The Compound and Friends - The Giant Five, Undropping the Bomb, Interview with the Founder of Public

Episode Date: June 26, 2020

In the first half of this week's episode, Josh discusses the coronavirus resurgence, 5 stocks that now make up 22% of the S&P 500, the precedent set by the Federal Reserve's pandemic response, and the growing interest in ESG investing. In the second half of the show, Josh talks with Jannick Malling, co-Founder and co-CEO of Public, about the measures his social investing app has taken to protect and educate young investors. Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey guys, it's your boy JB back with a brand new episode of the new and improved compound show. Let's do the disclaimer, then I got a whole bunch of stuff for you, plus my interview with the co-founder and CEO of Public, Yannick Malling. Do not move. This is going to be a lot of fun. Welcome to the compound show with downtown Josh Brown. Josh is the CEO of Ritholtz Wealth

Management. All opinions expressed by Josh or any podcast guest are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Okay, it's Thursday, June 25th. The big thing that's happening in markets this week is the comeback of the virus. The seven-day rolling average of new cases is back up to 28,000 per day, which is a lot. At the New York City peak in mid-April, we were something above like 30,000 cases. So the numbers are going up and they're going up all over the country. Disney just announced that they're pushing back the reopening of Disneyland in Anaheim because cases in California are surging. We're hearing about hospital capacity issues in Arizona, the Houston area, you know, all different areas of Florida. So the problem you're going to have now, even if you say,

whatever, we're still going to reopen the economy. It is what it is. Even if that's your attitude, and I hope it's not, but there are people that feel that way. The problem with that is that you can't make everyone go back out just because you reopen. So that's something that people are going to decide to do on their own. And if you live in a place like Florida or Texas or Arizona, where cases are surging again, it doesn't matter what phase the governor says we're in, right? So it could say, oh, we're in phase three. So go get your haircut and go eat indoors at restaurants. You can say that, get your hair cut and go eat indoors at restaurants. You can say that, but it doesn't matter if people decide that they don't trust you or they don't feel like the situation is under control. They're not going to go out. So that to me is why the idea of a checkmark-shaped recovery

always sounded more realistic than a V-shaped recovery. So, oh, and then I heard this new term, a K-shaped recovery. So think about a K. It's like one part of it's going up, which I guess is the stock market, and then the other part of it is pointing down. And that's all of the people who are working in industries that are not recovering. So that's kind of a dire shape for the recovery to have it be two speeds forever. But look at this week, the banks took a huge step back. Bank stocks, casinos, airlines and hotels, they were all rolling over hard again. Cruise lines goes without saying. Now that you're seeing like the Disneyland reopen not happening and that exhilaration of, oh, wow, we got through the worst of it.

That exhilaration has gone away as we're seeing new, more localized peaks in areas that just weren't as involved in the first wave like New York and New Jersey were. So I think that was probably the biggest story in the market this week. Michael Batnick did a thing called a giant update. He looked at the five gigantic stocks. You know the names by now, Microsoft, Alphabet, Apple, Amazon, and Facebook. He notes that those five stocks are now worth a combined $6 trillion. They are 22% of the S&P 500. It's just an incredible thing.

And this is bigger than the combined market cap of the next 24 companies combined. And these aren't miniature companies. I want to give you some of these names. So in other words, Apple, Microsoft, Amazon, Alphabet, and Facebook combined are bigger than Berkshire Hathaway, Visa, Johnson & Johnson, Walmart, MasterCard, JP Morgan Chase, Procter & Gamble, Home Depot, Intel, Nvidia, Verizon. It's a list of gigantic companies, It's a list of gigantic companies, and these five are equal to the next 24. So it's a pretty extraordinary time. I made the case the other day, though, that we have seen – it's not totally unprecedented. In the mid-1960s, there were just two stocks that were 14.5% of the S&P.

That was General Motors and AT&T. And the top 10 holdings in the S&P 500 in the mid-60s were 50% of the market cap of the whole stock market. So we have seen big concentration in the indices before. It's just that that had been coming down pretty steadily for 50 years up until let's say five years ago when this whole thing got started with the giant technology companies. So I think that that's another just, it's a major story. Speaking of Apple, Apple knows a really big thing. They know that their customers really don't care whose chips are in their phones, like which semiconductors.

Nobody really cares. You buy the new iPhone. You assume Apple knows what it's doing. They put the best possible equipment in there. And if that equipment is made in Taiwan or China or in America or if it's made by Intel or Qualcomm. It's just not important, really, to anybody. It's not going to affect pricing. It won't affect demand. They're not using chip makers in their marketing in the way that the Intel Pentium used to be used by, let's say, Dell Computer or Compaq. None of that is happening. And there's a really interesting

parallel here with the investing business that I'll get into. But the news this week came out that Apple is going to make its own chips for something that it used to purchase from Intel. So these are custom designed chips that Apple is making themselves. And they told the journal that these chips are more efficient and offer higher performance graphics than I guess what they were able to buy from Intel. And they think the hit to Intel is like $2 billion a year. So it's not like a major hit to any particular company, but it's a sign of things to come, I think, for Apple. And the Journal is saying that Apple makes 42% of the core iPhone components themselves. And five years ago, that was 8%.

So it's a really, really big change over the last five years. And the parallel to wealth management or asset management or investing is that we've got the situation now where BlackRock is $5 trillion and Vanguard is $4 trillion and State Street is a somewhat distant third in index funds and ETFs, although they have the biggest ETF, SPY. and ETFs, although they have the biggest ETF, SPY. And advisors are like Apple in this analogy. And I think the ETF companies, they look more like semiconductor companies. So what they do is fairly high tech. It's very research intensive. It's a very important part of advisors building strategies and recommending portfolios. They need those ETFs and those funds as building blocks for what they're doing,

but maybe they don't need them forever. And we're starting to see these movements happen, like direct indexing, or some of the larger RIAs are now hiring in-house research talent and asset management talent so that they can build and execute strategies of their own and potentially bypass the BlackRock's and the Vanguard's at some point. So I do think that there are some interesting parallels in terms of like, Apple is closest to the customer and the customer doesn't care what chip is in the Apple product. They want the Apple product. For most financial advisors, they're not selling the merits of an asset management product to a client. They're selling themselves. They're selling the experience of working with them. So to the client, they want to work with that advisor. And then what

components the advisor uses to deliver a strategy is less important. So in other words, if the advisor says, well, we're going to use the iShares version of this index, it's very rare that the client will say, well, why not the Vanguard version, right? And there's usually one of each. Or why not the State Street version? Or, oh, we're doing smart beta. Why are we using dimensional instead of wisdom tree? Those conversations are few and far between. I don't think that there's a lot of that happening at all. The client is listening to the advice from the advisor, not obsessing over the components of the portfolio. Actually, they probably care more about the asset class

exposure than the fund that's being used to get them that asset class exposure. So I think this has already been a predominant trend in the industry. And we see that in the form of fees falling for funds, right? If people look at the funds as being interchangeable versions of the same asset class, then it makes sense that the advisor is less willing to have a large basis point fee attached to that fund selection. But if you get into the situation where direct indexing all of a sudden replaces the ETF for some RIA firms, and that really catches on, that to me looks like the equivalent of Apple saying, you know what? We used to buy Intel chips. It turns out we can make our own chip to replace that in a MacBook, in an iPhone. So I think that's something interesting that we

see happening. And again, Apple knows this really big thing, which is that at the end of the day, the customer wants an iPhone, the customer wants a MacBook, and whatever chips and whatever equipment is inside of that is very, very irrelevant in the grand scheme of things. All right. The other thing I wanted to get into is Bank of America Merrill Lynch runs this factor survey. They've done 29 of them, apparently institutional factor survey. So this is my friend Savita Subramanian, who's the head of equity and quant strategy for B of A Merrill Lynch. And here's what she said. ESG popularity more than doubles. So in the 29th survey, which they just put the results out, this is of institutional investors. Of all the factors institutional investors use in their investment processes, ESG saw the biggest surge in popularity. Nearly 40% of respondents are incorporating ESG, which is two times as many as last year. It was 18% in the survey last year. And that's likely helped by a growing body of ESG data sets. She even says an arising proportion of investors with shorter time

horizons, in addition to long-term investors, are also using ESG. ESG is environmental. So like people thinking about the impact of a company on the environment, the S in ESG is social. So does it have a diverse board of directors? Is it all old white men or are they really incorporating everyone that they can into the decision-making process at the board level, at the executive level? Are there women in high places in the company? And are they pursuing policies as a company that are seen as being beneficial for the social good of everyone? So obviously,

for-profit prisons are not going to be in ESG funds, right? Companies that are seen as being anti-social causes will not make it in. And then governance, the G in ESG. So can we count on this company's governance measures to do the right thing for everyone involved, not just shareholders, but stakeholders, which I know a lot of people hear that word and they go through the roof. But does the company care about its employees? Is the company running itself in the best interest of the many people who have to interact with it, not just shareholders? So ESG, I think it's really important to younger generations more so than previous generations. It's tremendous in Europe. It's a very big part of the asset allocation game, and that is coming to America very quickly.

And so Savita cites that twice as many people say they are incorporating ESG into their process as they were last year. And that's 40% of respondents. into their process as they were last year. And that's 40% of respondents. And I bet next year, it's 50 or 60, because this is just one of those trends that's coming down the tracks. And I don't think it could be stopped. The thing with the rising proportion of investors with shorter time horizons using ESG, I thought that was funny. I picture like a day trader who says, all right, listen, I'm only going to be in this stock for the next hour, hour and a half tops. But while I'm in it, they better have some women on the board and they better not have all white guys in the C-suite. You know, for the short time I'll be invested.

But look, my take on ESG, I think it's great that there's a movement like this afoot. I don't think people should make ESG-related investments that they don't intend to also make money with. And bigger picture, probably the S&P 500 10 years from now has 100% buy-in to ESG concepts from its components. ESG concepts from its components, meaning with the exception of maybe one or two oil companies, most companies that are in the S&P 500 in 10 years will have already adopted ESG-like policies. And so the S&P 500 will look like an ESG fund and not vice versa. So it'll almost be a moot point, not yet, but that's coming. And so being able to charge a premium for ESG is going to get harder because corporations on a parallel track are getting better at this stuff. So that's how we think about it.

But we do run ESG versions of some of our strategies at Red Holtz Wealth. There are certain clients who care a lot about that stuff and we want to make sure that we have the right tools for them. And then there are clients that just don't and we want to have the right answer for both. Last one, Morgan Housel is, I think, one of the best writers in finance, one of the best investing writers I've ever read, but right now, one of the best writers in finance, one of the best investing writers I've ever read, but right now, one of the best current writers in our industry. He did a post at his blog, which is collaborativefund.com slash blog, but you can find it very easily with Google search, called Never the Same. And Morgan is talking about this concept that there are going to be huge unintended consequences for the way the Fed and Treasury ganged up to solve for the economic issues of the pandemic. We have now seen them do

it. And so now we as a society know that they're capable of doing it again. What do I mean by doing it? So Morgan lists all these extraordinary programs that came to be this March and April. Really quickly, this stuff happened. Number one, $600 weekly boost to unemployment benefits. That's coming from the federal government for people who have filed for unemployment benefits in each state. Then the Fed expanded its balance sheet by trillions of dollars, and they said they would backstop the corporate debt markets.

This is all brand new. Then they said they're going to do a $1,200 stimulus payment directly into people's bank accounts. So now we know the federal government can do UBI, basically, universal basic income. Now we know that that's in the toolkit. The payroll

protection plan, the PPP loans, which went out to four and a half million businesses. We know now that the treasury, the SBA, they can go to the banks and say, go out and make loans and we will help you deal with the ones that go bad. And we will backstop that. So we know that that's a new capability. Airline bailouts, that's an old capability brought back for a different industry. Moratoriums on foreclosure and forbearance for rent. These are now things that might be expected in the next recession. So like Morgan's making this really key point, which is like, okay, politically, you might not like this stuff, but what every politician wants in the end is to get reelected. And if we see that jobs are at stake and that there were tools that had been used in 2020,

if there's a recession in 2025 or 2028, how are you going to hold these tools back? You might not be able to do that anymore. Now that we've seen this in action and how quickly it can happen, this just might be the permanent way that the Treasury, the Fed, other agencies deal with market crises. And they might deal with a shallow recession in the same way that they dealt with this emergency that really doesn't look like any other recession we've ever had. So I guess Morgan saying like, this is the equivalent of Truman dropping the bomb, never had to drop it again, because the world got the message, oh, that's a thing that can happen now, right? That's like a

thing that exists in the world. You can't undrop a bomb is the way I would put it. You can't unring a bell. So what are the implications of that as an investor? Does that now change the way that you allocate and the way you think about risk, knowing that the central banks and monetary authorities and government agencies have this capability in their toolkit and have this institutional experience of having done this?

Do you now think about market crisis and the way you're taking risk? And does that lead to people taking risks they would not have otherwise taken, which is a whole other thing that he didn't get into or he got into a little bit. But that's, I think, worthy of a lot more exploration. My friend Allie Schrager wrote a book two summers ago or last summer where one of the chapters she talked about this thing that happened. I think it was in California or Hawaii where they started using jet skis to rescue people surfing out in the deep, like surfing big waves way away from the beach.

And they started incorporating jet skis into the rescues. And you would think that that would have made people safer. It's like, oh, now you don't have to wait for another surfer to come along or hope you can swim. Now you know that there are a couple of guys out there on jet skis picking up people that go down. What actually happened is it made the deep sea big wave surfers take even more risk. They were emboldened by the presence of these rescue jet skis being out on the water with

them. And so what did they do? They went even deeper or they went after even bigger waves or even more people came out to surf these big waves who had no business being out there because they felt that they had this new safety net with the jet skis. And Allison does a great job translating that into financial terms. So if we now think that don't worry about the next market crash or the next recession, the Fed and Treasury are going to team up and clean it up in five minutes. They'll just offer to buy every single junk bond on the market, and then they'll start buying ETFs, and then they'll start sending money directly into people's bank accounts. If that's now some sort of a baseline for how we deal with this stuff,

I think the implications are huge in a lot of ways. And maybe we'll get Morgan on here. We'll talk about that sometime. Okay. I think that's all I got. I want to get into the interview with Yannick Malling. I think I'm pronouncing that right. So Yannick is the CEO and co-founder of Public. Public is a trading and investing app. A lot of people, when they think of trading apps, they think of Robinhood. Public has deliberately built itself to be very different than Robinhood. It wants to be a tool for longer-term investors, and it wants to incorporate collaborative learning so that people feel like they're in a safe environment and they can ask questions of other investors and they can get smarter about the companies they're investing in. So the other thing that it lets you do is tell the app which of your positions are meant to be trades and which are meant to be long-term investments.

So it's a really interesting concept. I haven't opened an account yet and started playing with it, but I keep meaning to, and maybe I will. But anyway, I want you to listen to Yannick explain that to me and a recent decision that they made to protect their clients from investing in bankrupt equities. I thought it was a really good conversation. Here we go. Hey guys, it's downtown Josh Brown. I am here with a special guest today, Yannick Malling, who is the co-founder and co-CEO of Public, which is one of the most popular trading apps. Yannick's got a really interesting story. The app is built for the socialization of trading, letting people learn from doing. I'm really excited to

have him on. We're going to talk specifically about the recent phenomenon of people trading bankrupt equities and the very principled stand that public took. And I find it to be very admirable. So we'll get into all of that. Stick around. I think you're going to learn a lot today. Okay, Yannick, we're back. Let's talk a little bit about why you founded Public, why it's built the way it is, and what makes you guys unique. Because I think it's a really great story. Yeah, sure. Thanks for having me on here. So Public is a social investing app, right? So we're a social app for investing, which means you can connect with a community of like-minded

investors. You can see what they're investing in and why. So every time you make a trade on the app, you can add a little caption to it, like how you do with your Instagram pictures or whatnot. But it's also a fully regulated stock brokerage where you can invest in real time with fractional shares with share commission. And so we really built this company because we saw a lot of people who were waiting until maybe their late 30s or early 40s before they wanted to get involved in the markets. They saw it as a very daunting thing. And we did not want those people to lose out on 20 years of compound investing opportunity because we know that would

be a very expensive mistake sort of down the line for a lot of folks. But we always thought the recent people who were new to the stock market had not invested historically had less to do with fees and commissions and really more to do with a general lack of financial literacy. So, you know, what are sound investing principles, how to really build a solid portfolio? And, you know, they just didn't know where to start. Right. and they just didn't know where to start, right? And I think what you've seen, frankly, with the whole Sierra Commission movement is that has benefited a lot of day traders who were already deep in the market and trading. But for the rest, I don't think that was the main thing that was like blocking them from participating in the markets.

The difference between paying a $3 commission and a $0 commission probably was not stopping people from investing. I think apps like yours are so intuitive and beautifully designed that people who would otherwise struggle with the online user interface of a traditional, let's say, discount broker have something entirely new that they can really, with one finger, access the market. And I know the traditional brokerages have gotten better and they're trying to catch up,

but to me, it was always about making people feel comfortable on an app that feels more like something that they can actually manage. Right, exactly. I think a lot of people are familiar with the form facts or what public offers, right? So we have a feed that we open up with where you can see trades and captions

from people that you follow. We launched group messaging now. So you can go into these chat groups, which we just launched actually during sort of two months ago, I think, during this kind of quarantine period, which has completely taken off. People are using it to chat with friends,

but obviously also just like-minded investors who you can see own the same companies as you, right? And so there's an earnings call around Netflix, for instance, or whatever, like strangers are teaming up and have a shared interest in that moment, being owners in Netflix and using that as a platform to really kind of collaborate with each other and learn from each other's experiences. How do you keep those conversations friendly? Because, you know, when I first started in the industry,

there were message boards for specific stocks on Yahoo Finance and Raging Bull. And now, of course, there's Finance Twitter, there's Reddit. So there are other places where traders talk to each other. But in my experience, it doesn't take long for them to devolve into infighting and negative feelings. How do you keep those conversations from turning into what other online forums turn into? Yeah, I mean, I think you're very right. I think it came down to a couple of different problems. So number one, on public, so we actually say we're the most verified social network in the history of social networks because we're also a full stack broker dealer and so we have to do kyc and things of that nature which means that in order

to participate in the community we actually need to know your identity and that is just a fundamental difference from any other of message board or forum or social interaction that you had around trading or investing where it's just a username, maybe an email or password. And then you're talking about different things. So on public, when you see commentary from someone with one tap, you can go to their profile page, you can see their portfolio. And so it allows you to also just like know what companies people own. And it creates a way more constructive tone.

People are better behaved. People are better behaved when they're themselves. Exactly. Way better. I have found that. What else? Can I see somebody's returns or no? Just the stocks they're involved with.

We don't do the returns right now. We show the stocks that they have in their portfolio. We launched very recently, and as well as what they have in their watch list, we launched very recently something called Long-Term Portfolio, which is a feature. So to give you an idea, we always really wanted to build a very diverse and inclusive community. And so 90% of the people that join public are first-time investors. I think around 40% of the people that join public are first time investors. I think around 40 percent of the community are women. So there's still a little bit of a gender gap working too close. But that's pretty good. That's pretty good, though. By industry standards, it's pretty good.

A lot of people, including myself, will say that it's still not good enough, but it's definitely getting there. And so, for instance, we recently did a survey. And so 72% of the public community consider themselves to be predominantly long-term investors. And so I think that is a very different kind of community and audience, which just creates a different kind of vibe within the community, quite frankly. And so we launched Long-Term Portfolio as a way to divide your portfolio into what do you own versus what do you own for the long term, right? what do you own versus what do you own for the long term, right? So as a way that you can express, hey, Apple is a company that I'm just going to own forever, quite frankly, probably, right? And so I'm going to put that- Can I move something?

Yeah, exactly. So then you basically take it and slide it down into the long term. Can I say this is a trade now? It's no longer long term. I can move it back to trade. Yeah, you can move it back to. The funny thing is when you then sell something in your long-term portfolio, we actually give you a little interstitial screen, which serves as like a reminder of how long you held that. And it kind of lets you remind that at some point in the past engage in things like panic selling, right? Not like make rash, spontaneous decisions that didn't really fit with the overall

investing plan that they maybe set out with. All right. Let's talk about what went on over the last couple of weeks. We have this phenomenon now where there's no sports. There are millions of young people at home with not a lot to do, not a lot of action. And a lot of them have discovered trading, which I think is a silver lining. I think it's – look, I talk to people in their 20s, Yannick, and they want to get smarter. They want to know more. And I – of course. Yep. But then I say to them, I might be a lot smarter than you just

because I have more experience, but you have something I don't have, which is time. You have a lot more time than I do. And that's a more valuable commodity in investing than intelligence. That's like a fundamental belief that I have. But so a lot of them are discovering this and some of them will become real investors. Not everyone, some of them will lose everything and they'll say, this is rigged. It's not for me, but many of them will become real investors. Not everyone. Some of them will lose everything and they'll say, this is rigged. It's not for me. But many of them will make mistakes, learn, get better. So that's great.

And I think you're going to be a big part of that. But one of the tangential offshoots of this activity is that we now have very speculative behavior happening in a lot of equities and ETFs. And I think the situation of Hertz is probably the most emblematic. So here's a company that essentially is in the process of filing for bankruptcy while its stock becomes one of the most hotly traded issues on certain online apps. And you did something that I thought was very principled and worthy of admiration. You said, you know what? I understand was very principled and worthy of admiration. You said, you know what? I understand that people are treating this like a toy, but we are going to stop

our users from being involved because we think it's more dangerous and it's not worth letting them do it, even if they make money on a trade. So talk about what went into that decision. Yeah, sure. So I think it came back to, for us, the fact that the vast majority of our community are new investors with little to no investing experience. And so because of that, we really felt we had a fundamental responsibility to make sure these people didn't just get hurt very, very badly in their first trade. And if you think about it, it's the first time you invest in your first sort of interaction with the public markets, you get hurt and you walk out, it doesn't really help anybody.

It doesn't help the industry. It doesn't help them. It certainly doesn't. You buy something that's worth zero. It certainly doesn't help us, right? So in many ways, given the, I mean, we had never done something like this before, quite frankly, because it is an unprecedented situation in many, many ways. And so we've had other kind of clues when people were trying to buy stocks that were low in liquidity or maybe penny stocks, things of that nature.

They're like warnings in the app and things of that nature. But this was just something where we felt fundamentally like, sure, we could get some more flow on the platform, if you will, by not doing it. But that would be a very short-sighted decision. And that's not really what we're about. That's not how we want our community. That's not the type of investment we're designing this for anyway. And so for us, it was a little bit of a no-brainer, to be honest.

Did anyone complain? No. Did any users say, but I want to trade bankrupt equities? it was a little bit of a no-brainer, to be honest. Did anyone complain? No. Did any users say, but I want to trade bankrupt equities? No, they did not. They did not. And to your point, if they had actually done that, considering it's like a fairly transparent community, you would also have seen that along the platform.

Let me ask you a couple of follow-ups to that, because I think this is becoming a bigger and bigger topic in the media and you have a really important role here. So the guys at Betterment, who I'm friendly with, had a very controversial week. There was a period of time where the market was like kind of flash crashing early in the morning for something technically, like it wasn't economically related or maybe it was, but like it was a situation where it was very obvious the right thing to do was to stop people from selling into a gigantic gap lower on the open. And Betterment, which is an investment advisor, it is a broker, but it acts with clients as an advisor.

So it's giving advice. They decided we are not going to process all of these sell orders. We're going to wait till later in the day when the markets are more orderly. And people flipped out because prior to this, they were accustomed to every online service being a trading service. They didn't understand the difference between E-Trade and Betterment. So I came out and defended Betterment. I thought they made the right call. We obviously know the market recovered and restored. There was a restoration of sanity and Betterment's customers were well served by that decision. But the media flipped out on them.

Do you run that risk when you start locking securities and stopping people from doing things? Do you run the risk of people misunderstanding your intention or questioning your right to do that when it comes to other people's money? The way we kind of think about it, so there's no question that the last three months have sort of rewritten the rulebook a little bit about maybe how you should operate a trading platform, right? And I think where we come out on this is like with anything, the best problem is one that you actually don't have to solve. And by that, I mean, you want to solve as many of these things preemptively as you can, right?

And so I think a lot of it comes down to like education, right? Like before you hit that buy button, there should be small things. And like, we live in a predominantly kind of mobile world right now, or even in the web where you can add all these kinds of triggers in and it really doesn't cost you a lot, right? And so I think it's important to kind of think through

what are some of those things. So what we're going to be rolling out in the next couple of days is more of these kinds of signs, right? It's like we had never really seen before during Publix's lifetime, at least, we're still a young company, a company that was even trading up during a bankruptcy, and let alone one that was then going to do a new stock offering. Raise money.

Exactly, right? And so I think we just have to adapt to these money. Exactly, right? And so, and I think we just have to adapt to these kinds of things, right? And so when you try to invest in a company that has filed for bankruptcy on public days, you're going to get that warning that said like, hey, this is,

this and this has happened, et cetera, because I think a lot of this also comes down to... But you went beyond the warning. You locked it. We locked it, yeah. You said you're not buying it.

Correct. The Hertz thing we locked specifically due to the stock kind of offering plan too. I think there are cases where people generally have gone, there are very, very few of them though, but there are cases where people sort of have gone bankrupt and then actually like they filed for bankruptcy and then they've kind of come out of it again. like they filed for bankruptcy and then they've kind of come out of it again. We just thought that was not like never going to happen in the Hearst case. And so it makes no sense to allow people to continue to be able to buy that stock. But I think fundamentally. I agree. Yeah, I agree. And I think just fundamentally, it comes down to like thinking through the educational layer

when you've had a ton of people move into the markets like this with very little experience. Like I, as you, think it's fundamentally great thing like we've always we've almost doubled our growth every month um since since this whole thing started um but interestingly we also see we also saw engagement going up a lot right and so what that means for someone like us is when you have people's engagement and you have their attention, you have an opportunity to educate. Right. And that's maybe like if you think about Betterment, it's maybe not the kind of app that you check every day. Right. Public has that component. You shouldn't.

Because and it's not that people are day trading. They're just checking what other people are investing in and trying to get educated in these sort of bite sized forms of information every day. in these sort of bite-sized forms of information every day. And so we were, frankly, in a little bit of the privileged position, so to say, that people use our app very actively. And that means that we actually have an opportunity to put in triggers in the app that help kind of educate them

about what's going on during these fairly present times. I love it. What about things like showing people the tax consequences of maybe wiping out a portfolio and going to cap? I mean, I know it's a lot of smaller dollar figures. So maybe it's not as worthwhile in what you're doing. I mean, that's, I don't know.

Without supporting too much, that's something that a lot of people will ask for and we've been working on, right? And so the long-term portfolio, you can kind of easily imagine that counting up how many days you held it. But to your point, something like long-term and short-term capital gains tax, it's something that a lot of people don't really understand.

And I'll blame them. It's fairly complicated. But if you can break it down, serve it up as part of the experience. And I think historically, the problem has been, if you think about the number of people that are willing to go spend endless amounts of time Googling the web, reading all these different articles from different publishers. I think if you do that in 2020, there's even the element of who to trust more and things like that. That becomes a very daunting, long process. And that's just a long funnel where a lot of people drop off. You build it into the product experience, a lot more people are going to essentially

consume that educational content. And it's not going to feel like we're trying to educate them. It's just going to kind of happen and flow naturally. So this is the last thing I want to ask you on this. Where do you draw the line? So in 1980, the Massachusetts state securities regulators decided they were going to block the Apple IPO. It's a true story. So if you were an investor in the state of Massachusetts, you couldn't be in the Apple IPO.

And the reason they cited was because the company was losing money, which sounds hilarious to us now because those are the best IPOs. But Apple, of course, today is worth $1.5 trillion. And of course, you could have bought it the day after the IPO. So it's not like anyone was blocked from investing in Apple. How do you guys figure out where the line is between where you won't let people do something where you will? Is it a feel thing? Or are you going to kind of come up with like, all right, these are the rules going forward because we don't want to have this many judgment calls. Yep. That's a good point.

I mean, the Apple thing was interesting. We talked about that and the pun there was sort of like, that's not really apples to apples with what's going on with Hertz because I do think that to block an IPO because the company is improbable, it's never something we would do, obviously, right? I think we look at it a little bit like a pyramid so you will have now um some unprecedented situations happen as like what happened with hearst and hopefully that's not gonna that's gonna be the very top of the pyramid it's not gonna be every single company that goes through kind of a journey like that or a process like that and those are the ones that i think you can step in and kind of actively block

because there's just a general consensus that this is not going to go anywhere, right? I think the term worthless was mentioned half a dozen times in their own filing, right? Around the equity that they were issuing. And so I think that is a- Okay. So you know when you see it. Yeah, exactly. And then I think there's a second layer where it may not be an all-out block, but it's about having some nice way of letting the user know what's happening very recently with this company. Because I also think what a lot of people are doing right now, they're speculating in like, oh, who's going to go down? And then post-COVID, it's all going to be fine. And then they're all going to do great.

And I'm going to make a killing, right? Because you look back at the charts back in 08. And then it's like, yeah, everybody knows someone who invested just at the right time in 08, right? Or in 09. And I think the problem is if you then go and buy Hertz just to see you see dropping massively in the top movers without really taking the extra time to go through the news or things of that nature,

that's where I'm saying, let's bring the news to them. Let's build it into the experience in a way where they become fully aware of what actually is going on before they make financial decisions. Okay. No, I think that's totally right. I was never a fan of zero friction trading. I feel like there should be some speed bumps along the way before you do things that you can't undo. I think it's a philosophical question of whether you see it as friction or whether you see it as education. And I think it could be both. It could be both. In many cases, it's a matter of how you kind of define those two concepts.

But I think to a certain extent, they do overlap a little bit. And I think that's sort of the overlap that the trading platforms in general need to find. So two more quick ones on a different subject. The first is, it probably helps, but it also probably annoys you. How many times a day do you get a question from somebody asking about Robinhood? Maybe it's helped you because Robinhood's been successful and they've raised a ton of money. So it's probably good. But then it's probably very annoying because I can recognize how you're different.

But do a lot of people not understand the difference? I think they do now, if I'm being quite frank. We only launched to the general public last year. The first of the mobile apps industry to really launch these real-time fractional shares and then very quickly after that, everyone got it. But I think specifically in the last couple of months, I think people have realized that not just the social aspect, but like the community around public is very different. It's maybe a different type of audience really that kind of goes in there. And it's a fundamentally very different experience,

right? We've always said, when you're talking about Robin or anyone else, I mean, I think every investing app that's ever built is really one where you're locked in and it's like a single player mode thing. It's like you, your chats or your numbers. And that's always where the like intimidation has come from. And like, there's not a lot of dynamic stuff going on there with public. It's very kind of people-based.

So you walk in, you immediately see people that you follow, you see which trades they've been making and why. And that kind of just is a very kind of different experience and ultimately lends itself to a little bit of a different investor, I think, considering that most people in our community are kind of long-term investors. So you guys, you guys raised money from some interesting celebrities. I know Robin Hood did

also different celebrities. I like yours better. You have Will Smith and JJ Watt. So I know strategically that has value because they're in the public eye and millions of people love them. Does it extend beyond that? that has value because they're in the public eye and millions of people love them. Does it extend beyond that? Yeah, absolutely. Like I think we very specifically found, again, we actually think about ourselves as building a social app and a community first, but because it's like a vertical social network within the area of finance and investing, we're also a full stack kind of regulated broker dealer. But when you're building

community, you really want to think about who makes up that community. And today for a startup who's on your cap table really helps to signal that. And so I think in the case of both Will and JPA and even Casey Neistat and Sofia Barroso and some of the other people that got involved, I think they all really bought into the mission at a very fundamental level about sort of like, okay, there's been people who's trying to provide access to the markets and whatnot. I think we came at it a little bit differently, right? Like a public, we always say we want to accelerate people's prosperity by making the stock market inclusive, educational, and fun.

And that's actually a little bit different, right? Because it goes down to making it not just more accessible, but also more approachable, more educational. And so it basically came down to like, whether they wanted to help a company build more financial literacy for the next generation, get more people invested in the upside of the stock market, and kind of learn from each other. And that's something that a lot of people kind of like the notion of that. I think it's great that they're involved. I must've missed the phone call or maybe you had my wrong number.

You'll get me on the next round. You'll get me on the next round, Josh. All right, this has been Yannick Malling of Public. What's the URL? I know it's an app, but what's the URL for your website? It's public.com? It's public.com, It's public.com.

Yes. Easy enough. All right. Download the app. Check it out. I think you'll love it. Thank you so much, Yannick, for being with us. Let us know what you guys think about online trading.

Go ahead and leave us your feedback. You know we love that. Go ahead and hit that like button for me. Subscribe to the channel if you have not already. And we will be back very soon. Thanks for listening. Check us out at thecompoundnews.com for daily investing and market insights. You can watch all of our videos at youtube.com slash thecompoundrwm. Talk to you next week.