Big Technology Podcast - Robinhood's CEO On Dumb Money, Day Trading, and Retirement — With Vlad Tenev

Episode Date: January 31, 2024

Vlad Tenev is the CEO and co-founder of Robinhood. He joins Big Technology Podcast to share what's happened to meme stock traders after the meme stocks. We talk about how the company's 23 million members are adjusting to a challenging investment environment after riding the zero interest rate investment environment. We also discuss about how Robinhood is evolving, providing retirement services and working on a credit card. And Tenev addresses some controversial areas like margin trading and payment for the order flow. Tune in for the second half where we talk crypto, AI, trading on the Vision Pro, and inflation. You'll come away from this sub-60 minute conversation with deep knowledge of the state of fintech and investing today. --- Enjoying Big Technology Podcast? Please rate us five stars ⭐⭐⭐⭐⭐ in your podcast app of choice. For weekly updates on the show, sign up for the pod newsletter on LinkedIn: https://www.linkedin.com/newsletters/6901970121829801984/ Questions? Feedback? Write to: [e-mail]

The CEO and co-founder of Robin Hood joins us to talk about what happened to the meme stock investors after the memes and how his company is positioned against traditional financial institutions. All that and more coming up right after this. Welcome to Big Technology Podcast, a show for cool-headed, nuance conversation of the tech world and beyond. We have an amazing guest for you today. Glad Tenevis here. He's the CEO and co-founder of Robin Hood, obviously a company that has a lot of intrigue and plenty of brand new products that you may or may not know about. So we're going to talk about that. We're going to talk about the state of the market. And of course, how Robin Hood's customers have evolved. Vlad, welcome to the show. Great to see you. Thanks for having me. Thanks for being here.

So Robin Hood, you know, sort of became this global sensation during the GameStop era. And it's been very interesting because a lot of people, they bought GameStop. They were trying to crush the financial institutions. And then we never really heard what happened after that. So I'm kind of curious, like you've had a lot of the investors that were investing in GameStop, part of that meme stock craze. How did they evolve as investors? Because I imagine they stayed on the platform afterwards. So what can you tell us about that? Yeah.

I mean, even before GameStop, and I should say, there were so many things about, you know, COVID era that was extraordinary. one of them being just everything came together to make it really attractive for people to invest in stocks and in cryptocurrencies all at the same time, right? Interest rates going down to zero, stimulus hitting the market and sort of like lack of other means for people to spend their disposable income. So you saw savings growing through the roof. And, you know, in the years after COVID, when sort of the economy and society digested all of that, you saw a sharp correction. So interest rates instead started seeing the highest ramp in several decades. You're seeing savings being depleted. and you're seeing sort of like movement away from more speculative investments and

and cryptocurrencies. And I think our focus has always been on making sure we serve the customers and give them the best tools no matter what market conditions are. I mean, we've been known for our trading products and the way we serve active traders. But if you look at what Robin Hood's really been investing in over the past few years, Even from pre-COVID, we've rolled out retirement products where we offer the first and only built-in match on the market. And you're seeing that, you know, continuing to resonate. We have our gold offering with high yield on uninvested cash where you can actually benefit as a customer from rates going up.

I mean, historically, rates going up was considered a prime opportunity for, banks to pad their bottom lines, because if you have a traditional checking account or a savings account at a large bank or other financial institution, you're used to getting under 1% low single-digit basis points. And we've kind of turned that model on its head where if you're a Robin Hood gold customer, you're getting a very competitive rate on your cash. And so I think you've seen Robin Hood evolved with our customers in the same way that our customers have been interested in a broader variety of things, earning more interest on their cash, investing for retirement, increasing their time horizon. I think the company has evolved and has sort of like

transformed our business model, our service model, the way we serve our customers to make sure that we're even more relevant and even more important to our customers' holistic financial lives and the way they think about building their wealth. Yeah. And we're going to talk about all that as we go through this conversation. But one of the things that happened in the meme stock craze was a lot of investors who never bought a stock. They entered and they entered through Robin Hood. Right. And so like that's what my question is gearing at. Like of course, the market has incentivized different behaviors. But you've seen it happen. Like you've seen these people come in and become traders for the first time in their lives. By the way, probably at a younger age

than most people do. So get exposure to the market. Have they now moved beyond doing some of the day trading that they were doing in the beginning? And maybe this like yolowing the money. And of course, like you've built the products that have incentivized making what I would say are smarter decisions financially. Have like, have you seen customers who got in and said, I'm going to buy a share of GameStop and are now investing in, you know, ETFs and retirement, things like that? Like, what has the behavior path been for them? Yeah, absolutely. I mean, we've seen, in many cases, customers coming in through buying an individual stock

or even buying a cryptocurrency, and they kind of see the potential of building their wealth, and then they see all the things that we're offering, particularly, you know, with the gold offer, what we see and what we've kind of been trying to. your premium service that you pay for $6.99 a month and you can get some added benefits? Yeah. So it's a, it's a premium service. It's like a membership. And the way I kind of think about gold is, you know, if you, you can get some of these benefits that we offer like high yield on cash, low commission on on trades. Of course, for us, it's no commission. But If you're a high net worth individual at a bank, you can get a lot of these similar types of benefits.

For example, if you're a Chase Private Client Customer or Private Wealth Management customer, and they select for this group of customers based on their wealth, right? You have to hit a threshold of several million dollars of net worth, in some cases, even more. And then you can actually earn some interest on your cash, And you get a dedicated person to talk to. You can get access to like premium products, institutional grade money market funds and a higher level of service. And the way I kind of think about Robin Hood Gold is we can offer that to everyone. We can democratize it.

And it's not free, but it'll just cost a very small monthly subscription fee to be part of that membership experience. Right. And I mean, like, you guys are building retirement products. I see you can even buy like, you know, fractional shares of, of broad range ETFs on the platform. By the way, like I am one of Robin Hood's newest customers or users. I just signed in last night and began option trading today. So it was my first option trades that I've made. So, but I've also bought ATFs and started with the retirement products. So I feel like that was like a pretty interesting experience. I can help ground this conversation. And I'll definitely give you some product feedback if you want. But I guess like it sounds like from everything that you're saying that people came into Robin Hood in this meme stock moment, but started to, you know, end up doing more traditional investing, you know, smarter investing as it would be would be called. Does that sound right to you? Well, I would say, you know, Robin Hood has 23 plus million customers, right? So it's hard to say that, you know, each. of them behave the same way. We have lots of different customers that come in for various

reasons. I mean, you look at that number, 23 million. Yeah, it didn't all come in through that. But like here's, here's like why I'm bringing it up is because in that moment, you had so many young people that were starting to trade for the first time. And there was a lot of scorning, I think, from, you know, the traditional financial establishment, A, because of course they were going after a hedge fund, but B, because they called them the dumb money, right? I mean, name of the movie, where it had done money. But it's also just like these people got exposure to the financial system so much earlier than a lot of people. And it was great to like even make some mistakes early on.

And then you start to learn and you start to have strategies where you can then start to build your wealth. And it seems like that's what happened to a lot of them and that's what you're providing. I agree with that. And that's really the thing that bothers me most about that movie is this idea that retail investors are dumb money. I find that condescending and offensive. So, you know, a lot of people ask me what I think about that movie. It's like the title itself just perpetuates this type of stereotype that I think is very,

very harmful. And I think that's a big part of why not a lot of people saw it because, you know, who wants to see a movie that's sort of like making fun of, even if it is ironic in some way, making fun of uh making fun of you as a retail investor it's interesting because i would say that that having watched it it seems like it actually has a much more flattering portrayal of the quote unquote dumb money than i think was largely had in the popular conversation showing that they're smarter than they so many people are just going to look at the look at it exactly make their decision you know i think you're right like if you actually sit down and parse it and look

at it. It is, you know, sort of like a glorifying take on the retail investor. And I think that part is good, but, you know, it's sort of under this veneer of condescension that I think just pervades the financial industry. Well, I think a lot of that condescension comes from, and this kind of goes to like the core of the way that Robin Hood initially built momentum was with active traders, right? Like, it's popular to say that day traders, 10 to like 95% of day traders tend to lose money where if you like park your money and passive ETFs, you're going to do well over time. I'm kind of curious what you think about that. Well, I think there's there's two things. First of all, if you think about a Robin Hood product and

this goes to our active trading products, but really it's consistent with Robin Hood gold and our high yield product and retirement as well, there's really two things that I think, distinguish us and make the products interesting in the marketplace. One is the cost. Like any Robin Hood product, we look into how we can use technology and good engineering to dramatically increase the automation and put more money back in customers' pockets. And of course, that originated with zero commission trading with no account minimums. It used to cost $7 to $10 every time you place a transaction.

And so we were able to do that. But that's not enough for a Robin Hood product. The other thing is the user experience. It has to be extremely simple and easy to use. And, you know, we became the first financial services company to win design awards for our work. You don't really think about good user-centered design and experience when you think about a financial product. And I think Robin Hood really changed that. And so when you think about our trading products, really the idea initially,

was by introducing these two things, low cost and exceptional quality and craftsmanship and design, we would actually make it more approachable to people that had historically been left behind. And that's younger folks who don't have a family wealth manager that can just sort of like take their account. These people were largely being pushed away by the traditional financial system until they were in a position where they had much more assets and a nest egg and they were getting closer to retirement. So we just got them much earlier, like in their early 20s as opposed to early 40s. And that was in large part due to the low cost, low barrier to entry and user experience. And what we ended up seeing was that it actually not only appealed to people doing it for the first time,

but let's say you're an active trader, you're trading equities and options at a discount legacy broker, and you're being charged $7 every trade. Now of a sudden you're like, wait a minute, you know, these guys here are letting their customers trade essentially commission free. The value prop there is so strong. Why can't I get that? And of course, we saw all of these more experienced investors coming into the the platform and using it. And I think that's what ultimately led to sort of our model

becoming the dominant industry model and everyone else having to replicate it and a huge wave of consolidation like you're seeing now with Schwab and TD Ameritrade and Morgan Stanley and E Trade where a lot of these big competitors that were under the legacy brick and mortar models and they couldn't compete in the new world, couldn't survive as standalone own entities. So I would say our focus. Let me go back then to the question, right? If 95% of people who day trade lose, like, why would someone do it? Well, I think these statistics are always a little bit tough. And I'll tell you why. I mean, people cite these studies that, um, that, that, you know, day traders lose money and all these things. But those studies, a lot of them are from the 90s

earlier. And you see the dominant factor being commissions. It's like, oh, they're, they're trading a lot. And so the commissions are eating up like nearly all of the returns. And now, you know, we remove commissions. The entire study basically needs to be, uh, needs to be sort of like revalidated. But I think that the broader point is since we're a self-directed platform, like I would think about Robin Hood as a tool builder. Like we're providing these tools. And maybe in the same way as a major national securities exchange. Like if you're the NASDAQ or the NYC, you know, you're providing an interface, you're providing market access. We happen to do that for retail.

But the industry has strict separation between people that provide these tools as brokers and then investment advisors that are actually trying to influence and determine what their customers. invest in. And so as an impartial tool builder, our goal is to provide a reliable service, make sure that uptime, reliability, user experience is good, lower the costs of transacting, and in doing so, we enable lots of different activities. Of course, there's like activities that are active trading and more speculative, and then there's the retirement and wealth building stuff, all on that platform and infrastructure. And since we're not a registered investment advisor, we actually have to stay away from like recommending particular stocks or investment strategies. And, you know, I have my own personal opinions for what the best way

to invest in and what stocks buy, but I can't really influence platform decisions at all based on those. I will tell you, though, that one of the things that's been really interesting over the past year is, if you look at all these forums that sort of celebrate passive investing, like R-slash-Bogelheads, for example, or R-slash-investing, you're seeing Robin Hood mentioned more and more in these forums in a way where maybe two or three years ago it would be dismissed. And it's because people are looking at the value props of these retirement matches. And they're kind of seeing, they're saying that Robin Hood is the best place to have quote unquote lazy portfolio. So even if you're just putting money there and you're

going to set and forget it, it's actually a great place for portfolio building. And I think you're seeing the brand perception change as we're adding all of these tools. And I'd love nothing more than to be the company that did for long-term retirement savings and investments, what we did for, you know, meme stocks and more active trading. I think we've got some headwinds there because, I mean, as a media person yourself, the stories about people investing in boring sort of like long-term retirement, don't tend to be the most compelling stories to tell, right? Everyone wants to, you know, everyone's talking about the relatively small number of people

that are trading actively and, you know, doing more speculative activity. And I don't think too many of the stories about, you know, the folks that are stashing money away slowly over long periods of time and doing sensible things get told as much, even though you actually see that being a much larger group of people and a much higher percentage of the overall activity. Well, I don't know, Vlad. I mean, you're here, and we're going to talk about those boring, stashed away type of funds.

So, you know, I definitely think it's worth giving air time to. And it was interesting for me opening up a retirement account on Robin Hood last night, just going through it and sort of you pick the different type of strategy that you want based off of like your risk tolerance. And I love how it was like you have a high tolerance for risk or highest tolerance for risk or low tolerance for risk or lowest tolerance for risk. And it does enable you to like even put, I think I put $20 to work at a like pretty diversified group,

maybe six different groups of stocks, like fractional ownership of them. It was pretty interesting. So I'd love to hear your perspective. I mean, you know, why are these companies or these forums starting to talk about Robin Hood as a place for retirement? And how have your user started to gravitate towards, towards this type of buying?

I mean, I think these folks are smart, first of all, they're savvy investors that, you know, read the fine print of everything and they're making calculations. They're like, okay, if, you know, I'm investing at a discount brokerage or I have an advisor and, you know, I'm paying a 25 to 100 basis point annual fee, they run spreadsheets and see how. that affects their returns, right? And they see what these advisors are doing, in large part, you know, they're kind of handholding, they're providing a sounding board, they're calming customers down when the markets are exceptionally volatile and telling, and they're kind of a steady hand at the ship. The asset allocation is pretty commoditized. I mean, we know the algorithms there.

And, you know, some advisors and brokers are, still out there charging commissions because maybe their clients prefer to talk to them on the phone. They have higher costs of servicing. They like to go into a brick and mortar location to make their investments. But for our customers, they're younger. They tend to be much more digitally savvy. They're early adopters of technology. They want the service to just work. And they can have technology sort of solve a lot of these more transactional problems that, you know, you've had to go into a branch office or make a phone call to do in the past. And then you look at the costs, you look at the ease of use, and then you take these matches,

for example, the 1% in non-gold and then the 3% for gold accounts. You carry that over a long time period, say, you know, multiple decades, which is what these customers have for retirement. and that adds up to like a pretty strong economically rational argument for for investing with us and now I'd also add that um you know there's uh I was going to make another point but uh well I think of that let me ask you about the match how are you able to do the match I mean the money comes into Robin Hood it goes right into stocks so you're passing it a long into the equity. And you match. Like, I mean, I think I put, you know, $20 in yesterday and

free money from Robin Hood, like a free 20 cents came in from Robin Hood. Um, where are you getting that money? Like, how is that, how is that even feasible for your business? I mean, the way we think about it is retirement relationships, particularly are long term relationships. Those accounts, um, like we, we believe that if we serve those customers well, over time, they're going to continue to contribute it, contribute to their accounts. They'll grow. And also, they'll do more things with us. You know, and there is this thing where the more assets you have with one platform, the more

services you use, the more likely you are for the next service that we offer for you to be a customer there. And, you know, we have been seeing it. The more customers use our services, the more assets they, they, you know, they, you know, put on Robin Hood. Generally, the happier they become and they become product evangelists. And we think all of these things are going to coalesce into these being profitable relationships over the long run. And why do you think people are not getting these services from like the traditional financial system? Is it if they have like less money that just doesn't care about

them or like why would people open up a retirement account with Robin Hood versus like a JP Morgan Chase? Well, I think it's, again, those two things that make Robin Hood products differentiated in the market. It's the economics, which for retirement, it's not just the lack of commissions and minimums on trades, but it's also the compelling matches. And then the second thing is the user experience. You know, you don't want to fill out a PDF and fax things when you create an account. You don't necessarily want to have to go to a branch office. I could see the value of a branch office being there for exceptional scenarios, but for your

typical day-to-day work, you just want to take out your phone and do the action and have that completed seamlessly. And that's what we do better, I believe, than anyone else. And you've probably seen the onboarding experience yourself. The team has spent a lot of time crafting, particularly the retirement onboarding and how we construct those recommended portfolios, we've won design awards for that product. And I don't think that you can say that about other retirement products on the marketplace. I mean, when, no, I thought it was excellent. A retirement product winning a design award, you know. Yeah. No,

going through the flow, I thought it was excellent. So, you know, for a lot of companies in the economy, everything sort of flipped when we hit, you know, 5% interest rates going from zero, like within a year, year and a half. I can't imagine a company who would say, change life form more than yours, right, where people like in the zero interest rate environment are going to be more active trading equities. And now, like, you might be more interested in putting your money in a money market that will give you that five, you know, six percent. So what have you seen there and how has that changed like your mentality for the way that you do business? Yeah. I mean, what we've seen is a lot of the casual first time investors have sort

of retreated from the market and they're interested in other things like earning yield on their cash. And if you think about it again, from the economics perspective, it's an economically rational change because if you're earning five plus percent risk-free rate on your cash and you look historically at what the market's been able to do, you know, getting that 5% risk-free is a compelling value proposition in a zero rate environment, you know, you basically get nothing risk-free. And so you've seen kind of these macro flows away from equities into, you know, things like money market funds, high-yield accounts, and, you know, more and more and more sort of like the excess cash is going into these vehicles. In terms of active trading, I'd say active traders

tend to be more resilient because they engage in more sophisticated strategies. You know, they can, they have strategies that they deploy to take advantage of falling markets or are markets that tend to be like up and down. And so we have been continuing our focus on active traders. And in fact, we're much closer to active traders than we were in the early Robin Hood days. Active traders have always used our products. But, you know, before recent years, we kind of built for the first time mass market consumer and we didn't really get deep into the needs of active traders and solving their problems. And we've been able to do a ton of work starting in the year 2020 that, you know, builds towards us being the best platform for active traders. And we've got some more wood to chop, but active traders are much happier on our platform now than they were at the beginning of 2022 yeah they must love the volatility i mean with the vix as high as it's been over the past few years well also just like the user experience you know it's like basic things like um

making sure that customers who are trading options actively can continue to trade them if they're marked pattern day traders and having a good cash account account experience where you can continue to trade options in cash accounts, not just margin accounts, giving customers more data and more advanced charting. I think if you look at the needs of these active customers, we've got a full roadmap many, many years of work to craft the best experience for them. And I think it's an exciting challenge for our teams because, you know, it pushes us to make our systems faster, make our experience even better.

while making that simplicity, while keeping the simplicity that, you know, Robin Hood is known for. And I think these are the types of problems that attract really great engineers and designers and kind of keep us at the forefront of innovation in our space. Right. And you've mentioned design and like ease of use a handful of times in our conversation already, which like is, it's important, right, because it does make this stuff more accessible to people who might otherwise be turned off by platforms. I don't let them in without a minimum balance, for instance, or, you know, just are designed so dauntingly that it wouldn't, it's not worth taking the hours to go and open a retirement account

if you have $20. And so you've solved that. But you did, you did get some flack, you know, in the earlier years about making it so easy, you know, and on the downside, like for instance, making it easy to open margin accounts and trade, trade on margin, people trading with money they didn't have or losing more money than they had, which is always a possibility when you do margin trading. Have you taken any of that feedback to heart and changed the product at all after that early criticism? I think some of that criticism is fair. Other parts of it are kind of in the vein of, well, commissions are good because people shouldn't be trading that much. And so, you know, if you charge people more, they'll do it less. But in reality,

that's kind of self-serving criticism in a way because, you know, none of these brokers that were charging commissions were doing it because of like... Yeah. I'm not going to stand here and argue that commission's good. I am not going to do that. But the broader criticism. Yeah. It's a fair...

It's a different form of that argument to say that, oh, it's good that, you know, our sign-up flows are convoluted and, you know, confusing and you have to go through all these steps because... There's got to be some middle ground. people that know what they're doing to do it. But it's not. It's because they haven't invested in engineering and user experience. You know, if they could wave a magic wand and have a great customer experience, every single brokerage would do it.

And I'd say they're like trying really hard to do it. And that's why you see like the user interfaces of the brokerage products that are doing well have all tended to begin to resemble Robin Hood's user interface over time. You know, it's just like it's gone from inspiration to more and more kind of blatant copying, I would say. Yeah, so you talked to Ben, in the earlier part of your response, you said there was some criticism that's valid.

So like putting aside the fact that there are some people that say commissions are good, what do you think about the valid part of that criticism then? I mean, I think that it's always good. to take into account the impacts of new technology on society, right? Like, we have to ask these questions. Like, you know, we're now in a world where people can communicate with each other and share ideas. What's the impact of that going to be on the markets and on people's well-being?

And those questions are being asked. You're seeing a lot of that with AI. Like, what's the impact of that going to be on people's investments? And, you know, imagine a world. where you have an AI telling you what to invest in or what to do, sometimes you do need to reconsider regulations. In terms of investments and what brokers can and can't offer to customers, there are existing rules like suitability.

You know, we have to run suitability checks, and there's regulations governing who's suitable for advanced products like margin and options. And of course, I think it's entirely reasonable to like rehash these rules over time, reconsider them, see if anything needs to be updated. But I think the right way to do that is to do that on like a industry-wide basis where there's a level playing field and to make sure that, you know, it's not just new companies like Robin Hood and smaller startups that are kind of being

singled out. But if you want to change the rules, everyone should. have to everyone should have to be part of that right and speaking of like examining things at an industry-wide level when it comes to payment for order flow the SEC has been investigating that you made some comments about that in in the past i'm curious like that that's been another place where people look when they look at robin hood's business and they wonder what's up there like should robin hood be you know making that much money on payment for order flow so i'm curious like what your perspective is on that front and if you have any plans to shift away from that

Yeah, I mean, my perspective on that is, I mean, I remember a time where, you know, brokers were charging $10 in trade commissions. It wasn't that long ago, right? If you look back, let's say in the year 2018 or 2019 and you look through a publicly traded brokerage, retail brokerages financials, for example, old TD Ameritrade. financials, you can get a pretty good idea of what the revenue model and how the business of retail trading looks like. And if I remember correctly, these are rough numbers, but directional, you know, they would say they made on average $11 of revenue per trade. Of that $11, $10 was commissions. And around $1 was, you know, order routing revenues or payment for order flow. And of course, what happened when they had to replicate our business? business model is that $10 went away and they were generating some money from payment for order flow. And, you know, on the first day when they announced moving from removing the commissions,

you see the stocks of these active trading platforms dropped by considerable amounts. I think TD Ameritrade was over 30% in one day. So I think you look at the markets don't lie. What happened was the elimination of commissions just led to a lot more value coming back into the hands of consumers. And it affected the financials of these large competitors. And that's what happened across the board. And, you know, I think it's just good to level set or remind people that we're talking about that little bit that was like the remaining 10% of economics in the trade. And in general, you know, I'm in favor of examining the business models, but I think a return to like commission-based pricing is going to lead to less money in the pockets of consumers. And you don't really want to turn back the clock here because I think the model has unquestionably led to lower costs and a better user experience for retail investors.

And you don't think there's a problem. I actually haven't heard of a compelling alternative. I mean, alternative or one way or another rewinding to how things were five years ago, right? And what's going to happen is people are going to pay higher fees and nobody wants that. If they did want that, Robin Hood wouldn't have become so successful with our model. Totally. And what about the side of the argument that says that, you know, if you do rely on that, it makes a broker like Robin Hood too close to the market makers?

Yeah, that never really resonated with me because, like, market makers are, I mean, it's a very commoditized service. It's basically like a utility. I mean, they do a lot of work on the back end, but you can look at our routing table. We route orders to lots of market makers, and they all compete over who provides the best execution quality to our customer. And if you read, there have been several academic studies that actually go through and, you know, place trades at a variety of brokers and they see how execution quality is affected by order size and timing of trades. And, you know, it paints a very positive picture, I think, of how Robin Hood conduct that business. And, you know, that's also a story that's kind of seldom told. everyone likes to kind of rag on Robin Hood, but we put a lot of investment in making sure that

customers get great execution quality. And, you know, there's a lot of, like, data science and engineering involved in optimizing these things for customers. And I think, you know, through these academic studies, you can actually see the degree of sophistication that we put in to make sure people get their executions. Yeah. And I think over time, like over this conversation, we've talked a lot about like the how Robin Hood stacks up against legacy financial institutions and it is good that you guys are pressing them because you see things like for instance I'm banking with Chase I guess now I'm a Chase and a Robin Hood customer right and yeah there are so many things like here's one example if I want to buy a bond there I got to call

the financial advisor or if I want to move a certain amount of money into an IRA I have to call and the reason that you have to call is because that they put you on the line with one of their financial advisors selling their financial products that have that 1% commission and that's how they're making their money and they don't need to you don't like there's no reason to physically have to make that phone call it's just for chase to try to make money that 1% off of anything that you have with them and like that's ridiculous like the ease of use that you have with some of these fintech companies actually does press that and say and says if you're going to do that, there's going to be alternatives that will not force people to make these

phone calls and be able to do what they need to do when they need to do it and the consumer will choose. Yeah, I mean, I agree with what you said with one caveat. I actually don't think they're capable right now of providing you that experience digitally. I think what happened was they have to provide that experience over the phone with humans. They're running on mainframes and they have legacy technology and they use that opportunity they're saying oh well our agents on the phone with a customer anyway like let's see what else we can sell them while we've got the customer on the phone so i i don't think yeah i think the causality went into the other direction like really you think it's a tech limitation absolutely yeah i mean now it's entrenched right

now it's uh sort of like the service and the sales are one and the same And that's actually an impediment to them providing you the great experience. Because, you know, if the engineering team's like, we can fix this and we can actually completely digitize it, they probably have a sales team that's like, oh, but that's our, you know, number three channel for getting new customers. And, you know, it's sort of like that's going to prevent them from doing maybe the right thing. And I think that's the benefit that we get, in part because we really care about the engineering. of these systems, but also because we are a younger company. We started with a clean slate. We had the benefit of like modern technology, cloud, AWS. We're here in Silicon Valley. We're we have a great team of engineers that obsesses over these things. And so sometimes starting without

the legacy, Cruft gives you an advantage when when kind of rethinking these things from first principles. We're here with Vlad 10 of the CEO and co-founder of Robin Hood. On the other side of this break, we're going to talk a little bit more about Robin Hood's push to sort of get the legacy financial institutions on their heels with something like credit cards. That might be fun to talk about. And we'll also talk about crypto and the moves that we're seeing with Bitcoin and the Bitcoin ETF. All right. We'll be back right after this. Hey, everyone. Let me tell you about the Hustle Daily show, a podcast filled with business, tech news, and original stories to keep you in the loop on what's trending. More than 2 million professionals read The Hustle's daily email for its irreverent

and informative takes on business and tech news. Now, they have a daily podcast called The Hustle Daily Show, where their team of writers break down the biggest business headlines in 15 minutes or less and explain why you should care about them. So, search for the Hustle Daily show and your favorite podcast app, like the one you're using right now. And we're back here on Big Technology Podcast with Latentive CEO and co-founder of Robin Hood. Let's just briefly just talk about crypto. We have a debate here on the show a lot about why anybody would need a Bitcoin ETF. A, Bitcoin had to, like, you know, the idea was to challenge the existing financial system and be, you're just, you could just buy Bitcoin with Coinbase.

Like, why do you need an ETF there? It's something that Robin Hood gives service to. So, yeah, so talk a little bit more about that. Oh, yeah, you could also buy Bitcoin. I have actually did buy some Bitcoin on Robin Hood last night. So why the need for an ETF? Yeah. And again, with our crypto offering, it's also those same two things, the user experience, making sure that's world class and the economics. And since you mentioned you transacted with Robin Hood crypto, you can probably appreciate the effort and care we've put into not just the experience, but like making it clear to you what the economics of that transaction are and just how great of a deal you're getting on Robin Hood relative to some of the other places. Bitcoin

ETF, I think I see both sides of that argument. And I have to be careful not to talk about individual securities on the platform. But what I'll tell you is the argument behind these DTFs is there's a lot of participants in the legacy financial system that maybe don't have the ability to offer spot crypto products directly. They don't want to deal with like the cybersecurity challenges of custodying these things appropriately, holding on to the private keys doing all of that work, which is new work. But they just want to give their clients exposure to Bitcoin or other cryptos in as easy of a way as possible. And they're already plugged into the capital markets, the regulated exchanges. If something is listed on a national securities

exchange, they can plug it into their security master and offer it to clients. And for them, this lowers the barrier to entry for getting exposure to this asset class. So I think that that's the argument for it. But yeah, for those that are tech. technically savvy and you know know how to use robin hood or other platforms i don't know if it actually changes the the dynamics so much what do you think it says about the bitcoin dream then that if it's so intermingled in mainstream financial platforms um yeah i i have mixed feelings about that i think to some extent like in order for it to be successful like having a um you know, having a regulated framework behind it and having sort of like acceptance and

integration into the legacy financial system is going to be a prerequisite. On the other hand, I know that there's like a contingent Bitcoin maxis that are, you know, very libertarian in their beliefs and they might disagree with me there. But I think for the asset to actually have staying power, it is going to have to find an equilibrium and there there is going to have to be strong integration with legacy financial rails and abilities to to move money and traditional kind of compliance infrastructure. Right. Okay. Got to talk about credit cards. I mean, credit card business is such a fascinating business, right? It's so exploitative in some ways. Like you get behind in your credit card payments

and you're just in in store for a heap of interest. And it'd be very difficult to dig out. out of it. On the other hand, some people love their credit cards. They like, there are people who spend their lives like manipulating the points on their credit cards and trying to figure out how to get the highest credit score and they become kind of obsessive about it. And obviously it underpins a lot of the, a lot of the commerce that we do today. So you've said like you think parallels notably with investing in that way, right? Right. I mean, it's like any powerful tool that, you know, democratizes access to something. There's sort of. of ways that it can be abused and in ways that it can be extremely powerful.

And I think the challenge is like how can we, how can we make these products as good as possible, like not throw the baby out with the bathwater, but address some of these concerns so that. So what's your answer? So what's your answer there? Yeah. And what's your answer there? Well, my answer is, I mean, without getting into the details of products that we're going

a launch. I'd say the philosophy is the same. In general, we want to build products that lower costs to consumers and result in more money in their pockets. And we want the experience to be world-class and top-notch and not just the pixels, but also how we're communicating information, how you know the status of your account, whether it's in good standing, and kind of the transparency into the internals that we provide. Those are all things that are very important for any product that we roll out. Now, last thing I want to talk to you about,

you mentioned a little bit about AI, about how we might see AI start to advise people on trades, things like that. What do you think about? I mean, the world of generative AI seems like it would be perfect, especially for a company like yours, who's like walking people through these complex, you know, financial decisions.

Seems like it would be perfect addition to your product, right? I go in and I say, you know, give me a state of the accounts that I have within Robin Hood. Like, where am I winning? Where am I losing? What should I be thinking about? What is it? And then education, explain to me what exactly it is to like have a long call or something like that. Are you thinking about that? Can we expect to see that? Is this going to be something that? I mean, obviously, if it gets something wrong, it's a problem. But is this something that we're going to see in a product like Robin Hood? I mean, we spent a lot of time thinking about this, probably wouldn't surprise you. I do think that over time, you'll see AI technologies going further and further upstream. I mean, if you look back a couple of years, even before, you know, GPT4 came out, you had machine learning algorithms that were sort of like extreme. extremely kind of down funnel in the financial experience.

A lot of companies were using them for fraud analytics to detect suspicious activity, all sorts of things like that. And then over time, you know, especially with large language models, you're seeing that going further and further upstream to the point where like reasoning is now aided by AI. You can actually help people make decisions. And, yeah, I don't think financial services is going to be immune to this. I think financial services will benefit tremendously from AI kind of augmenting and permeating every aspect of the financial relationship. And that includes investment advice and idea generation. It also includes cross-sell.

I mean, we were talking about your. you know, your interaction with your bank where, you know, you were trying to fund a retirement account and they're selling you other products. Well, over time, I think AI is sort of good user experience cross-sell tool inside products. You're also going to see that more and more. It's also Vision Pro Week. Are you going to get a Vision Pro? Are you guys going to develop for it? I love new, new things. I did actually pre-order a Vision Pro.

I got very excited about it, so I can't wait. I haven't actually played with it yet, but yeah, I can't wait to try it out. I think that, you know, I have mixed feelings when I saw the initial demo, the battery pack that you had to kind of

carry around with you. Also feels pretty lonely. Yeah, but you know, anytime you see a new platform release like that, in the last one was the watch that I'm wearing right now from Apple. And to some extent, AirPods with podcasting, you've got to pay attention. And, you know, I know our designers and engineers are really excited to take a look at the capabilities and what we can do for customers there.

Yeah, I'm just imagining like, it's kind of like a scene from movie, right? Just sitting back with the Vision Pro and you can like literally have all your holdings, all your charge that you would have to go tab, tab, tab, just all there in front of you. It's like a day trader's dream. But I want to ask you to reveal your plan because I know you're in quiet period, but sorry, go ahead. I mean, I do think that if you look at what it gives you, it's sort of like opening up infinite screen real estate. And that's kind of an interesting new paradigm. Right. All right. Let's end with this 10 years, right, at Robin Hood. What is surprised you? And what do you think the next 10 will look like? I think what's surprised. I think what's surprised

me is how adaptable, even a large organization can be. I think I've had the privilege of starting the company when we were a handful of people. I was a software engineer just writing a lot of code and seen it evolve through the various stages. And just particularly in the past couple of years, seeing how the company has evolved into one that predominantly served novice slash active traders into one that, you know, serves people in a wide spectrum of things in retirement and wealth building and earning more yield on their, on their uninvested cash. And kind of the way that small groups of highly motivated people who are mission-oriented can actually have a huge impact.

And I think I'm just continually amazed at what our people can do and how much resilience and kind of passion for the customer we have. And it makes me, and I'm just very proud to be working here. And it's funny, like, I still feel like we're a small startup because I kind of have seen it. But looking back at the 10 years number, and it's really quite shocking. It's a long time. long we've been at this and how much we've learned. Yeah, currently a $9.5 billion company on the stock market. So what do you think the next 10 years looks like?

Like in 10 years of now, is Robin going to look the same? I mean, we're very ambitious, as you can imagine. That's for sure. I think there's a couple of transitions that we'll have to make. One is like actually continuing on the process from not just serving. active traders, but actually serving people's comprehensive wealth building needs. Also, we're still predominantly a U.S. company. You know, we've expanded into some markets where we announced launching in the U.K.

last year in the EU for crypto as well. And these are long-term vets that will materialize over the long run and making sure that we successfully navigate the transition from being kind of a U.S. focused company to really serving customers from around the world. And if you look back at our mission, it's absolutely critical that not just Americans have access to the best financial tools, but there's lots of people out there that, you know, are in countries without a functional currency or banking system. They don't have access to easy ways to invest. I mean, I saw that myself in the 90s when, you know, Bulgaria.

went through economic crisis and hyperinflation and like the the kinds of things that people had to do to stash away their wealth were shocking and if they had just had easier tools that were accessible to everyone I think that we could really help people on a much bigger scale what did they do to stash away their wealth copper cookware really yep my my grandparents had copper cookware that, you know, was, they would put their pension, pension funds in because the Bulgarian Lev in the 90s hyperinflated like a thousand percent, which is also funny, you know, hear about low single digit inflation and people are rightfully very concerned about that, but having been through like multi hundred percent, thousand percent inflation in

the 90s, you just get a little bit of a different perspective at. you know how how lucky we are to be in this country and and plugged into this financial system, which is sort of like the envy of most of the world. Definitely. I mean, even last year, like you saw inflation rates in Argentina were 100 or 80 to 100 percent. And you're right, U.S. was going through crisis at something like seven or eight. I mean, you know, it's not good in any situation. So all right, Vlad. Thank you so much for coming on. Great to see you. And thanks so much for all the insights yeah thank you alex really appreciate the time all right thanks everybody for listening we'll be back on friday with actually ron john roy will be here to help

us break down the news as always but joanna stern from the wall street general will talk about her experience skiing down the ski slope and the vision pro so hope to see you then we'll see you next time on big technology podcast Thank you.