rubin?

  Wow.

• 35:24Speaker 01

  And, you know, we had gone from a $75 million valuation in 2014, that was our Series A round, to seven and a half billion.

• 35:34Rick Rubin?

  Amazing.

• 35:35Speaker 01

  Right, 100x in four years. And a very interesting thing happened in September of 2019. Remember, this was right before COVID. All of the major incumbent competitors, within pretty much a week of each other, lowered their commissions to zero. So they saw this and like, one of them moved first. I think it was Interactive Brokers, lowered the commissions to zero. And then it was clear, they all had like a playbook that they had prepared. All of them went to zero. I don't think anything's happened like that in, in business history, as far as I'm aware. It would be almost like if all the car makers got together in response to the Tesla threat and said, we're going all-electric, full bore, in the same week.

• 36:20Rick Rubin?

  Yeah.

• 36:21Speaker 01

  And so what happened was the ones that were public and trading-oriented, TD Ameritrade and E-Trade were the two big ones, their stocks fell by like 35% in one day, just cratered, right? Schwab, who was less dependent on trading commissions, they had more of a retirement advisory business, sort of stickier, they fell, but more like 10%.

• 36:44Speaker 01

  And I had sort of like two feelings about it, right? One was, holy shit, this is a little scary. Our biggest differentiator, like the reason why you would tell someone to use Robinhood.

• 36:57Rick Rubin?

  You're a free.

• 36:57Speaker 01

  Has become commoditized. But then I would get all these messages streaming in of people kind of congratulating me like, amazing, thank you, you saved, you know? People in their retirement accounts don't have to pay fees anymore, which was kind of nice. And the outcomes of that were E-Trade and TD Ameritrade didn't continue as standalone companies. They had to get gobbled up by larger incumbents. So TD was eaten by Schwab. E-Trade got gobbled up by Morgan Stanley. And so the space consolidated. But another thing happened. So I thought that the public narrative would be very positive. And it would be, look what Robinhood did.

• 37:41Speaker 01

  They like changed the industry. And we had some of those articles.

• 37:45Rick Rubin?

  Now it's better for everybody because of Robinhood.

• 37:47Speaker 01

  Exactly. But we didn't get much of that. And instead, that was the beginning of like our negative press. And when things got very, very negative for Robinhood. And it was around this whole payment for order flow topic that Michael Lewis popularized with his book. And the gist of it was, well, you know, they say they're commission free. But this payment for order flow thing, like they're not really talking about that. And it was positioned as some kind of catch.

• 38:18Rick Rubin?

  Is that part of Robinhood, though? The payment for order?

• 38:22Speaker 01

  Yeah, it was almost as if they were claiming we invented it. But the reality was, all of the incumbents, pretty much, they all accepted the commissions and the payment for order flow. And if you look at the numbers.

• 38:34Rick Rubin?

  It was the industry standard at that time, no?

• 38:37Speaker 01

  And still has been, right? So for example, TD Ameritrade, you look at their financials at the time. They made about $11 a trade. $10 of it was from the trading commission. The $1 was payment for order flow. So when we removed the commissions, their stock went down 35% for a reason. As a company, they were making much less money. But yeah, the public positioning was actually.

• 39:02Speaker 01

  Is Robinhood making even more from the payment for order flow thing than they would have been if they had charged commissions? And is this even, is this like a worse thing for customers?

• 39:12Rick Rubin?

  How do you think that idea started?

• 39:16Speaker 01

  Now I kind of understand how these things work. I don't think it was organic, right? I think it was probably just on background, probably talking to the incumbents, the big guys, talking to journalists, also simultaneously talking about us in Washington and getting the regulators riled up. I mean, it would be foolish for me to think that they had, you know, the business model, the lowering commissions to zero part of the playbook worked out. I mean, that's actually really hard. The easier stuff is to talk bad about you on background to reporters and journalists and to sort of like raise a stink in Washington. And so I think that was the beginning of that.

• 40:00Rick Rubin?

  In a way, that tells you you were successful in that moment.

• 40:03Speaker 01

  I mean, we were successful. And then we announced we had 10 million customers in the US. A lot of people think, oh, COVID is really when I started hearing about Robinhood and when it really grew. And that's true. We basically tripled the business in 2020.

• 40:16Rick Rubin?

  You think it's because people had more time?

• 40:19Speaker 01

  I think it was a confluence of factors. I mean, certainly people had more time and, you know, a lot of people weren't working anymore. And we kind of lowered the barrier to the point where if you were a service industry worker, for example, you were on Robinhood. You didn't really have alternatives because we were just so much cheaper. So our customers probably had more time on their hands. You had the market crashing in March of 2020. So the market just dropped by a huge amount, which if you're an older customer, like a retiree, you end up kind of turtling and getting into a defensive posture. The market crashes, okay, I'm going to sell my stocks and put it in safer assets. But our customers were younger.

• 41:02Speaker 01

  If you're a younger customer, the psychology flips. And instead, you're like, I've been waiting for a good entry point. You know, I have a long time horizon. I want to pick up these stocks when they're on sale. So that was good for us. Actually, big, big crashes historically have been some of our biggest days of purchasing stocks.

• 41:22Speaker 01

  And then, you know, interest rates going to zero. I mean, the government, the Fed immediately intervened when COVID started and lowered the rates from like 2.5% at the time, down to zero. And that has an effect because if you've got 2.5% rates, what that means is if you can put your money in a high-yield savings product, you can get a 2.5% risk-free rate of return. So like investing in stocks becomes less attractive. But when the rates go to zero, stocks become more attractive because there's opportunity cost leaving your money in cash. So you see these flows into stocks. And of course, the stimulus, you know, the helicopter money sent to people.

• 42:07Speaker 01

  A lot of people didn't need it, fortunately or unfortunately, and those people deployed it into their Robinhood accounts.

• 42:14Rick Rubin?

  When the stimulus checks went out, did you see a big uptick in business?

• 42:17Speaker 01

  Huge. You know, that year, 2020, so end of 2019, we had something like 700 employees at Robinhood. We made something like 270 million of revenue. End of 2020, we had close to a billion in revenue, so 3 to 4X increase and over 2,000 employees, the bulk of which hired remotely once we transitioned to COVID-era work-from-home.

• 42:47Rick Rubin?

  What can you do on Robinhood now beyond trading?

• 42:53Speaker 01

  Yeah, now Robinhood is a comprehensive financial super app.

• 42:57Rick Rubin?

  What was the first thing you added?

• 43:00Speaker 01

  Well, first, I'd say the big thing was giving people more to trade, right? So we started with stocks. And then a big acceleration in the business was when we added options. And options are even more expensive than stocks. So we were able to offer options for zero commissions and zero contract fees.

• 43:23Speaker 01

  Usually, options you're charged twice. You have the commission per trade and then you also have a per-contract charge. And we cut both to zero, which was really transformative. And that led us to now we're the top options broker, I think, in the world. A huge chunk of global options volume flows through Robinhood. Then we added crypto.

• 43:46Rick Rubin?

  What year was that?

• 43:48Speaker 01

  2018, so relatively late for a crypto company.

• 43:52Rick Rubin?

  Yeah.

• 43:52Speaker 01

  But the first traditional financial company, which we were at the time.

• 43:56Rick Rubin?

  New traditional.

• 43:57Speaker 01

  Yeah, the first new traditional to add crypto. And that blew people away. People had never seen crypto alongside traditional assets. And we had to contend with that. And now recently, we have prediction markets, which is another thing. Like, we added prediction markets to the whole package. And we were the first broker to add prediction markets too. So we always try to make sure that if you're trading, if you want to trade.

• 44:21Rick Rubin?

  Do you build each of these things yourself for prediction markets? Do you do that independently? Or do you partner with a prediction market company?

• 44:28Speaker 01

  Typically with TradFi, crypto is a little bit different. The regulators have set it up so that there's sort of like separation of concerns. So the broker is a separate entity than the exchange and the clearinghouse. So they try to separate into three chunks broadly. The broker, which deals with the clients. The exchange, which has the concern of matching orders. And then the clearinghouse, which does kind of the back office, record-keeping. So we've always started in each of the assets as being the broker. Because the thing that is our differentiator is the customer relationship, the user interface. But for some of the assets, we do all three.

• 45:12Speaker 01

  And we vertically integrate and we just sort of do it all. And because we have so many customers, there's economies of scale. And it's sort of where we vertically integrate depends on whether we can use those economies of scale to negotiate good deals on the backend to lower the costs. Or if it's like a newer market, we vertically integrate so we can control our own costs. Because at the end of the day, from the very beginning, one of the reasons to use Robinhood is because it's cheaper than the competition. So we just have to work hard to make sure it's actually cheaper and that we have these structural advantages. The second big idea, besides trading,

• 45:54Speaker 01

  that allowed us to expand is around this yield question. So the observation was this, okay, well, if you open up a checking account or a savings account, the trick there is that they don't pay you any yield. You have to do a lot of work to get the yield. And in particular, they make it so that you really have to move your money and optimize for it. It doesn't happen automatically. And in checking, you're not going to get any yield. Typically, it's zero. Savings at most places, you get very little also. So the sort of incentive for the bank is for you to keep all of your money in these low-yield generating accounts

• 46:38Speaker 01

  so that they can make more money off of you. And if you look at the big banks, I mean, trillions of assets that are, they're basically taking all the margin on. So we asked ourselves, you know, can we take advantage of this to make a great yield product for customers? And can we make it so that you get the lion's share of the margin, which right now is, you know, between 3.5% and 4.25%. And we make a little bit of margin, but call it like 1/10th, right? In that ballpark. So still fair. And then can we just create a stickier product? Another factor of this that I didn't really like as a business person is that your revenues are highly dependent

• 47:21Speaker 01

  on what the interest rate is by the Fed. If interest rates are high, you're making a lot of money. If interest rates are low, you're not. So you're kind of not controlling your destiny. But if you commit to operating at a certain spread or margin, then you just tick up the rate that you give your customers up or down, depending on what the Fed does. And that's much more sustainable. So the second big idea was, can we take this yield thing and just turn it into a great product for customers? And that is sort of like what pushed us into Gold Subscription product, which now has 4 million-plus paid subscribers in the US. What is that? So Gold Subscription, the best way to explain it is, you mentioned Amazon. Think of it as kind of...

• 48:07Speaker 01

  Amazon Prime for financial services or the Costco subscription. Can it just be the best financial membership? So that you get good value if you're a Robinhood customer. But if you want insane no brainer value, you become a Robinhood Gold member. And then the incentive is, well, you should know you're getting great value across the entire suite of products. So if you're in the market for another one of our products, it just like pushes you to try everything out.

• 48:38Rick Rubin?

  I thought you were gonna say it was to buy gold.

• 48:41Speaker 01

  We also offer that. And actually, I should show you. I have a physical product that... There's probably two great quintessential products that Robinhood has launched. Commission free trading, the initial one, that's one of them. And this is the other one, not evenly distributed yet. But that's the Robinhood Gold Card.

• 49:06Rick Rubin?

  That's really beautiful.

• 49:08Speaker 01

  Yeah, so that one is solid gold.

• 49:10Rick Rubin?

  Wow.

• 49:10Speaker 01

  Yeah, 10 karat gold because if it's higher carats, it gets too soft. I mean, we can't make them fast enough. It's like people still complain that they're on the waitlist even though it's sort of like, yeah, among the fastest growing cards in history. And what this gives you, it's again, it's the same combination of things that make Robinhood successful. You know, if I had to distill it into two things, it's amazing user experience and amazing economics. Can we lead in both of those? And I think one of the two gives you a good product. But if you nail both, if you give people the best economics and the best customer experience, then it's really strong.

• 49:55Speaker 01

  So this card was special about it. 3% cash back on all categories. So the next highest you'll be able to find is two. So it's like head and shoulders above the rest.

• 50:08Rick Rubin?

  How are you able to do it?

• 50:10Speaker 01

  In a nutshell, it's also the same playbook, which is if you look at the big credit card companies, like Capital One, for instance, and you look at how much revenue they generate over their transaction volume, you get to something like 6%. So they actually, if you look at all aspects of the credit card business, add them together, it's like 5 to 6% volume yield.

• 50:36Speaker 01

  Now, why can't they do 3%? Well, they have something like 20,000 employees. They're spending billions to tens of billions on marketing. So, the observation is if we can cut that, operate much more efficiently, spend less on marketing. In fact, we put the vast majority of our resources on the actual core economics that are easy to understand. Then, it becomes so good that the customers market for you.

• 51:05Rick Rubin?

  Yeah.

• 51:05Speaker 01

  And that's why, you know, anytime I tweet on social media, I usually have a bunch of people replying to me, asking where their gold card is because they've been waiting for months or years in some cases.

• 51:21Speaker 03

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• 52:49Rick Rubin?

  Tell me about the users. How old are people on Robinhood?

• 52:54Speaker 01

  It's largely millennials and Gen Z. So when we first got started, it was kind of like a millennial company, right? But one of my big focuses is to make sure we're not just millennial company. Because that's where you kind of get stuck with customers that eventually like age out, right? You've got Schwab, quintessential baby boomer company. You've got E-Trade, which is kind of Gen X. So one of the big things we think about is how do we always stay relevant to the next generation? So we've been spending a lot of time on Gen Z. We're already thinking about Gen Alpha and Gen Beta. How can we make sure, you know, we're your first brokerage account regardless of how old you are?

• 53:38Speaker 01

  And not get stuck in the generational rut as our predecessors. But yeah, right now, customers are kind of 35 on average, 34 on median, so a little bit younger than me. It used to track pretty closely with my age, but we have been somewhat successful getting younger and younger customers. So my age is outpacing the average customer age now.

• 54:02Rick Rubin?

  And you said there's crypto now. Is the crypto aspect of it buying and selling?

• 54:07Speaker 01

  Yeah, buying and selling. There's staking as well.

• 54:11Rick Rubin?

  What is staking?

• 54:13Speaker 01

  There's two ways to look at it. From a user standpoint, it's a way to get passive yield for holding. Much like I put cash in and I get my yield if I have Ethereum or Solana, although not yet in the state of California, you can just get yield for holding without trading. And the way it works is you're basically contributing your coins to support the overall network. So you get paid by the network for helping maintain it and processing the transactions.

• 54:47Speaker 01

  So that's why it's called staking. You're putting your your coins at stake for for the benefit of of the network.

• 54:54Rick Rubin?

  I see.

• 54:54Speaker 01

  So there's a nice sort of like kumbaya aspect to it.

• 54:58Rick Rubin?

  Are there any plans for additional services? Or have you maxed out on all the financial services?

• 55:03Speaker 01

  Well, we were adding new services all the time. We're the initial broker and trustee, sole broker and trustee for the Trump accounts, which we announced a couple of weeks ago. So basically, this is a new initiative where every newborn in the country gets a thousand dollars in a brokerage account so that they can start investing from birth.

• 55:24Rick Rubin?

  For free. It's a government gift.

• 55:26Speaker 01

  Yeah, government gift. And then some private donors like Michael Dell and Brad Gersner, who came up with the the concept a couple of years ago, they're funding it for certain subsets, like a lot of people are funding newborns in their state or in their hometown. So there's a lot of philanthropy. And then we're building a really nice gifting flow so that if you're a grandparent or other family member, or you know, you want to send out a link for birthdays, you can you can get people to fund these accounts. And, you know, I think that's a really cool initiative. Our first stint as a government subcontractor, but but really opportunity to get in front of customers from age zero, which would be pretty cool.

• 56:11Speaker 01

  Robinhood Banking has been going really well. We launched that a couple of months ago. That's been growing. Prediction Markets, I mentioned, that's fastest growing business in our history. We launched that a little bit over a year ago.

• 56:24Rick Rubin?

  Tell me about your thinking about prediction markets. How do they impact our world?

• 56:28Speaker 01

  I'd say the the genesis of prediction markets being like a real useful thing for me was always the election. So I remember I first discovered prediction markets in the 2016 presidential election, which was Hillary Trump, right? And the usefulness for for me was how do you cut through the noise? You're watching the news. You're trying to figure out who's likely to win this election. Which way is it going to go? The incentives of the news isn't to give you the information right away that you're looking for. It's to keep you engaged and entertained so you keep watching. So I think over time, the news has kind of shifted from being the place where you get your information

• 57:13Speaker 01

  to the place where you get entertainment. And so that's kind of created a gap because there is a use case for how are these things going to go? Who's going to win the next election? What's the Fed going to do with rates? And so prediction markets are the best tool that has been created to get to ground truth on the likelihood of a future event happening. And I think that's what makes them super interesting from my standpoint because it changes Robin Hood's place from just being a transactional platform to now you can get your information. And that's really the goal. Can we get it so that Robin Hood gives you your information?

• 57:55Speaker 01

  And if you want to know what's happening to with news, current events, sports, you just go and you can like really quickly see it.

• 58:04Rick Rubin?

  Was it obvious to add prediction markets or no?

• 58:07Speaker 01

  To me, it was super obvious. I mean, we were the first to add it, right? And we just knew that this would change the world. Now, what was not obvious was is this going to be at first? Was this going to be a every four years like election type thing, right? Because we could tell the elections were very, very useful, but the other contracts, I don't think had as much activity on them, not as much trading volume. But from my standpoint, I didn't really care because we have so many products. So we can roll out this thing to customers if it's not useful.

• 58:45Rick Rubin?

  Also with prediction markets, I don't think elections was ever part of the original consideration of what was great about them.

• 58:51Speaker 01

  Yeah, there was a Hollywood one.

• 58:54Rick Rubin?

  I remember years ago.

• 58:55Speaker 01

  Yeah, in the early. In the early 2000s, right?

• 58:58Rick Rubin?

  Yeah, they had a place on La Cienega Boulevard and they had like a cafe.

• 59:04Speaker 01

  Yeah.

• 59:04Rick Rubin?

  That had the ticker going.

• 59:06Speaker 01

  Yeah, yeah, I mean, that was when I've, when I've read about the prediction markets lore, that one always comes up. And then there was the, I think, Google internally had a prediction market where people would like make predictions on how delayed features would be.

• 59:24Rick Rubin?

  Oh, cool, just for the staff.

• 59:25Speaker 01

  Just for the staff.

• 59:26Rick Rubin?

  Cool.

• 59:27Speaker 01

  And these were very accurate because obviously everyone has a disincentive to share bad news publicly. And so they would give you, they would give, you know, an official rosier picture. But in projects that weren't going well, the, the prediction markets would sort of like surface the issues. And I think they were planning to roll that out, but they decided not to. And then there was the, which one was it? The Iowa Prediction Markets. So there have been a couple of experiments. But yeah, I'd say when they became really big in 2024, it was, it was the presidential election because that was a mass market event. And everyone was kind of searching for the answer to this question of, of who's winning and, and how likely is it?

• 1:00:10Speaker 01

  And then, of course, over the past year, it's expanded into sports where now prediction markets are kind of eating and disrupting traditional sports betting. And I think that's brought with it a lot of controversy, also a lot of battles. But yeah, I think from the standpoint of an active trader, this gives you lots of things to trade on, right? Now you can hyper specialize on all these things. Like you could be, if you're an expert in culture or video games, you have like this new niche of things to, to trade on. And I, I think that's why it's resonated. And for the general public, the sum total of all that trading activity gives you

• 1:00:53Speaker 01

  a truth signal, to a large degree unbiased, probably not entirely, but very strong signal as to what's true or likely to happen.

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• 1:02:40Rick Rubin?

  Are there limits on what you can predict on? Or can it be anything?

• 1:02:46Speaker 01

  Yeah, I mean, in the regulated prediction markets, there are definitely limits. And we impose limits ourselves. So one of the things we don't offer is these mention markets.

• 1:02:56Rick Rubin?

  I don't know what that is.

• 1:02:57Speaker 01

  Mention market is basically like, you know, president gives a speech. What are the odds he's going to say a certain word?

• 1:03:06Rick Rubin?

  I see.

• 1:03:06Speaker 01

  Yeah, I know some places offer those markets. In our view, they're too easily manipulable. So they sort of like deviate a little bit from something that is a useful, high-quality product.

• 1:03:20Rick Rubin?

  Do you guys curate the questions or are they user-generated?

• 1:03:26Speaker 01

  We curate them.

• 1:03:28Rick Rubin?

  So do you have a staff who that's their job?

• 1:03:30Speaker 01

  Yeah, and we're currently not the exchange, we route to exchanges.

• 1:03:35Rick Rubin?

  I see.

• 1:03:36Speaker 01

  So the exchanges actually have to list the contracts. Out of the ones they list, we figure out which ones to offer to customers.

• 1:03:44Rick Rubin?

  Who are your competitors in your overall business?

• 1:03:49Speaker 01

  We've got lots of competitors. I think the most obvious ones are the discount brokers. So the big trillion dollar asset firms like Schwabs and Fidelities.

• 1:04:00Rick Rubin?

  Any upstarts after you that are making an impact?

• 1:04:05Speaker 01

  I mean, in our, in the direct brokerage industry, there's kind of this trend of Chinese companies, you know, companies that actually have their teams in China, but they're operating regulated brokerages here. So like Weebull, Mu Mu, they're sort of trying to do certain aspects of what we're doing. There's a lot of companies that are taking the Robin Hood playbook and doing it internationally.

• 1:04:32Rick Rubin?

  Do they have any advantage being based in China? That they don't have to jump through certain hoops that you've had to?

• 1:04:40Speaker 01

  I think the big one is just cost of operations.

• 1:04:43Rick Rubin?

  I see.

• 1:04:44Speaker 01

  Lower cost of operations, you know, high quality engineering. They should be having to jump through the same.

• 1:04:50Rick Rubin?

  Subject to the same rules.

• 1:04:52Speaker 01

  Yeah, I mean, the US financial services industry has always had, I think, a little bit of trouble in recent years dealing with the offshore platforms in general. I don't know if you remember FTX. FTX was an interesting one where they were basically offshore. The lion's share of their business was based in the Bahamas and technically not open to US customers. But they had like a small subsidiary that was regulated in the US that was doing next to no business. But that opened up the door to market locally. So that's why you would see like FTX Stadium, all those commercials.

• 1:05:35Speaker 01

  And essentially what was happening was they were sort of like getting customers into the offshore entity and turning a blind eye to it because they weren't supposed to do that. And I don't know, I think at the time, for sure, that wasn't as well handled. There wasn't as much scrutiny. I think we've gotten better. But yeah, I think offshore is still a problem and there's a lot of, you know, like you can get away with a lot there and, you know, there's competitors that are offering really high leverage, more products, unrestricted prediction markets on all kinds of things. And, you know, some people that get confused can tend to go there. You've got the big crypto firms that are all sort of trying to converge on the super app vision, doing similar things

• 1:06:20Speaker 01

  to us in that sense. The credit card companies. But yeah, I think the aspiration is really, Robin Hood now does a lot of trading. We want to be your financial home for your whole whole family. So all of your financial needs should be best served by our product. And I think that NState doesn't really exist as one competitor. That's why, you know, we're the first to put in prediction markets into your overall package with a credit card, with bank accounts, with retirement, with matches, the Trump accounts, right? It's like, I don't think anyone has solved this on a global scale yet. How can we actually

• 1:07:03Speaker 01

  help you with all of your financial needs?

• 1:07:06Rick Rubin?

  And where are you now globally?

• 1:07:09Speaker 01

  We're still very much like

• 1:07:10Rick Rubin?

  US centric?

• 1:07:11Speaker 01

  US centric business. We are live in the UK and in Europe, but with a subset of our products. In Europe, we're doing an interesting thing where we're trying to rebuild our infrastructure from the ground up on crypto technology. So we don't offer stocks in Europe like we do in the US, but they're tokenized stocks. So on-chain versions of it.

• 1:07:35Rick Rubin?

  How do the on-chain versions impact the stock prices? Or do they not?

• 1:07:40Speaker 01

  I think right now the business is too small for that to really be super meaningful. I mean, tokenized stocks as

• 1:07:49Speaker 01

  A slice of global stocks are still fairly small. And, and every trade that we do in Europe is sort of like backed by a real trade.

• 1:07:58Rick Rubin?

  Explain tokenized stocks to me.

• 1:08:00Speaker 01

  So the tokenized stocks vision is going to happen in sort of like three phases. And we're in phase one right now. And basically what happens is here is the user. Here's your phone. Let's say you wanted to buy some Apple. Right now, what happens is that transaction goes to our backend. And the backend sends it to a TradFi broker.

• 1:08:30Rick Rubin?

  What is a TradFi broker?

• 1:08:31Speaker 01

  A TradFi broker you can think of as Robinhood in the US. They deal with the real stocks, the non-tokenized versions. And they go to the market center as well. So the market center, so you can think of this as a traditional exchange like the NASDAQ or the NICE. So you take the order, you get the ак, and then you send it to what's called a tokenization engine. So every time you get a share back, say it's a share of Apple, it goes into the backend. The backend will mint one token, one for one, for each share. And it'll store it.

• 1:09:15Speaker 01

  And then it'll return that token to the user.

• 1:09:21Rick Rubin?

  So if it's one to one, it's no different than buying the stock, really?

• 1:09:25Speaker 01

  Yeah, that's true. So each trade essentially results in the minting of one token and you get the token. And then if you sell, then we actually, the token engine burns the token and then we end up selling it. So that's phase one. And in phase one, as you're building the liquidity and building the supply of the tokens, each trade goes to the traditional market. Now, phase two is where things start to get really interesting. So we have an exchange that we acquired about a year and a half ago called Bitstamp. It's actually the, the oldest and the longest continuously running exchange, older than Robinhood.

• 1:10:09Speaker 01

  And then what happens is We connect the tokenization system to Bitstamp. And what happens then, once you want to sell or buy the token, Apple, you have an option. You can either go to the TradFi market, or you can go to Bitstamp and get the token directly. So in this flow, it's token to token. So you don't have to go to the TradFi market.

• 1:10:40Rick Rubin?

  So in the second case, it doesn't impact the price of the stock?

• 1:10:44Speaker 01

  Not directly.

• 1:10:45Rick Rubin?

  Not directly?

• 1:10:46Speaker 01

  Yeah. I mean, obviously, there's, you can imagine in Phase 2, there's arbitrage bots and everything. So if the stock moves in one place and doesn't in the other, like, there will be an economic incentive to draw them closer together. And this happens also because there's multiple exchanges already that trade the same stock, like between NISI and NASDAQ, that could happen. Or also a foreign exchange, if a stock is listed in Canada and in the US. But yeah, there's a market mechanism to do that, but nothing forces it automatically. But what this unlocks for the user is 24/7 trading,

• 1:11:27Speaker 01

  which I think is really interesting, because right now what we have is 24/5 in Phase 1.

• 1:11:33Rick Rubin?

  And even 24/5 is new?

• 1:11:35Speaker 01

  24/5 is new, yeah. We pioneered that in 2023.

• 1:11:40Rick Rubin?

  Really new?

• 1:11:40Speaker 01

  With 24-hour market, yeah. So now the last frontier is like Saturdays and holidays, basically, because you can trade from 5:00 PM Sunday to late Friday. And then Phase 3 is where things really start to get interesting. And this is where you can interact directly with the blockchain. So underlying the token engine is the blockchain, which is where all the tokens are settled and stored. That's kind of the backbone. And right now, the only interface to the on-chain transactions is through our front end. But in Phase 3...

• 1:12:22Speaker 01

  The tokens leave our walled garden and enter your wallet into the world of DeFi. So then they become

• 1:12:30Rick Rubin?

  And do you stamp the coins?

• 1:12:32Speaker 01

  Yeah, we mint and burn them.

• 1:12:34Rick Rubin?

  You mint and burn them?

• 1:12:35Speaker 01

  Yeah, and that might change over time.

• 1:12:37Rick Rubin?

  Yeah.

• 1:12:37Speaker 01

  But yeah, for now, we control everything. And we also have Robinhood Chain, which is the chain that's going to be underlying this. That's in testnet right now with over 100 million transactions. So it's actually one of the most successful testnet chain launches. So that's going to be going live on mainnet in the coming months.

• 1:13:03Speaker 06

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• 1:14:34Speaker 06

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• 1:15:00Speaker 06

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• 1:15:18Rick Rubin?

  Tell me about the percentages of your business. Is the majority of the business now the stock trading?

• 1:15:25Speaker 01

  No, it's gotten much more diversified over time. Last public number we announced was over 11 business lines generating nine figures, 100 million plus in annual revenue.

• 1:15:38Rick Rubin?

  Each of the nine?

• 1:15:38Speaker 01

  Each of the 11 businesses. So yeah, crypto is like 15 to 20% of our revenue. Stock trading by itself is, I want to say, less than five.

• 1:15:51Rick Rubin?

  Wow.

• 1:15:52Speaker 01

  Options trading is the largest.

• 1:15:54Rick Rubin?

  It's just interesting because that's what was the basis of the whole thing.

• 1:15:58Speaker 01

  Yeah, it was the start of everything. It's still a nice business. We make a few hundred million in revenue. But options trading is much bigger. Options trading is, I think, our first 10-figure line of business. And then, you know, we have a big subscription business now, you know, with more than 4 million Gold subscribers. Those are paying $5 a month or $50 a year. So that's a multi-hundred million in annual revenue just from subscription. So yeah, it's gotten much more diversified.

• 1:16:28Rick Rubin?

  So what are the blockages in terms of being totally global?

• 1:16:33Speaker 01

  So each country has...

• 1:16:37Speaker 01

  Definitely, regulations are kind of diffuse, but also behaviors can be different as well. So in different markets, people like different things.

• 1:16:49Rick Rubin?

  Is Europe one market?

• 1:16:52Speaker 01

  Europe is one market in some ways in that they have some common regulatory structures and regimes underlying crypto and securities. But there's also country-specific taxes. There's country-specific incentives. Where, for example, if you're in Germany, the plumbing behind how you get pensions and taxes is slightly different. So each country has freedom to incentivize its own behavior. In the UK, obviously, post-Brexit, they've diverged quite a bit and they have their own standards and rules. But yeah, if I had to condense the differences into a couple of buckets.

• 1:17:36Speaker 01

  Number one, onboarding is a little bit different. So each country has their own rules for how you accept customers, what questions you have to ask them, how you collect their tax status. Funding is different. So how you move money into and out of the account, that's sort of unique on a per-country basis. With some places like Europe being pretty standardized. Some have local markets that they care about. The UK has London Stock Exchange, where you can get some unique local stocks. Burberry, for instance. And then retirement and tax-advantaged wrappers tend to differ.

• 1:18:14Rick Rubin?

  But it's doable?

• 1:18:15Speaker 01

  Yeah.

• 1:18:16Rick Rubin?

  And is that the plan?

• 1:18:17Speaker 01

  Long term, if you look at our business in terms of three arcs, right? The first arc, which is the short-term one, which we're in the heyday of, is to be the number-one platform for active traders. Medium-term arc, which is sort of a five-year, is how do we go from just being useful to traders to being truly your financial home? Can we be where you do your banking, your retirement, give you a physical, human advisor, which we offer, by the way, if you want someone to actually help you with all of your financial needs?

• 1:18:50Rick Rubin?

  Is that part of the gold?

• 1:18:51Speaker 01

  It's separate. We acquired a company called Trade PMR, which is essentially a platform, a marketplace for human advisors. And some people, you know, they like having someone to talk to when they're navigating all this stuff, right? Particularly with multi-generational issues and setting up trusts and wills and estates, doing their taxes. So we offer that. That's the second arc. How do we become number one in wallet share? How can we build your financial home for your whole family? The third arc, which is the longer term, I call it number one global financial ecosystem. And that's basically, how do we go from US only, or US primary, to fully global? And

• 1:19:33Speaker 01

  how do we go from retail only, which is dealing with individuals, to business and institutional? Can we take the same things we've built for individual customers and kind of go backwards, back to our origins, serve hedge funds, serve like developers, serve advisors? And I think that one is a big business opportunity, even if it's slightly less kind of democratic in a sense, because the institutions want the same things that retail wants. Rock-bottom rates, high-quality access to markets, lots of different assets, crypto and traditional

• 1:20:13Speaker 01

  assets in one place. And if you look at the space of institutional products, they're probably at this point further behind retail in terms of user experience.

• 1:20:25Rick Rubin?

  Well, thanks to you.

• 1:20:26Speaker 01

  Yeah, I think we've made some progress. So now the institutions are knocking on our door, asking when they can have some of these things. 24/7 access to markets, big one.

• 1:20:35Rick Rubin?

  The benefit, if you can pull all that off, is the economy of scale translates across the board.

• 1:20:42Speaker 01

  Yeah, exactly. I mean, the same infrastructure that we're serving retail can also be amortized across institutional.

• 1:20:52Speaker 01

  You also have to navigate, well, what's happening with AI? How is that gonna change how we invest? You know, about vibe coding? Is there gonna be vibe trading? Where you know, you have your agents working autonomously on your behalf and finding opportunities?

• 1:21:09Rick Rubin?

  Do you have any open claw customers who buy on your platform?

• 1:21:16Speaker 01

  Well, we certainly have seen API usage and you know, people sort of like reverse engineering our APIs, posting them on GitHub. And you can kind of like, at this point, get your claw to use your computer. And it's indistinguishable from a human. So I'm sure we do. I think it's still a fairly niche thing for a couple of reasons. Number one, a lot of people just like, don't wanna hand their keys off completely to these things that can make mistakes and be unpredictable. You have to be really sophisticated to set these things up particularly safely. And there's a lot of fear, right?

• 1:21:58Speaker 01

  So there's definitely people trying it, like, we're very, very early. But I think there's gotta be, there's gonna be a lot of product thinking to turn it from its

• 1:22:09Speaker 01

  sort of like grotesque state now into something that's useful for the mass market.

• 1:22:16Rick Rubin?

  How important is privacy?

• 1:22:19Speaker 01

  Privacy? I mean, I think in our space, there's just this assumption of privacy. Because financial products typically are single person experiences. And actually, when you want someone to see the information, it's fairly selective, you know, paths. Like, maybe you have a joint account with your spouse, or a custodial account for your child. Or you want your accountant or your financial advisor to see your data. We are experimenting with this. So we rolled out a product, Robin Hood Social. The question there, in my mind, is can we actually

• 1:23:02Speaker 01

  go from being useful to people when they're making the transaction to helping you generate the idea? Can you get all of your information, not just from prediction markets, but also from other people on the platform that are uncovering things? And so that's the idea there. And the one unique thing that we have as a big differentiator is because all the transactions happen on our platform, we can validate them. So when someone posts a trade or some kind of idea, we can actually connect that with what they're doing on the platform. And it's not like a fake screenshot. You can have confidence that the person's actually putting their money where their mouth is. And so far, it's been going really well, actually. It's kind of exceeded our expectations.

• 1:23:47Speaker 01

  So we've been iterating on it, trying to improve it on once or twice a week basis. Of course, by default, it's private, but I think there are some people that are willing to share some aspects of what they're doing in controlled ways. And I think it's like a very powerful thing to enable that because you see them doing it already, like posting your account on social media, getting feedback, getting feedback on trading ideas. So there are definitely opportunities for collaboration.

• 1:24:19Rick Rubin?

  Has Robinhood ever been hacked?

• 1:24:23Speaker 01

  Not like a full system breach exploit sort of thing, but we've had some instances where relatively small amount of customer data was compromised. I think the biggest instance was back in, I think it was 2021, end of 2021. One of our support agents got compromised and, yeah, relatively small set of customers, you know, had their names and other information revealed. So still not great, but I think the impact was fairly well-contained.

• 1:25:02Rick Rubin?

  And is that a focus?

• 1:25:04Speaker 01

  Huge focus.

• 1:25:05Rick Rubin?

  Well-defended?

• 1:25:06Speaker 01

  Yeah, we spend a lot of, a lot of our best people are on cybersecurity. Yeah, because we have the crypto stuff. And you know, now with these AI tools, like I'm sure you've heard about Mythos, you essentially have to have no gaps. There's a very, it's a very high standard of correctness. Because you can't rely for very much longer on obscurity.

• 1:25:34Rick Rubin?

  Yeah.

• 1:25:35Speaker 01

  It used to be that, okay, well, the North Koreans can only, they only have so many engineers, so many offensive cyber experts. So you just have to like not be the weak link. But, but now we're entering into a world where you should just assume that you're being probed constantly. And that just means that you have to be robust at all times.

• 1:26:01Rick Rubin?

  When did Robinhood go public?

• 1:26:03Speaker 01

  2021.

• 1:26:05Rick Rubin?

  Tell me about how that changed things, or did it change anything?

• 1:26:08Speaker 01

  It was definitely a big change. Yeah, it was a big change for me. But I think that we've kind of made it our own. So I think the, the first thing about going public is there's a lot of rules. You kind of encounter it through the IPO process itself. So there's like the quiet period. You can't talk about stuff. You have to be extremely careful what information you disclose and when. And I think my first approach was, okay, I don't know when I'm breaking the rules. I'm not like super comfortable with this, so maybe I just don't say anything.

• 1:26:45Rick Rubin?

  Yeah.

• 1:26:46Speaker 01

  Let's just like not worry about it. Just focus on the business, not communicate. And then it was sort of like doing the bare minimum public stuff in the way that it's always been done.

• 1:26:58Rick Rubin?

  How long of a period is that?

• 1:27:00Speaker 01

  Well, you kind of have it every quarter. So for example, the quiet period is the period between the end of the quarter and when you announce earnings, where you can't be like, you have to be careful not to share any recent numbers, anything non-public, not to do any tipping. And then there's another quiet period that's around the time of the IPO. So we had to deal with that too because I did a second IPO for Robinhood Ventures Fund 1 RVI, which is essentially you can think of it as a venture capital fund that invests in private companies, but we wanted to take it public so that retail investors can get access to those same private companies. It's a very cool product.

• 1:27:44Speaker 01

  But yeah, so at first I was kind of going through the motions. Everyone has this impression that being public is kind of a chore, right? You don't want to do it, you only do it because you have to. And so I was doing earnings the same boring way that everyone was doing them, which is you have your polycom, you kind of read your script word for word, you open it up to analyst questions from the institutional analysts, and then you have like five listeners on the call. I did, you know, a few earnings calls that way. And then I realized that we have all these fans, all these retail customers, and they're tracking the company performance and how we're doing on YouTube.

• 1:28:27Speaker 01

  I started watching their YouTube analysis and you can imagine, it's like a bunch of bros hanging out on a video chat with our earnings call. And it's like blank screen because it's no video. Dry, monotonous, someone reading a script. These live streamers were like, almost apologizing for us. Like, I know this is really dry and boring, but you know, hopefully we'll get some good stuff in the Q and A. But they didn't really get too much good stuff in the Q and A. It was, it was by the books. And then I was like, well, you know, we have these fans. The intent of this whole thing is to actually like educate these people.

• 1:29:09Speaker 01

  And what happens if we don't think of it as just this chore that we have to do, but instead it's this opportunity to like

• 1:29:20Rick Rubin?

  Engage.

• 1:29:20Speaker 01

  Engage with our community, get together with our community once a quarter and turn it into a thing that we celebrate. So that switch flipped for me about, you know, two years after we went public. And everything changed. And now I'm having much more fun. So we first started doing interviews, not just with the press, but with some of our retail financial content creator folks. Then we started live streaming on video, our earnings calls.

• 1:29:48Speaker 01

  And my model for it was I wanted to be like an NBA post-game interview, you know, where they had like the logos in the back, the big mics. You know, NBA post-game interviews are fun. If your team loses, it's kind of entertaining because they're kind of, the players go out and they're kind of in a bad mood. And maybe they'll talk shit about the other players or the coaches. And if they're winning, they come in and they've got the swagger. Like Anthony Edwards has his shirt off and has the towel over his shoulder and he's just like, I'm king, you know? And then we took questions, not just from, so the conventional wisdom is you only invite sell-side analysts.

• 1:30:30Speaker 01

  And these are the people that aren't actually making the decisions. But the big banks employ analysts to analyze companies. They write these reports and then the buy-side consumes these reports and they figure out.

• 1:30:43Rick Rubin?

  But it sounds really dry.

• 1:30:45Speaker 01

  Yeah, it's kind of like people pay for this and there's an established industry. And I was like, well, why is it only sell-side analysts? Is there a rule? Is there some kind of law that makes it so that we can't make it bigger? And everyone's scratching their head saying, well, that's, that's how it's always been done. And there would be these made up rules like, oh, the sell-side analysts want to make sure that they have time, that they're adequately respected, that they get to ask their questions. But then we started inviting the retail folks in, the retail content creators. They started asking questions. Then the sell-side analysts came up to us and they're like, you know, it would be fun to have some buy-side folks in here too. They're the ones making the investment decisions. You should hear what they want. And so we invited them.

• 1:31:30Speaker 01

  And then we started inviting the media too.

• 1:31:32Rick Rubin?

  Awesome.

• 1:31:32Speaker 01

  Journalists.

• 1:31:33Rick Rubin?

  Great.

• 1:31:33Speaker 01

  Yeah, I think, I think we kind of like rebuilt all of these things from the ground up really from first principles.

• 1:31:38Rick Rubin?

  Has anyone followed that example?

• 1:31:41Speaker 01

  Yeah, actually now we offer a service to other companies. So not only can we help you with this, but also if you choose to use our public company services, we can live stream your earnings to our user base on Robinhood. And Open Door was our first customer and this is another company. They do like buying and selling homes and they have a big retail following. And the CEO of Open Door, it's a great guy named Kaz. He did an interview recently who said, We went from five people watching our earnings calls to 55,000.

• 1:32:19Rick Rubin?

  Amazing.

• 1:32:19Speaker 01

  So it's literally like 10,000x improvement, which is crazy. And I was part of this roundtable hosted by the SEC in New York a couple of months ago. It was called Make IPOs Great Again. Because one of the big, I think, tragedies of our time is, you know, it used to be that back in the 80s or 90s, a company like Microsoft or Amazon would go public and then normal people can invest in it at valuations of hundreds of millions. And now you've got these gigantic companies, Anthropic, you know, rumors of secondary at a 900 billion valuation, OpenAI at 800 and some billion.

• 1:33:01Speaker 01

  And, you know, these companies might not go public until they're well into the trillions, which means for the customer to get that type of public markets return that they got with Microsoft or Amazon of 1,000x, they have to go into the quadrillions. So like the gains are just accruing to a smaller and smaller group of wealthy insiders that just keep getting wealthier and the retail mom and pop, normal investors being shut out. So two-pronged attack to solve this, making IPOs great again, which I think is not just like lowering the barriers and like lowering the legal risks and just the all of that. But I think it's also changing the perception of being a public company

• 1:33:44Speaker 01

  from this chore and annoyance into like,

• 1:33:47Rick Rubin?

  It's a cool thing.

• 1:33:48Speaker 01

  Kind of cool to be a public company. You should like embrace it and use it as an opportunity because there are certain things you get that you just can't get otherwise. And also, the second thing is, you're probably not going to convince everyone to go public earlier. But if we unlock the privates to retail, the combination of these two things should solve the problem. You know, I worry, I don't know if you worry about this stuff. I mean, the- The AI backlash among the people here is extreme. And I think you juxtapose that against something like crypto. With crypto, there's like this army of people that defended against government overreach. And whenever there's a hint of someone coming after your crypto

• 1:34:32Speaker 01

  or affecting the price negatively, there's this like whole army of people that just mobilizes, right? And I think the crypto community has been very effective with this in the media and in Washington. And I think a big part of it was from the very beginning, a retail investor could hold crypto. And it was actually like retail first in a sense, because it was first the retail that came in, then the institutional. But with AI, you have this thing where like it's hugely disruptive. People are scared. They're worried it's going to take their job or it's going to put a data center in their neighborhood. And they don't own any of it.

• 1:35:08Rick Rubin?

  They can't participate.

• 1:35:09Speaker 01

  Yeah, none of the companies that are really leading it. I mean, except for the giant ones that were big already are available for for people to invest. So that's kind of been my

• 1:35:20Rick Rubin?

  Interesting.

• 1:35:20Speaker 01

  My latest crusade. How can we like crack that open so that everyone can can have access? And can we do that at earlier and earlier stages? Like, I think the first round of financing that a company does, your seed round and your series A should have a big retail component. And we're going to make that happen. And I think if we succeed, there's going to be more entrepreneurship in this country.

• 1:35:44Rick Rubin?

  You think for every company that has the opportunity to go public, that's a good choice?

• 1:35:50Speaker 01

  The big thing for me is making sure the gains don't just accrue to a small group of people with the access or the deal flow. So if we can accomplish that through other means, that's the thing I care more about. It does resonate. I talked to the guys from Stripe, who ended up actually agreeing. I think I I managed to convince them or annoy them enough for them to agree with. They were very negative to opening up to retail initially. But then they were one of our first participants in Robinhood Ventures. And, you know, they they were basically like, look, this is just a small Irish family business like.

• 1:36:28Speaker 01

  Why do you, why do I have to do anything I don't want to do?

• 1:36:30Rick Rubin?

  Yeah.

• 1:36:31Speaker 01

  And I think that kind of resonates with me, right? If you want to just, if you're following the rules, then you should be able to basically do what you want. So I, I wouldn't just go as far to say everyone absolutely needs to be public, but...

• 1:36:44Rick Rubin?

  But you think it's a great opportunity?

• 1:36:47Speaker 01

  Yeah, I mean, I think it's an honor to be public. I mean, it was something, obviously, when I first became interested in business in my twenties, it was sort of like the dream.

• 1:36:57Rick Rubin?

  A goal.

• 1:36:57Speaker 01

  Yeah, one day, you know, if you, if you could be a public company and not, not everyone does that. There's very few things like that. And you know, now I have two, two bell ringings, one on NASDAQ, one on NICE. Maybe, hopefully, we'll have a lot more. But yeah, very much it's like cord to Robin Hood. Robin Hood is about giving you access to, to public markets. So I think it would, it makes sense for us, but maybe not for every single company out there.

• 1:37:52Speaker 07

  Tetragrammatin is a podcast. Tetragrammatin is a website. Tetragrammatin is a whole world of knowledge.

• 1:38:07Speaker 06

  What may fall within the sphere of tetragrammatin? Counter culture? Tetragrammatin. Sacred geometry? Tetragrammatin. The avant-garde? Tetragrammatin. Generative art? Tetragrammatin. The tarot? Tetragrammatin. Out of print music? Tetragrammatin. Biodynamics? Tetragrammatin. Graphic design? Tetragrammatin. Mythology and magic? Tetragrammatin. Obscure film? Tetragrammatin. Beach culture? Tetragrammatin. Esoteric lectures? Tetragrammatin. Off the grid living? Tetragrammatin. Alt spirituality? Tetragrammatin. The canon of fine objects? Tetragrammatin. Muscle cars? Tetragrammatin. Ancient wisdom for a new age.

• 1:38:54Speaker 04

  Upon entering, experience the artwork of the day.

• 1:38:59Speaker 04

  Take a breath, and see where you are drawn.

• 1:39:07Speaker 07

  petragrammatin.com