#683 Robinhood’s Recent Rise w/ Vlad Tenev

Vlad Tenev is the co-founder and CEO of Robinhood. In this conversation, we discuss financial markets, reducing friction for accessibility, payment for order flow, crypto wallets, the Gamestop saga, and much more. ======================= If you haven’t started building your crypto portfolio on Okcoin, there’s no better time. They’re one of the fastest growing global exchanges around and they have some promotions happening right now to help even more people be part of the future of finance. If you have an account already, you can split $100 in BTC with a friend when you invite them to sign up for Okcoin if they buy $100 of crypto in the first month. The more friends who sign up and buy, the more BTC you get. And I always recommend dollar-cost averaging as a way for investors to have more control over their average price when building their portfolio. Now you can automate dollar-cost averaging with completely fee-free daily, weekly, or monthly recurring buys on Okcoin until November 1. That’s no fees at all on your purchases until the holidays. Get started on the web or on their new super easy-to-use app at okcoin.com/pomp ======================= MiamiCoin is the first token to be released by CityCoins, a community-driven project built on Bitcoin. CityCoins aims to give people around the world a new way to support their favourite cities. The protocol has already generated over $7 million dollars in donations to the city of Miami and continues to grow every day. If you want to get involved Follow @minecitycoins on Twitter to stay up to date with the project. Visit chat. CityCoins.co to join the community discord and contribute to the movement. =======================

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

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Vlad Tenev is the co-founder and CEO of Robinhood. In this conversation, we discuss financial markets, reducing friction for accessibility, payment for order flow, crypto wallets, the GameStop saga, and much, much more. I really enjoyed this conversation with Vlad, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is OKCoin. If you haven't started building your crypto portfolio on OKCoin, there's no better time. They're one of the fastest-growing global exchanges around, and they have some promotions happening right now to help even more people be part of the future of finance. If you have an account already, you can split

• 0:46Anthony Pompliano?

  $100 in Bitcoin with a friend when you invite them to sign up for OKCoin if they buy $100 of crypto in the first month. The more friends who sign up and buy, the more Bitcoin you get. And I always recommend dollar-cost averaging as a way for investors to have more control over the average price when building a portfolio. Now you can automate dollar-cost averaging with completely fee-free daily, weekly, or monthly recurring buys on OKCoin until November 1st. That's right, no fees at all on your recurring purchases until the holidays. Get started on the web or on their new super easy-to-use app at okcoin.com/pomp. Again, okcoin.com/pomp. Go check out what they're doing. Pay no fees on all recurring

• 1:29Anthony Pompliano?

  buys until November 1st. Next up is MiamiCoin. As you may have heard, we just had Miami Mayor Francis Suarez on the show to talk all things Miami, including his excitement for a project that's really caught my attention recently, MiamiCoin. MiamiCoin is the first token to be released by CityCoins, a community-driven initiative built on Bitcoin. CityCoins aims to give people around the world a new way to support their favorite cities. In short, the city of Miami was given $7 million and counting by private citizens to improve the city with no strings attached. A city government embracing crypto instead of fighting it was a historic event. Do you want to get involved? Follow @MineCityCoins on Twitter to stay up to date with the project and check out the app.

• 2:10Anthony Pompliano?

  You can also go to citycoins.co, citycoins.co to join the community discord and contribute to the movement. Citycoins.co, go check them out. Miami coin over $7 million contributed and continuing to grow. Pretty cool. I really like what they're doing and I'm excited to see what the impact will be on city governments like Miami. All right, let's get into this episode with Vlad. I hope you guys enjoy this one.

• 2:35Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 2:58Anthony Pompliano?

  All right, guys. Bang, bang. I've got Vlad here. Thank you so much for doing this.

• 3:01Speaker 02

  Thanks for having me. Good to meet you.

• 3:03Anthony Pompliano?

  Absolutely. You've made, uh, built a multi-billion dollar business by essentially dropping the friction, uh, for people to enter into the financial markets. Uh, it's something that my brothers and I spent a bunch of time thinking about and working towards is getting more people invested in the market. As you've built that business, uh, obviously there's been an incredible boom, uh, in participation in the markets. There's also been all kinds of chaos and craziness that's gone along with it. Before we get into the actual business itself, tell us a little bit about you in terms of, uh, kind of your journey to starting Robinhood and kind of like coming from Bulgaria to the United States and what that was like.

• 3:38Speaker 02

  Yeah, I'd say there were a couple of defining moments and, um, I, I put it in perspective and say that actually growing up, I didn't intend to be an entrepreneur. You know, I, I, um, I grew up with academics and that was kind of the ticket, uh, from my parents' perspective at least to, to being successful. They migrated from Bulgaria in the early 90s, right as the Berlin Wall fell and kind of communism collapsed all throughout Eastern Europe and they had to start over. And, you know, the, the things that they instilled me with from a young age were just working super hard and prioritizing,

• 4:19Speaker 02

  uh, education. And so I came to Stanford initially to study math and, and physics and my,

• 4:29Speaker 02

  My goal was to be a professor. So I thought that, you know, by being a professor in math or physics, I'd be able to contribute to society by kind of pushing forward the overall body of knowledge. And sort of stumbled into entrepreneurship. You know, my, my co-founder Beju, we were really good friends in college. We both were actually kind of on the academic path and, and we're, we're doing math and physics together. And I graduated college and he graduated from his masters in 2008. When Lehman Brothers went belly up and you had kind of the, the start of the global financial crisis,

• 5:12Speaker 02

  which was a category defining moment for the financial industry. And so in the wake of that, we started a few financial companies. And that's kind of how we, we cut our teeth on entrepreneurship. But sort of looking backwards, there were a few defining moments that made me exceptionally aware of, you know, how privileged we are in this country to actually have access to a functional financial system. In, in the mid 90s, Bulgaria actually went through hyperinflation. And so I remember, you know, as a kid, visiting my, my grandparents back in Bulgaria.

• 5:52Speaker 02

  And, you know, one year, a stick of gum would be, you know, two leva. The next year it would be 2,000, right? So you had, you had dramatic hyperinflation. Their pensions basically evaporated. The kind of social safety net really wasn't there. And, you know, I think we take it for granted in, in the U.S. Just how good of a stable financial system we have, how strong capital markets are, how easy it is, especially now with, with products like Robinhood to become an investor. And, you know, there is, there is a little bit of a question mark about, people just take it for granted.

• 6:34Speaker 02

  They, they assume that these things exist and we have access to them. But they've never experienced kind of in the way that, that I have and, and my family has. What happens if you don't have these things and how bad things can be? And so I, I think that, you know, that, that motivated me quite a bit. You know, if my grandparents had access to investments and the ability to actually like store value in something other than copper cookware or the Bulgarian hyperinflating currency, their lives would have fundamentally been better. And I think they were fortunate that we were in America and we could help them out, but many others in Bulgaria were not as fortunate.

• 7:19Anthony Pompliano?

  Talk a little bit about that idea of democratizing access to the markets, right? I think there's, on a net basis, most people say, hey, this is amazing. Then there's what I'll call the critics. And those critics basically are like, hey, if people are uneducated and we give them access, then they're just gonna lose all their money. How do you evaluate, is democratizing the access good or bad? And then how do you think about, is it just open the markets and let everyone participate? Or is there some sort of kind of guide rails or education or something that should go along with it?

• 7:47Speaker 02

  Yeah, sure. And that's a question that we ask ourselves very frequently, right? Do we believe in democratization at all costs? Certainly not, right? And I think the way to articulate it is by talking about our core values. And we actually publish these on our website, so you can find them. And we have four values, and they're actually linearly prioritized in order. So the top value is safety first. And what that means to us is it's paramount for us to safeguard the security of our customers' accounts and

• 8:29Speaker 02

  assets, to provide them great customer support that's timely. And as a matter of fact, we announced 24-hour customer support just today. So now, any customer can request live phone support via the app for any issue, including cryptocurrency-related issues, which I believe makes us the first crypto brokerage to offer 24/7 live phone support. I think that's a big deal. And it goes in line with the value of safety first. It also means we're investing in education. We're investing in safeguards and guardrails within the product. So, you know, we'll actually tell you if you're investing in, in a stock that is experiencing

• 9:14Speaker 02

  high volatility or if it's a leveraged ETF, for instance, and, you know, there, there's unique properties that a first time investor might not understand without that additional information. So, safety first is, is our top value. Our second value, participation is power. That's the one you kind of associate with democratization. And democratization is important to us because for a long time, just wealthy people have had access to, to, to these financial tools, right? And all that does over the long run, if you allow wealthy customers access to, to certain

• 9:55Speaker 02

  tools and, and everyone else to not have it, is it just increases tension. It increases the gap between the haves and the have nots, increases wealth inequality. And I think as a society, these are, are very deleterious things. You, you know, you might not notice in the near term, but over a long period of time, you know, it, it can be very, very dangerous. So certainly we believe in democratization and we believe that everyone should have access to the highest quality tools, even those tools that have previously been reserved just for the wealthy. And, and we believe in that very strongly, but not at the expense of safety. I think safety, uh, safety is paramount to our product and our customers.

• 10:39Anthony Pompliano?

  When you start to think about that participation, one of the big knocks against a lot of young users, but specifically of Robinhood is, you know, they don't have no clue what they're doing. They're, uh, they've got memes, they've got the diamond hands, they've, uh, kind of run into the market and they're buying options or they're buying assets and they have no clue what they're doing. Uh, some people may call it uninformed, some people may call it undisciplined, uh, and some people may just say, hey, look, they're taking way too much risk and they shouldn't be allowed to do that. I guess one question is just like, how do you think about the user base and their sophistication level? And then two is, are there things that the platform should do to, uh, kind of limit risk? Or is it something where the education ends up actually driving, uh, the users' decisions around how much risk to take or how much risk not to take?

• 11:23Speaker 02

  We do see, as you're suggesting, that, you know, people tend to,

• 11:29Speaker 02

  Sort of paint a brush with broad strokes about Robinhood and our customers and even more broadly, kind of this this next generation of investors. And I mean, I would just say it's it's a little offensive. It's offensive to us to have them be referred to as, you know, uninformed or or clueless investors. Actually, we see a lot of them are learning, even the ones that sort of are engaging more actively are getting getting pretty deep and sort of doing a lot of analyses of these companies and they they're very much are aware of what they're doing. Now that said, if I think about kind of my my

• 12:11Speaker 02

  personal predisposition and what type of investing that I like, I'm all about long-term investing in companies that you care about and doing that consistently and steadily over a long period of time. And you can see through some of the products that we've rolled out that Robinhood, the product itself is is making it easier to do that type of long-term habitual investing. So we rolled out recurring investments and DRIP last year as part of our fractional shares rollout. And actually, just a couple of weeks ago, we rolled out crypto recurring as well. So it really leverages the zero commission execution

• 12:53Speaker 02

  of our crypto platform. Now you can dollar cost average and really invest over the long run using crypto commission free, which I think is a is a very, very strong value proposition for crypto investors as well. I mean, it can be stressful trying to time the market and seeing the highs and lows and thinking about entry points. And I think recurring investments takes a lot of that out of the picture. So most of our customers are not, you know, active traders, very small percentage trade options or invest using margin. The bulk of customers are typical buy and hold investors that are just trying

• 13:36Speaker 02

  to build diversified portfolios over a long period of time. And, you know, Robinhood exists to make things easier for them. And I think we've made a lot of progress, but still we have a lot more we can do.

• 13:48Anthony Pompliano?

  Let's talk about GameStop. I got a whole bunch of questions here. I took questions from the audience. As everyone would expect, some of them were intelligent, some of them were absurd and everything in between. First, I think it's important to call out that the folks on Reddit, which is obviously not on Robinhood, that identified the short squeeze opportunity ended up being right. And I think that gets lost in all of this, right? Is they basically identified this short squeeze opportunity, they went ahead, they exploited it, and for all intents and purposes, they applied quite a bit of pressure to a number of very large Wall Street firms. Some of that was on Robinhood, some of that was done elsewhere, but that's kind of a quick summary of the situation. When you think about that, and you talk to somebody in private, it's like, how do you describe that situation?

• 14:31Anthony Pompliano?

  Was it something that you all saw pretty early on happening? Did it only really become kind of the forefront once there was the pressure to the large firms? Like, just what is your recollection of like, when you first became aware of that kind of whole situation that was transpiring?

• 14:46Speaker 02

  Oh, man. Well, there's so much that happened in that time period, right? I mean, there was so many things going on, so it's hard to say where to start. I mean, you had, basically, you know, I was coming back home from the East Coast back to the West Coast in early January at the start of the new year. And typically, at the start of the new year, you get an influx of people just generally interested in investing. So, you know, people have New Year's resolutions, you have, you know, people getting their year-end bonuses. So, there's a lot of just the natural kind of seasonal interest in investing

• 15:31Speaker 02

  at around that time. You also had sort of the remnants of the election and then the insurrection in January.

• 15:41Speaker 02

  And you know, the pandemic was was very much flaring up. So people were were inside. And you know, dealing with sort of the the peak cases and and and pandemic activity. So we were very much still locked down. And then I think people had gotten stimulus checks at the end of of the previous year as well. So the confluence of all of these factors led to just the Robin Hood climbing through the App Store, you know, we were we were first hitting sort of like number one in the financial category and then eventually ended up actually number one overall, you know, ahead of social media products like

• 16:24Speaker 02

  TikTok and Instagram and and Facebook, which is pretty pretty unprecedented for a financial product and a brokerage product. So, you know, we were trying to keep everything together and, you know, looking around corners best we could to make sure we were stable and and up for customers. I remember at that time that was my number one priority because at the beginning of the pandemic, March of 2020, we had we had some some downtime, right? As markets were getting super volatile and that was very disappointing to me, kind of as an engineer who built the product, right? You never want your service to be

• 17:03Speaker 02

  down for for a significant period of time, especially, you know, when there's there's a lot of market volatility. So that was kind of fresh in my mind, just making sure that the investments that that we made on the technology were paying off. And, you know, we were really being tested at that point with some growth that we hadn't seen in the past. And then, of course, you know, we couldn't have anticipated the the five sigma, the sort of one in 3.5 million event, which resulted on the the week of January 28th, where basically the kind of viral social media activity all funneled through a handful

• 17:47Speaker 02

  of stocks and and really a handful of brokerages. Robin Hood kind of being the bulk of it, but also lots of other brokerages had to deal with with similar things, both before we restricted the stocks and after. So the way I describe it is, you know, the markets as they currently were were were set were not really built for that type of activity. And you can kind of see a bunch of assumptions breaking. And, and you know, that that's what led Robin Hood to restrict opening positions. And that's why many other brokerages did that as part of their risk mitigation procedures, one way or another, before and after our restrictions.

• 18:33Anthony Pompliano?

  So most of the questions fall in three buckets around all this stuff. And there's a whole bunch of professionals, whether they're journalists, they're politicians, they're etc., that'll kind of do like the fact finding mission. So I'm gonna leave it to them to do their jobs. Frankly, I don't think that stuff is as interesting as just kind of getting your perspective here. So the first thing is, what are in hindsight, the things that you wish that you'd either done differently, or that were like the lessons learned, right? So, you know, hindsight bias is amazing. We get to sit here, kind of safely on the other side of this for for you and for Robin Hood and say, okay, what would you have done differently? Or what did you learn from that entire experience and kind of chaos?

• 19:12Speaker 02

  Yeah, I mean, I think, I think the straightforward one is just communicating with with customers and letting them know sort of like, with more specificity, what what could happen, what could not happen. We did, we did communicate to customers, actually quite prolifically. But, you know, I look back at some of those communications, and especially in the days leading up to the January 28, we would, we would send information about market volatility, and how to protect yourself, and, you know, information about, you know, long term investing, and

• 19:53Speaker 02

  I think hindsight being 2020, we had no idea we would have to restrict these stocks up until the morning of January 28th. But, you know, being a little bit upfront and preparing people for possibility, you know, I think would have gone a long way, just saying, hey, you know, in addition to this information about what volatility means, you know, this is what a brokerage could do in response to volatility, including, you know, restricting these stocks. Probably would have tempered a little bit of kind of the conspiracy theories that emerged of, you know, the brokers colluding with the hedge funds,

• 20:37Speaker 02

  which, you know, despite all of our efforts, all of my efforts, still remain, you know, people still out there think that Robin Hood colluded with hedge funds, which, you know, is flabbergasting to me, even though all of the mountain of actual evidence, I think, pretty categorically explains that, you know, we had to impose these restrictions because we got a big collateral call from NSCC, which, you know, is completely, has nothing to do with hedge funds whatsoever. But, you know, stemming that at the beginning as early as possible, probably would have been a little bit more effective.

• 21:22Speaker 02

  But, you know, you yourself probably know it's very, very hard to stop the spread of misinformation on social media. And, you know, a simple lie is just more compelling than a complicated truth a lot of the times. And for some reason, it's like collusion is like the word of the decade. You know, people love talking about collusion one way or another. If it's like, you know, collusion with Russians for one election, collusion with someone else for another election, collusion with hedge funds. People like to think that, you know, that's, you know, it's a very, very tempting narrative and.

• 22:03Speaker 02

  Unfortunately, you know, tempting narratives win the day in this age of social media. So I think there's a lot of things we could have done better, a lot of lessons. And a lot of things, you know, we have done better since then, including communicating more transparently. Really ramping up our customer support to make sure we're there for customers. And generally articulating our values a little bit better, telling people, hey, we are a safety first company. We believe in democratization, absolutely. We want you to do everything that you want to do within the confines of sort of law and regulation. But we want to make sure that especially the young people and the first time investors on Robinhood

• 22:44Speaker 02

  are having a great experience, have great support and have access to all the information they need to become long-term investors.

• 22:52Anthony Pompliano?

  All right. So the second one is definitely more fun. Everyone wants to know, you mean that you're to tell us that you're not evil? Robinhood's not evil? You don't want to take advantage of customers? Like, how do you look at the people who think you guys are bad guys, right? However, you want to kind of describe that and that you're essentially taking advantage of customers? Like, what's the kind of pitch to them or the response to those folks?

• 23:15Speaker 02

  Oh, man. Well.

• 23:20Speaker 02

  Yeah, I don't really know what to say to that. That's a new one to me. I mean, look, I think Robinhood, over the long run, is going to be judged by what we do for customers, right? And I'd like my legacy to be that, you know, we build a great product. We improve it every day and we really execute on our mission to democratize finance for all and bring in all of these people that previously didn't have access to bring them into the markets and plug them into what's been, you know, among the greatest engines of wealth creation that we've seen.

• 24:00Speaker 02

  And, you know, recently, even with, we try to live and breathe that as much as possible, even amidst kind of the the public offering that we did a couple of months ago. I think a lot of companies.

• 24:16Speaker 02

  For a lot of companies, an IPO is kind of a distraction. It has generally nothing to do with their products and with their customers. And they just sort of like get through it and get back to to normal operations. We tried to make it the most sort of like customer first IPO in history. So we had a live customer roadshow as part of our roadshow where customers were able to ask us questions and could hear directly from the management team. And then for the IPO itself, we actually built a product called IPO Access that gave customers the ability to participate in these IPOs at the IPO price.

• 24:58Speaker 02

  Obviously, we offered that for for our own listing, but also for a bunch of other listings before and after Robinhood's IPO. And that's another, what we call participation is power product. Because traditionally, you look at IPOs and they're only available for institutions or high net worth individuals. And with Robinhood, we made it available not just to our individual investors, but we made it equally available to everyone. So we didn't look at their lifetime value as a customer or how much money they had in their account. Everyone has has an equal shot regardless of whether you have $10 in your account or a million dollars.

• 25:41Speaker 02

  So through all of these things, we try to live our values and execute on our mission. And I think over the long run, we believe that that's really what's going to resonate with customers and just making our customers very, very happy with the service and giving them more value, I think is just gonna govern sort of how they view the company, how they view me personally and everything of that nature.

• 26:09Anthony Pompliano?

  Awesome. And so I got one more question, then we'll move on to Bitcoin and cryptocurrencies. I believe that you raised like a billion dollars overnight during this entire thing at one point. What goes on on those calls? Like, most people are like, wait, how the hell do you raise a billion dollars in, you know, 10 hours or five hours? Like, do you just call one person, you're like, hey, I need a billion dollars? Or is there some other process? Like, whatever you can share in terms of, you know, kind of that actual series of events in terms of raising so much capital so quickly and also having it happen in somewhat of a chaotic, like, you know, type situation?

• 26:45Speaker 02

  Yeah, I mean, it was, um, I think it was, it was over $3 billion, either 3.4 billion or 3.6 billion. Yeah, that, uh, a lot of which came in within 24 hours and then we, we had some, uh, the following Monday. So all this went down on Thursday. So within just a handful of business days, it's, uh, over $3 billion. And, uh, it was challenging. I mean, don't get me wrong. If, if you'd asked me, uh, you know, back in 2018 or 2019, whether it was possible to pull something like that off.

• 27:26Speaker 02

  I, I probably would have said no. I mean, I can't imagine pulling it together that, that quickly. Typical round takes multiple months to close. Um, so, you know, people did, people did a lot of work across multiple departments, you know, the, the finance team, obviously the legal team, accounting, everyone just, uh, just pushed really hard. And, um, you know, there, there were a few investors that I called in, um, in those kind of like early moments of, uh, of, of Thursday morning that basically committed on the spot. You know, I, I've got a, got to call out, uh, Mickey Malka from Ribbit Capital, who's been a friend and partner.

• 28:11Speaker 02

  But, you know, committing on the spot and, and, you know, saying, I'm in for $500 million and, uh, and let me make some calls and, and, and get you a little bit more. I think that went a long way because, um, you know, when, when people see that the first few people, the first few investors are committed, um, it makes it a lot easier for them to come in. So definitely owe a lot of, uh, of gratitude to the investors that we've known for a long time that supported the company through that, um, yeah, through that really unique time. Yeah. I, I think another big part of it was, I think at that time we were, we were number one on the app store. So. It was a problem of of growth, right?

• 28:54Speaker 02

  So, you know, I think I think we were fortunate that we were in this weird situation where, which was because we were growing so fast, we needed the extra capital to to continue to grow and to to handle all the demand on the on the platform.

• 29:08Anthony Pompliano?

  Yeah, absolutely incredible. Mickey, obviously, is a legend in his own right, but to commit $500 million on a phone call, kind of right out of the gate, is is pretty impressive. Talk to me about adding Bitcoin and cryptocurrencies to the platform. I know that, obviously, tons of young people are interested in these assets, they've been buying them. What was kind of that process like? And then how has that gone so far, in your opinion, in terms of of the success of rolling out those products and really kind of scaling it to the customer base?

• 29:34Speaker 02

  Yeah, well, we've seen a lot of interest in cryptocurrencies on the platform, and I would say that was non-obvious when we decided to to do it back in 2017, early 2018, because we were the first, or if not among the first, sort of traditional financial companies to to add trading of of cryptocurrencies. And I think the the thinking behind it is, you know, there's our traditional business that, you know, tends to evolve more slowly, and then cryptocurrencies that are evolving very, very quickly.

• 30:15Speaker 02

  And, you know, we we saw a world where, you know, there there's all sorts of things being built on Ethereum. Bitcoin itself was being talked about more and more as kind of a store of value and gold replacement, and, you know, less useful at that time, at least, for for transactions. So people were thinking about these things as as assets to invest in, and that was very much in Robin Hood's wheelhouse. We wanted to be the best place for for people to be investors. And 2017, 2018, it became more clear that that's how people viewed these assets. And so, of course, we had to be there.

• 30:56Speaker 02

  We had to build cryptocurrencies in a Robin Hood way. And what that means for us is giving people access to really high value and great pricing and, you know, making Robin Hood synonymous with

• 31:13Speaker 02

  Getting crypto for the lowest possible cost. So that's what brought in commission free. And then from the user experience standpoint, making it as easy to use as possible. And you know, this is something that I think we, we've heard feedback from customers, but at the time it was, it was really a decision to, you know, not have customers worry about things like public, private key cryptography and encryption, and kind of take that step, that hurdle that sort of put it in the realm of you had to be a computer scientist or an engineer to understand how to work with these things and, and made it accessible to everyday people that wanted exposure to the asset. So now we're, we're adding wallets.

• 31:58Speaker 02

  We've rolled out the wallets waitlist. Actually just hit a million, a million people on it yesterday. And, you know, we're, we're looking to provide the same sort of user experience and ease of use that we did for kind of the, the crypto trading product to wallets themselves. But I think that, that was the advantage in the early days. It was just, Robin Hood crypto was, was meant to be the lowest cost and easiest to use way to, to get exposure to crypto. And I, I think that's manifested itself in the growth of the business. I mean, you see through some of our quarterly metrics and results that crypto has really become a bigger

• 32:43Speaker 02

  and bigger part of our business, especially through 2021. And we're continuing to invest more and more into it and making the product and the service better and, and more reliable and, and more useful for customers.

• 32:56Anthony Pompliano?

  Talk a little bit about, you know, there's some platforms that are Bitcoin only. There's some that offer everything. I think you all offer a whole bunch of different assets, but there's really been a ton of interest in Dogecoin specifically. How do you kind of think through that? Is that just a, kind of an extension of the GameStop, AMC and that type of consumer behavior? Or is there something else that you think is kind of driving what I would consider more of like an outlier amount of interest in assets that maybe aren't as popular on other platforms?

• 33:27Speaker 02

  Yeah, I think it's a good question. I think there's probably some overlap, but I think they're they're very distinct communities that have formed around some of these things. So there there's definitely a Dogecoin community with its own Dogecoin memes and they're very, very passionate and they're really funny. So and I think there there's people around a variety of coins. There's communities forming on social media, obviously, around around some of these meme stocks. So probably a little bit of overlap, but I do think to to some degree, these are distinct communities that that care about

• 34:08Speaker 02

  very different things. And, you know, some of these, some of these have have written manifestos and kind of code of ethics. So it's really, really interesting to watch it evolve. I think it's kind of an emergent phenomenon that that'll be studied. And I don't know if if anyone is adequately explaining, you know, the factors that have that have caught that have caught rise to to all these communities.

• 34:36Anthony Pompliano?

  I always describe meme stocks are not new. You know, in some weird way Berkshire Hathaway is a meme stock. Like, people feel like they're disciples of Warren Buffett. They go on like almost this trek to Omaha every single year to listen to him. There's a way of life. There's memes. They don't call them memes, but there's definitely other things. So so I do think that, you know, it's new, but it's also not new, which is which is pretty interesting. You've rolled out the crypto wallet. As you mentioned, there's over a million people who have already signed up on the waitlist for that. I think people are generally very excited about the products that you guys are rolling out. One of the risks to the business, which frankly, I'm not as up to speed on, but but would love your thoughts, is there seems to be some regulatory questions around payment for order flow. So maybe just describe like what exactly that is, and then how you think

• 35:21Anthony Pompliano?

  about that regulatory risk. And if for some reason, whether it's, you know, small or large percentage chance, that was actually rendered not available to Robinhood, what would the impact on the business be?

• 35:34Speaker 02

  Yeah. So payment for order flow is

• 35:38Speaker 02

  It it it's a thing on the security side of the business. So stocks and options trading, less so crypto, because crypto operates under a different regulatory regime right now. But basically, the way to think about it is it's a revenue stream. You can think of it as a revenue share between market makers and brokers. So market makers are for-profit entities that make markets on, you know, either stocks or options or cryptocurrencies. And they make markets for customers of brokers like Robinhood.

• 36:21Speaker 02

  And so, payment for order flow is basically, Robinhood gets gets a portion of those profits as revenue. You can kind of think of it analogously to affiliate or lead gen. You know, we're we're responsible to some degree for for the profits because the customer orders are coming through us. And so, we get a chunk of them through through this revenue share. So, right, I can say so much about this, but I'll just make a couple of points. One is that this isn't new. This isn't something that Robinhood has created.

• 37:00Speaker 02

  Prior to Robinhood coming around, the brokers would generate revenue from payment for order flow, and they would generate revenue from commissions on top. And people didn't pay much attention to the payment for order flow because the commissions revenue was so much bigger, right? So it was like, you know, tiny little payment for order flow and then commissions revenue being, you know, 10 times bigger or something of that nature. So what Robinhood did was

• 37:29Speaker 02

  Basically obliterate that commission revenue stream industry wide. And back in, you know, the fall of 2019, when all of the kind of legacy incumbent brokers replicated our business model and got rid of commissions. I don't know if you remember this, it was, it was pretty awe inspiring in a way because all of these stocks just cratered by like 35% or 30%. You saw E-Trade going down 35%. You know, TD Ameritrade, Schwab, Schwab went down quite a bit because, you know, one after the other, they lowered commissions to zero. And so, you know, that, that doesn't happen when they're suddenly making more money.

• 38:10Speaker 02

  You know, a huge chunk of, of their revenue disappeared and that went into the pockets of customers in the form of, of lower fees. So basically having payment for order flow has made commission free trading possible, not just for Robin Hood, but for the industry. And, you know, it would be really unfortunate to, to see that go away because certainly you'd see some brokers reintroducing commissions one way or another. And I think in terms of retail investors, their arguments, I think people just don't really understand it in detail, which I think points to an opportunity for us to continue explaining it a little bit more. They don't understand it in detail.

• 38:53Speaker 02

  It sounds confusing and complicated and, you know, it's become political to some degree. But you've heard, you know, some of the market makers being interviewed about this as well. And they're a little bit perplexed, right? Because they're like, payment for order flow is a cost to me, right? So, you know, the people arguing for this are in a sense arguing for market makers or kind of hedge funds as the internet calls them, making even more money. So, you know, I, I don't understand that, but.

• 39:30Speaker 02

  You know, we'll continue to, to try to, try to make awesome products for customers. We, we like the fact that people aren't paying commissions and payment for order flow makes that possible. And I think if people really start to understand the nuances of it, they'll understand that it's actually a great thing for, for customers and it's made, it's made the democratization of the markets and this greater participation that we've seen in the past few years possible. Cause you, you couldn't, you just couldn't invest if you were paying seven to $10 commissions. I think investing with a hundred dollars, even a thousand dollars becomes much more expensive under that, that old structure.

• 40:12Anthony Pompliano?

  You ever sit around and you're like, yeah, we, we destroyed that part of the industry for, for kind of the incumbents? Like, is there a level of like satisfaction with you and the team of just like, you came in, you did something that most people weren't willing to do and it really did send shockwaves, right? You know, both obviously from the stock prices of those organizations, but it changed the business models. We've seen many people go to zero commission. Like, is there a level of just like, you know, people can say whatever they want about us, but we did get that done?

• 40:38Speaker 02

  A little bit, you know, and it was good. On the one hand, you know, it was kind of stressful going through that time period because you're like, oh man, they all just matched our pricing. You know, we, we used to be kind of the, the only one that was offering commission free trading. But yeah, I think recognizing that it's, it's better for customers and it's not just our customers, but tens of millions of customers that have never used Robinhood that are benefiting from this, I think is a very powerful thing. I mean, it would be almost like, you know, if you're making electric vehicles and, and you know, your Tesla or something, and then all of the legacy sort of internal combustion

• 41:22Speaker 02

  manufacturers just went to electric at the same time. Obviously, you know, different situation, but I, I've just never seen anything like that in, in any industry. So it was kind of remarkable how, how quickly it happened. And by the way, I think it's going to happen in crypto. Currency as well. I think you look at the cryptocurrency, the cryptocurrency business. People are paying exorbitant fees right now. Whether it be kind of in the, the spreads in the different swaps products, the DeFi products, or commissions in the centralized exchanges, you know, some of those commissions are 3%, 4%, even more.

• 42:03Speaker 02

  And, you know, tho- those are gonna go down to zero as well. I think, I think that's an inevitability. And, yeah, well, Robinhood hopefully will have a big part to play there.

• 42:19Anthony Pompliano?

  I've got a couple more questions, then we'll wrap up. There's a ton of people online who have questions around assets that Robinhood employees hold, when they can buy and sell, how they buy and sell. There's questions around the GameStop situation, who is buying, who is selling? There's all these emails that came out. I'm frankly not, you know, in the weeds enough to understand all the nuanced questions, but maybe just walk us through how you all think about employees, what assets they hold, when they're allowed to buy and sell? And then are there times where you kind of think about it from, are we doing things that are aligned with or against what people on the platform are doing themselves?

• 43:00Speaker 02

  Yeah, it's an interesting question.

• 43:04Speaker 02

  I guess what I'll say is,

• 43:07Speaker 02

  you know, it, it reminds me of, I, I, I forget who is saying this, but there's this company Chewy that a lot of people really love, right? They, they make pet food. And one of the reasons that they were able to be so successful is that their customer service was just awesome, right? And the way they had great customer service was, you know, they got together, you know, a group of like the biggest, most enthusiastic dog lovers ever, and had them, you know, serve customers. So, you know, when you, when you called customer support, you know that, you know, you're getting someone that's super, super passionate about what they're doing.

• 43:53Speaker 02

  And, you know, it wasn't just customer support, it was across the board, all of the, all of the employees of the company. So. I think that Robinhood is similar in some ways, right? People, there's people that work at Robinhood that are really passionate about our customers. They're passionate about the markets. They're passionate about investing in trading. And, you know, they come to Robinhood because that's a place where, you know, they can exercise that passion and combine it with their work. So, of course, you know, we've got people at Robinhood that are interested in trading. I probably shouldn't talk about any legal matters,

• 44:37Speaker 02

  but I will tell you that, of course, we have policies and procedures in place to monitor and to govern employee trading. There's also policies and procedures kind of industry-wide. And we do our best to comply with them and to be sort of reasonable, good stewards there.

• 44:59Anthony Pompliano?

  One of the things that I've never heard anyone ask you, I don't think, is how you think of your own personal portfolio. So I'm assuming, and correct me if I'm wrong, a very big portion of your net worth is tied up in Robinhood equity itself, like most, you know, technology founders. But outside of the Robinhood equity, do you invest any of your assets? Are you too busy to do it? Like, how do you, do you give to somebody else to do? Like, just walk me through kind of how you think about investing. Because it's interesting, right? Like, you've built a, one of the most popular platforms in the world for investing, but I don't know if anyone really thinks about how you think about investing.

• 45:33Speaker 02

  So this is something that's really changed for me as Robinhood has gotten bigger and especially since we've, since we've gone public. And it's one of the things that's hard for me because I really love, you know, I love investing, I love trading. It's, it's probably been, you know, one of the things that, you know, I'm very passionate about and have been from, from an early age when I opened up my first brokerage account in the dot-com kind of boom and bust in the late 90s. So I love it. And, you know, unfortunately, it's just like impossible for me to do it at this point.

• 46:15Speaker 02

  So now I don't do any of my own investing and, and trading anymore. And I haven't for, for some time.

• 46:22Anthony Pompliano?

  When you think about crypto, do you have exposure to Bitcoin cryptocurrencies and anything in there?

• 46:28Speaker 02

  I have had a little bit, yeah. I mean, not, you know, a significant chunk, but, you know, I've been, I got curious about crypto back in 2011. I read the White Paper and a bunch of folks from my math program who were interested in cryptography were like, hey, you're in finance, you should learn about this. So I went through a period where I tried mining it, but of course, mining it is very hard. It's very unlikely that, you know, you'll get the 50 Bitcoin block reward back in those days. So nothing really came out of the mining. And I remember I was signing up for a Mt. Gox exchange account

• 47:11Speaker 02

  at that time, and I hadn't put anything in it, but I was thinking about it. This was back in 2011, when it was trading at, you know, a few dollars a coin. And then Mt. Gox got hacked. And I was like, oh, man, dodged a bullet on that one. Good thing I didn't put anything in it. And then I just, you know, I didn't end up participating. I thought frankly, that it was dead at that point, that the Mt. Gox hack just killed any enthusiasm that there was for the asset. But I think at the end of the day, that ended up being a miscalculation. And I think every few years, people will say, for one reason or another, crypto is dead. Or at that time, since Bitcoin was the only one, Bitcoin is dead.

• 47:55Speaker 02

  And the resilience of the asset in the space has been, has been pretty remarkable.

• 48:02Anthony Pompliano?

  Yeah, I completely agree. And especially when you look at it, it's not just Bitcoin and crypto. I actually think there's something interesting about, you know, the GameStop AMC, kind of what's called the meme stocks today, et cetera. It seems like there is a very strong belief, kind of the diamond hands type mentality, with some of these younger investors, and it changes the market dynamic, right? You know, in the stock market, for example, if all of a sudden a company came out and sold a bunch of shares to raise capital or whatever, there would be pretty material movements in the stock price. But in some crazy way, sometimes the market doesn't care, just because people have like a much different view of the asset. They're buying it for a different reason. They have a longer time horizon, et cetera. So it's fascinating to see just the resilience across markets, but obviously Bitcoin probably being

• 48:47Anthony Pompliano?

  the best example of it.

• 48:48Speaker 02

  Yeah, absolutely. I think the liquidity in some of these assets, the amount of global participation, I think it's pretty unique. It's not quite what you see in Forex, definitely dissimilar to equities. So I think it's a new beast.

• 49:11Anthony Pompliano?

  For sure. I want to wrap up with kind of just giving you the floor. So there's people who are watching this who absolutely love Robinhood, think you're a genius, they're so happy because they got into financial markets and Robinhood helped them do that. There's people who are watching this who literally are like, "Man, that guy shut off stocks and screwed me," whatever that ends up meaning. And then there's everyone in between. What's kind of your pitch to people around Robinhood, why they should use the product, and then what the philosophy is as to how you guys interact with customers and what the company is that you want to build as you continue moving forward?

• 49:46Speaker 02

  Yeah, my philosophy is just to, we have our mission, which is democratize finance for all, and we have our core values: safety first, participation is power, radical, customer focus, first principles thinking. They govern everything that we do. So rather than me just talking and telling you about Robinhood, I think the best thing to do is to watch us deliver and see what we build and deliver to customers. And over time, what we deliver and what we build should be consistent with what we say. And with things like 24-hour

• 50:26Speaker 02

  customer support, crypto wallets, commission-free crypto recurring, IPO access, all these recent product developments, I think are built for customers to make their experience better, to make it easier for them to become long-term investors. And that's what we're going to continue to do. And you'll see the product continue to get better week after week. And my goal is to make it unreasonable to use anything else. So you should feel like you're at a disadvantage across all dimensions by not using Robinhood.

• 51:08Anthony Pompliano?

  Got it. Where can we send people to find you on the internet if they want to follow you or find out more about Robinhood?

• 51:15Speaker 02

  You could, you could go to whenwallets.com, W E N wallets, you know, or you can find me on Twitter or find Robin Hood on robinhood.com. We're generally pretty easy to find. There you go. Yeah.

• 51:29Anthony Pompliano?

  Got it. I appreciate that you guys understand the, the culture of, of the customer base because I tweeted yesterday and I said you were coming on and I was blown away by how many people had questions and you know, when wallet was like the number one question that everyone wanted to hear. So.

• 51:46Speaker 02

  That's funny because that's the one I feel like we've answered pretty, pretty well. So we're, we're letting the first customers on in the alpha this month and hope to roll it out to everyone in Q1 of next year.

• 51:58Anthony Pompliano?

  The, I had 1.2,000, so 1,200 questions and literally everyone wants to know when wallet, when, whatever their favorite shitcoin was and, and then basically about GameStop. So you did a great job.

• 52:11Speaker 02

  I liked a few of those questions. Yeah. I liked a few of them. I don't know if you noticed.

• 52:17Anthony Pompliano?

  I saw.

• 52:18Speaker 02

  There were some random ones.

• 52:21Anthony Pompliano?

  Awesome, man. Well, listen, thank you so much for taking the time to do this. I think people really generally appreciate hearing your perspective on a number of different things and best of luck as you continue to build the business and what to do to get in the future.

• 52:31Speaker 02

  Thank you. Would love that.