The Pomp Podcast - #683 Robinhood’s Recent Rise w/ Vlad Tenev

Episode Date: October 8, 2021

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

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

and they have some promotions happening right now to help even more people be part of the future of finance. If you have an account already, you can split $100 in Bitcoin with a friend when you invite them to sign up for OKCoin if they buy $100 of crypto in the first month. The more friends who sign up and buy the more bitcoin you get and i always recommend dollar cost averaging as a way for investors to have more control over the average price when building a portfolio now you can automate dollar cost averaging with completely fee-free daily weekly or monthly recurring buys on okcoin until november 1st that's right no fees at all on your recurring purchases until the holidays get started on the web or on their new super easy to use app at okcoin.com slash pomp again

OKCoin.com slash Pomp. Go check out what they're doing. Pay no fees on all recurring buys until November 1st. Next up is MiamiCoin. As you may have heard, we just had Miami Mayor Francis Suarez on the show to talk all things Miami, including his excitement for a project that's really caught my attention recently, MiamiCoin. MiamiCoin is the first token to be released by CityCoins, a community-driven initiative built on Bitcoin. CityCoins aims to give people around the world a new way to support their favorite cities. In short, the city of Miami was given $7 million and counting by private citizens

to improve the city with no strings attached. A city government embracing crypto instead of fighting it was a historic event. Do you want to get involved? Follow at MineCityCoins on Twitter to stay up to date with the project and chat. You can also go to CityCoins.co, CityCoins.co to join the community discord

and contribute to the movement. citycoins.co go check them out miami coin over seven million dollars contributed and continuing to grow pretty cool i really like what they're doing and i'm excited to see what the impact will be on city governments like miami all right let's get into this episode with vlad i hope you guys enjoy this one anthony pompliano runs pomp investments all views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of pomp investments You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his

personal opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I've got Vlad here. Thank you so much for doing this. Thanks for having me. Good to meet you. Absolutely. You've built a multi-billion dollar business by essentially dropping the friction for people to enter into the financial markets. It's something that my brothers and I spent a bunch of time thinking about and working towards is getting more people invested in the market. As you've built that business, obviously there's been an incredible boom in participation in the markets. There's also been all kinds of chaos and craziness that's gone along with it. Before we get into the actual business itself, tell us a little bit about you in terms of kind of your journey to

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

be a professor. So I thought that, you know, by being a professor in math or physics, I'd be able to contribute to society by kind of pushing forward the overall body of knowledge and sort of stumbled into entrepreneurship. You know, my co-founder Beju, we were really good friends in college. We both were actually kind of on the academic path and we're doing math and physics together. And I graduated college and he graduated from his master's in 2008 when Lehman Brothers went belly up and you had kind of the start of the global financial crisis, which was a category defining moment for the financial industry. And so in the wake of that, we started a few financial companies and that's kind of how we cut our teeth on entrepreneurship. But sort of looking backwards,

There were a few defining moments that made me exceptionally aware of, you know, how privileged we are in this country to actually have access to a functional financial system in in the mid 90s. Bulgaria actually went through hyperinflation. And so I remember, you know, as a kid visiting my my grandparents back in Bulgaria and, you know, one year a stick of gum would be, you know, two leva, the next year, it would be 2000, right? So you had, you had dramatic hyperinflation, their pensions basically evaporated, the kind of social safety net really wasn't there. And, you know, I think we take it for granted in the US, just how good of a stable financial system we have, how strong capital markets are, how easy it is, especially now with with products like Robinhood to become an investor. And, you know, um, there is, there is a little bit of a question mark about, um, people just take it for granted. They, they assume that these things exist and

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

I think there's on a net basis, most people say, hey, this is amazing. Then there's what I'll call the critics. And those critics basically are like, hey, if people are uneducated and we give them access, then they're just going to lose all their money. How do you evaluate, you know, is democratizing the access good or bad? And then how do you think about, is it just open the markets and let everyone participate? Or is there some sort of kind of guide rails or education or something that should go along with it? Yeah, sure. And that's a question that we ask ourselves very frequently, right? Do we believe in democratization at all costs? Certainly not, right? And I think the way to articulate it is by talking about our core values. And we actually

published these on our website, so you can find them. And we have four values, and they're actually linearly prioritized in order. So the top value is safety first. And what that means to us is it's paramount for us to safeguard the security of our customers' accounts and assets to provide them great customer support that's timely. And as a matter of fact, we announced 24-hour customer support just today. So now any customer can request live phone support via the app for any issue, including cryptocurrency-related issues, which I believe makes us the first crypto brokerage to offer 24-7 live phone support. I think that's a big deal. And it goes in line with the value of safety first. It also means we're investing in education. We're investing

in safeguards and guardrails within the product. So we'll actually tell you if you're investing in a stock that is experiencing high volatility, or if it's a leveraged ETF, for instance, and there's unique properties that a first-time investor might not understand without that additional information. So safety first is our top value. Our second value participation is power. that's the one you kind of associate with democratization and democratization is important to us because for a long time um just wealthy people have had access to to these financial tools right and all that does over the long run if you allow wealthy customers access to to certain tools and and everyone else to not have it is it just uh increases tension it increases

the gap between the haves and the have-nots, increases wealth inequality. And I think as a society, these are very deleterious things. You might not notice in the near term, but over a long period of time, it can be very, very dangerous. So certainly we believe in democratization and we believe that everyone should have access to the highest quality tools, even those tools that have previously been, um, reserved just for the wealthy. And we believe it that very strongly, but not at the expense of safety. I think safety, uh, safety is paramount to our product and our customers. When you start to think about that participation, one of the big knocks against, uh, a lot of young users, but specifically of Robin hood is, you know, they don't have no clue

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

We do see, as you're suggesting, that people tend to sort of paint a brush with broad strokes about Robinhood and our customers and even more broadly kind of this next generation of investors. And I mean, I would just say it's a little offensive. to us to have them be referred to as uninformed or clueless investors. Actually, we see a lot of them are learning. Even the ones that sort of are engaging more actively are getting pretty deep and sort of doing a lot of analyses of these companies. And they very much are aware of what they're doing. Now that said, if I think about kind of my personal predisposition and what type of investing that I like, I'm all about long-term investing in companies that you care about and

doing that consistently and steadily over a long period of time. And you can see through some of the products that we've rolled out that Robinhood, the product itself is making it easier to do that type of long-term habitual investing. So we rolled out recurring investments and drip last year as part of our fractional shares rollout. And actually, just a couple of weeks ago, we rolled out crypto recurring as well. So it really leverages the zero commission execution of our crypto platform. Now you can dollar cost average and really invest over the long run using crypto commission free, which I think is a very, very strong value proposition for crypto investors as well. I mean, it can be stressful trying to time the market and seeing the highs and lows and

thinking about entry points. And I think recurring investments takes a lot of that out of the picture. So most of our customers are not active traders, very small percentage trade options or invest using margin. The bulk of customers are typical buy and hold investors that are just trying to build diversified portfolios over a long period of time. And Robinhood exists to make things easier for them. And I think we've made a lot of progress, but still we have a lot more we can do. Let's talk about GameStop. I got a whole bunch of questions here. I took questions from the audience. As everyone would expect, some of them were intelligent, some of them were absurd and everything in between. First, I think it's important to call out that the folks on Reddit,

which is obviously not on Robinhood, that identified the short squeeze opportunity ended up being right. And I think that gets lost in all of this, right? As they basically identified this short squeeze opportunity, they went ahead, they exploited it. And for all intents and purposes, they applied quite a bit of pressure to a number of very large Wall Street firms. Some of that was on Robinhood. Some of that was done elsewhere. But that's kind of a quick summary of the situation. When you think about that and you talk to somebody in private, how do you describe that situation? Was it something that you all saw pretty early on happening? Did it only really become kind of the forefront once there was the pressure to the large firms? Just what

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

remnants of the election and then the insurrection in January. And the pandemic was very much flaring up. So, uh, people were, were inside, um, and, you know, dealing with sort of the, the peak cases and, and, uh, and pandemic activity. So we were very much still locked down. Um, and then I think people had gotten stimulus checks at the end of, of the previous year as well. So the confluence of all of these factors led to just, uh, Robin hood climbing through the app store. You know, we, we were, we were first hitting sort of like, um, number one in the financial category and then eventually ended up actually number one overall, you know, ahead of social media products like Tik TOK and Instagram and Facebook, which is pretty, um, pretty

unprecedented for a financial product and a brokerage product. So, um, you know, we were, we were trying to keep everything together and, you know, looking around corners best we could to make sure we were stable and up for customers. I remember at that time, that was my number one priority because at the beginning of the pandemic, March of 2020, we had some downtime, right? As markets were getting super volatile. And that was very disappointing to me

kind of as an engineer who built the product, right? You never want your service to be down for a significant period of time, um, especially, you know, when there's, there's a lot of market volatility. So that was kind of fresh in my mind, just making sure that the investments that, that we made, um, on the technology, uh, were paying off. And, you know, we were really being tested at that point with some growth that we hadn't seen in the past. And then, um, of course, you know, we couldn't have anticipated the five sigma, the sort of one in 3.5 million event, which resulted on the week

of January 28th, where basically the kind of viral social media activity all funneled through a handful of stocks and really a handful of brokerages. Robinhood kind of being the bulk of it, but also lots of other brokerages had to deal with similar things, both before we restricted the stocks and after. So the way I describe it is the markets as they currently were set were not really built for that type of activity. And you can kind of see a bunch of assumptions breaking. And that's what led Robinhood to restrict opening positions. And that's why many other brokerages did that as part of their risk mitigation procedures one way or another, uh, before and after, uh, our restrictions. So most of the questions fall in three

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

and kind of chaos? Yeah. I mean, I think, uh, I think the straightforward one is just, um, communicating with, with customers and letting them know sort of like with more specificity, what could happen, what could not happen. We did communicate to customers actually quite prolifically, but I look back at some of those communications and especially in the days leading up to January 28th, we would send information about market volatility and how to protect yourself and, you know, uh, information about, you know, long-term investing. And, um, I think hindsight being 2020, we, we had no idea we would, we would have to restrict these stocks, uh, up until the morning of January 28th, but, you know, being, being a little bit upfront and preparing people

for possibility, um, you know, I think would have gone, gone a long way just saying, Hey, in addition to this information about what volatility means, this is what a brokerage could do in response to volatility, including restricting these stocks, probably would have tempered a little bit of the conspiracy theories that emerged of the brokers colluding with the hedge funds, which despite all of our efforts, all of my efforts, still remain. People still out there think that Robinhood colluded with hedge funds, which is flabbergasting to me, even though all of the mountain of actual evidence, I think, pretty categorically explains that we had to impose these restrictions because we got a big collateral call from NSCC, which completely has nothing to do with hedge funds whatsoever. Um, but, you know, uh, stemming that at, at the beginning as early as possible, um, probably would have been a little bit more effective, but, you know, you yourself probably know

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

So I think there's a lot of things we could have done better, a lot of lessons and a lot of things, you know, we have done better since then, including communicating more transparently, really ramping up our customer support to make sure we're we're there for customers and generally articulating our values a little bit better, telling people, hey, we are a safety first company. We believe in democratization. Absolutely. We want you to do everything that you want to do within the confines of sort of law and regulation. But we want to make sure that especially the young people and the first time investors on Robinhood are having a great experience, have great support and have access to all the information they need to to become long term investors. All right. So the second one is definitely more fun. Everyone wants to know. you mean that you're to tell us that you're not evil? Robin Hood's not evil. You don't want to take advantage of customers. Like, how do you look at, uh, the people who think you guys are, uh, are bad guys, right? However you want to kind of describe that. And, uh, that you're essentially taking advantage of customers. Like what's the, uh, uh, kind of pitch to them or the,

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

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

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

over, over the long run, uh, we believe that, uh, that's really what's going to resonate with customers and just making our customers very, very happy with the service and giving them more value. I think it's just going to govern sort of how they view the company, how they view me personally and everything of that nature. Awesome. And so I got one more question, then we'll move on to Bitcoin and cryptocurrencies. I believe that you raised like a billion dollars overnight during this entire thing at one point. What goes on on those calls? Most people are like, wait, how the hell do you raise a billion dollars in, you know, 10 hours or five hours? Like, do you just call one person? You're like, Hey, I need a billion dollars. Or is there some other

process, like whatever you can share in terms of, of, you know, kind of that actual series of events in terms of raising so much capital so quickly and also having it happen in somewhat of a chaotic, like, you know, type situation. Yeah. I mean, it was, I think it was, it was over $3 billion, either 3.4 billion or 3.6 billion. Um, yeah, that, uh, a lot of which came in within 24 hours. And then we had some, uh, the following Monday. So all this went down on Thursday. So within just a handful of business days, it's, uh, over $3 billion. And, uh, it was challenging. I mean, don't get me wrong. If, if you'd asked me, uh, back in 2018 or 2019, whether it was possible to pull something like that off, I probably would

have said no. I mean, I can't imagine pulling it together that quickly. Your typical round takes multiple months to close. So people did a lot of work across multiple departments. The finance team, obviously the legal team, accounting, everyone just pushed really hard. And there were a few investors that I called in those early moments of Thursday morning that basically committed on the spot. I've got to call out Mickey Malka from Ribbit Capital, who's been a friend and partner, but, you know, committing on the spot and, and, you know, saying I'm in for $500 million and and let me make some calls and, and, and get you a little bit more. I think that went a long way because you know, when people see that the first few people, the first few

investors are committed it makes it a lot easier for them to come in. So definitely a lot of gratitude to the investors that we've known for a long time that supported the company through that really unique time. I think another big part of it was, I think at that time we were number one on the app store. So it was a problem of growth, right? So I think we were fortunate that we were in this weird situation where, which was because we were growing so fast, we needed the extra capital to continue to grow and to handle all the demand on the platform. Yeah. Absolutely incredible. Mickey obviously is a legend in his own right, but to commit $500 million on a phone call kind of right out of the gate is pretty impressive. Talk to me about adding Bitcoin

and cryptocurrencies to the platform. I know that obviously tons of young people are interested in these assets. They've been buying them. What was kind of that process like? And then how has that gone so far in your opinion, in terms of the success of rolling out those products and really kind of scaling it to the customer base? Yeah, well, we've seen a lot of interest in cryptocurrencies on the platform. And I would say that was non-obvious when we decided to do it back in 2017, early 2018, because we were the first or if not among the first sort of traditional financial companies to add trading of cryptocurrencies. And I think the thinking behind it is, you know, there's our traditional business that, you know, tends to evolve more

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

to really high value and great pricing and, you know, making Robin hood synonymous with getting crypto for, for the lowest possible cost. So that's what brought in commission free. And then from the user experience standpoint, um, making it as easy to use as possible. And, And, you know, this is something that I think we we've heard feedback from customers. But at the time, it was it was really a decision to, you know, not have customers worry about things like public private key cryptography and encryption and kind of take that step, that hurdle that sort of put it in the realm of you had to be a computer scientist or an engineer to understand how to work with these things and and made it accessible to everyday people that wanted exposure to the asset. So now we're adding wallets. We've rolled out the wallets waitlist, actually just hit a million people on it yesterday. And we're looking to provide the same sort of user experience and ease of use that we did for kind of the crypto trading product to wallets themselves. But I think that was the advantage in the early days. It was just Robinhood crypto was meant to be the lowest cost and easiest to use way to get exposure to crypto. And I think that's manifested itself in the growth of the business. I mean, you see through some of our quarterly metrics and results that crypto has really become a bigger and bigger part of our business, especially through 2021.

And we're continuing to invest more and more into it and making the product and the service better and more reliable and more useful for customers. Talk a little bit about, you know, there's some platforms that are Bitcoin only. There's some that offer everything. I think you all offer a whole bunch of different assets, but there's really been a ton of interest in Dogecoin specifically. How do you kind of think through that? Is that just a kind of an extension of the GameStop, AMC and that type of consumer behavior? Or is there something else that you think is kind of driving what I would consider more of like an outlier amount of interest in assets that maybe aren't as popular on other platforms? Yeah, I think it's a good question.

I think, um, there's probably some overlap, but I think they're, they're very distinct communities that have formed around some of these things. So there, there's definitely a Dogecoin community with its own Dogecoin memes, and, uh, they're very, very passionate and they're really funny. Um, so, um, and I think there there's people around a variety of coins, there's communities forming on social media, obviously around some of these meme stocks. So probably a little bit of overlap, but I do think to some degree, these are distinct communities that care about very different things. And some of these have written manifestos and kind of code of ethics. So it's

really, uh, really interesting to watch it evolve. I think it's kind of an emergent phenomenon that, um, that'll be studied. And I don't know if, if anyone is adequately explaining, you know, the factors that have, that have caught, that have caught rise to, to all of these communities. I always describe, uh, meme stocks are not new, you know, in some weird way, Berkshire Hathaway is a meme stock. Like, uh, people feel like they're disciples of Warren Buffett. They go on like almost this trek to Omaha, uh, every single year to listen to him. There's a way of life. There's a memes. They don't call them memes, but there's definitely other things. Uh, so, so I do think that, you know, it's new, but it's also not new, which is,

which is pretty interesting. Uh, you've rolled out the crypto wallet. Uh, as you mentioned, there's over a million people who have already signed up on the wait list for that. Uh, I think people are generally very excited about the products that you guys are rolling out. One of the risks to the business, which, uh, frankly, I'm not as up to speed on, but, but would love your thoughts is, uh, there seems to be some regulatory questions around payment for order flow. So maybe just describe like what exactly that is and then how you think about, uh, that regulatory risk. And if for some reason, uh, whether it's, you know, smaller or large, uh, percentage chance that was actually, uh, rendered not available to Robinhood, what would the impact on the business

be? Yeah. Um, so payment for order flow is, um, it, it, it's a thing on the security side of the business. So, um, stocks and options trading, uh, less so crypto because crypto, uh, operates under a different regulatory regime right now. Um, but basically the way to think about it is it's, uh, a revenue stream where you can think of it as a revenue share between market makers and brokers. So market makers are for profit, uh, entities that make markets on, you know, either stocks or options or, or cryptocurrencies. And, um, they make markets for customers of brokers like Robinhood. And so, um, payment for order flow is basically Robinhood gets, um, gets a portion of those profits as revenue. Um, you can kind of think of it analogously to

affiliate or lead gen, um, you know, we're, we're responsible to some degree for, for the profits It's because the customer orders are coming through us. And so we get a chunk of them through this revenue share. So I can say so much about this, but I'll just make a couple of points. One is that this isn't new. This isn't something that Robinhood has created. Prior to Robinhood coming around, the brokers would generate revenue from payment for order flow and they would generate revenue from commissions on top. And people didn't pay

much attention to the payment for order flow because the commission's revenue was so much bigger. So it was like tiny little payment for order flow and then commission's revenue being 10 times bigger or something of that nature. So what Robinhood did was basically obliterate that commission revenue stream industry wide and back in you know the fall of of 2019 when all of the um kind of legacy incumbent brokers replicated our business model and got rid of commissions um i don't know if you remember this it was it was pretty awe-inspiring in a way because all these stocks just cratered by like 35 or 30 percent you saw e-trade going down 35 percent, you know, TD Ameritrade, Schwab, Schwab went down quite a bit because, you know, one after

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

detail. It sounds confusing and complicated and, you know, um, it's become political to some degree, but, um, you've heard, you know, some of the market makers being interviewed about this as well. And they're a little bit perplexed, right? Because they're like payment for order flow is a cost to me, right? So, you know, the people arguing for this are in a sense, arguing for market makers or kind of hedge funds as the internet calls them making even more money. So, you know, I don't understand that. But, you know, we'll continue to try to make awesome products for customers. We like the fact that people aren't paying commissions and payment for order flow makes that possible. And I think if people really start to understand the

nuances of it, they'll understand that it's actually a great thing for customers. And it's made the democratization of the markets and this greater participation that we've seen in the past few years possible. Because you just couldn't invest if you were paying $7 to $10 commissions. I think investing with $100, even $1,000 becomes much more expensive under that that old structure. You ever sit around and you're like, yeah, we, we destroyed that part of the industry for, uh, for kind of the incumbents. Like, is there a level of like, uh, satisfaction with you and the team of just like you came in, you did something that most people weren't willing to do. And it really did send shockwaves, right. You know, both obviously

from the stock prices of those, uh, organizations, but it changed the business models. We've seen many people go to zero commission. Like, is there a level of just like, you know, people can say whatever they want about us, but we did get that done a little bit, you know, and it was good. on the one hand, you know, it was kind of stressful going through that time period because you're like, oh man, they all just matched our pricing. You know, we, we used to be kind of the, the only one that was offering commission free trading. But yeah, I think recognizing that it's, it's better for customers and it's not just our customers, but tens of millions of customers that have never used Robinhood that are benefiting from this, I think is a very powerful thing.

I mean, it would be almost like, you know, if you're making electric vehicles and, you know, your Tesla or something, and then all of the legacy sort of internal combustion manufacturers just went to electric at the same time. Obviously, you know, different situation, but I've just never seen anything like that in any industry. So it was kind of remarkable how quickly it happened. And by the way, I think it's going to happen in cryptocurrency as well. I think you look at the cryptocurrency, the cryptocurrency business, people are paying exorbitant fees right now, whether it be kind of in the spreads and the different swaps products, the DeFi products or commissions in the centralized exchanges. You know, some of those commissions are three percent, four percent, even more. And, um, you know, those are going to go down to zero as well. Um, I think, uh, I think that's an inevitability and, um, yeah, well, uh, Robin hood, hopefully we'll have a big part to play

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

Yeah, it's an interesting question. I guess what I'll say is, you know, it reminds me of, I forget who is saying this, but there's this company Chewy that a lot of people really love, right? They make pet food. And one of the reasons that they were able to be so successful is that, um, their customer service was just awesome. Right. And the way they had great customer service was, you know, they got together, you know, a group of like the biggest, most enthusiastic dog lovers ever and had them, you know, serve customers. So, you know, when you, when you called customer support, you know, that, you know, you're getting someone that's super, super passionate about what they're doing. And, you know, it wasn't just customer support. It

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

procedures kind of industry-wide. And we do our best to comply with them and to be sort of reasonable, good stewards there. One of the things that I've never heard anyone ask you, I don't think, is how you think of your own personal portfolio. So I'm assuming, and correct me if I'm wrong, a very big portion of your net worth is tied up in Robinhood equity itself, like most technology founders, but outside of the Robinhood equity, do you invest any of your assets? Are you too busy to do it? Like, like how do you, do you give to somebody else to do? Like, just walk me through kind of how you think about investing. Cause it's interesting, right? Like you, you've built a, one of the most popular platforms in the world for investing, but I don't know if anyone

really thinks about how you think about investing. So this is something that's really changed for me as Robinhood has gotten bigger, and especially since we've gone public. And it's one of the things that's hard for me because I really love, you know, I love investing. I love trading. It's probably been, you know, one of the things that, you know, I'm very passionate about and have been from an early age when I opened up my first brokerage account in the dot-com kind of boom and bust in the late 90s. So I love it. And, you know, unfortunately, it's just like impossible for me to do it at this point. So no, I don't do any of my own investing and trading anymore. And I haven't for for some time. When you think about crypto, do you have exposure to Bitcoin,

cryptocurrencies and anything in there? I have had a little bit. Yeah. I mean, not, you know, uh, a significant chunk, but, you know, I've been, uh, I got curious, uh, about crypto back in 2011. Uh, I read the white paper and, uh, a bunch of folks from my math program who were interested in cryptography were like, Hey, you're in finance. You should learn about this. So I went through a period where, um, where I tried mining it, but of course mining it, it's very hard. It's very unlikely that, you know, you'll get the 50 Bitcoin block reward back in those days. So nothing really came out of the mining. And I remember I was signing up for a Mt. Gox exchange account at that time, and I hadn't put anything in it, but I was thinking

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

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

Bitcoin probably being the best example of it. Yeah, absolutely. I think the liquidity in some of these assets, the amount of global participation, I think it's pretty unique. It's you know, not quite what you see in Forex, definitely dissimilar to equities. So I think it's a new beast. For sure. I want to wrap up with kind of just giving you the floor. So there's people who are watching this who absolutely love Robinhood, think you're a genius. They're so happy because they got into financial markets and Robinhood helped them do that. There's people who are watching this who literally are like, man, that guy shut off stocks and screwed me, right? Whatever that ends up meaning. And then there's everyone in between, uh, what's kind of

your pitch to people around Robin hood, uh, why they should use the product and then kind of what the philosophy is, uh, as to, uh, how you guys interact with customers and, uh, and kind of what the company is that you want to build as you continue moving forward. Yeah. My philosophy is just to, to, you know, we have our mission, which is democratize finance for all. And we have our core values. Safety first, participation is power, radical customer focus, first principles thinking. They govern everything that we do. So, you know, rather than me just talking and telling you about Robinhood, I think, you know, the best thing to do is to watch us deliver and see what we build and deliver to customers. And over time, what we deliver and what we build should be

consistent with what we say. And, you know, with things like 24-hour customer support, crypto wallets, commission-free crypto recurring, you know, IPO access, all these recent product developments, I think, are built for customers to make their experience better, to make it easier for them to become long-term investors. And that's what we're going to continue to do. And, um, you'll see the product continue to get better, uh, week after week. And my goal is, is to make it, um, to make it unreasonable to use anything else. So you should feel like you're at a disadvantage across all dimensions by, by not using Robin hood. Got it. Uh, where can we send people to find you on the internet? If, uh, if they want to follow you or find more about Robin

hood you could you could go to when wallets.com w-e-n wallets um you know or uh you can find me on twitter or find robin hood on robin hood.com we're generally pretty easy to find there you go yeah got it uh i appreciate that you guys understand the uh the culture of uh of the customer base because uh i tweeted yesterday i said you were coming on and i was blown away by how many people had questions and you know when wallet was like the number one question that everyone wanted to hear. So, uh, that's funny. Cause that's the one I feel like we've answered pretty, pretty well. So, um, we're, we're letting the first customers on in the alpha this month and hope to roll it out to everyone in Q1 of next year. The, uh, I had 1.2 thousand. So 1200 questions

and literally everyone wants to know when wallet, when, whatever their favorite shit coin was. And, uh, and then basically about GameStop. So, uh, you did a great job. I liked a few of those questions. Yeah. I liked a few of them. I don't know if you noticed. I saw there were some random ones. Awesome, man. Well, listen, thank you so much for taking the time to do this. I think people really generally appreciate hearing your perspective on a number of different things and best of luck as you continue to build the business and want to do it again in the future. Thank you. Would love that.