WSJ Your Money Briefing - Robinhood Aims to Expand But Still Make Investing Fun

Episode Date: December 16, 2024

After being a key player in the 2021 meme stock frenzy, Robinhood is now a public company. CEO and co-founder Vlad Tenev joined WSJ’s Take on the Week podcast to discuss the evolution of the company, what’s next, and the gamification of investing. Co-host and WSJ columnist Telis Demos joined host J.R. Whalen to break down the discussion. Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

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For new U.S. customers with minimum financial commitment, offer ends $12.3124. See if your company qualifies at oracle.com slash Wall Street. Here's your money briefing for Monday, December 16th. I'm JR Whalen for The Wall Street Journal. Since its launch, online brokerage Robinhood has been a disruptor, giving individual investors an entryway to buying stocks, ETFs, and crypto in ways other companies didn't. Co-founder and CEO Vlad Tenev is the featured guest on this week's episode of WSJ's Take On The Week.

Here's co-host, Telus Demos. What first got our attention at the Wall Street Journal about Robinhood was its accessibility and the audience that it was bringing in. But it also drew a lot of criticism toward them because it made it seem like have they made investing too fun and too accessible and have they gamified what should be a serious business? And that's something that they've had to deal with. And that's something that we also talked with Vlad about. We'll hear more from Telus after the break. AI is coming to your industry if it isn't already here. But AI needs lots of speed and computing power. So how do you compete without cost spiraling?

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Robinhood is aiming to broaden its core users beyond mostly younger investors. Co-founder and CEO Vlad Tenev joined our sister podcast, WSJ's Take on the Week. Co-host Telus Demos joins me. Telus, congratulations on you and Gunshin Banerjee being named co-hosts. What's the show about? Thank you. WSJ's Take on the Week is back after a hiatus. We are focused on giving our audience a leg up on the world of money

and investing. So the idea is we have these great conversations in the newsroom between reporters, right? So Gunjan and I sit next to each other at the journal and we literally just talk all day sometimes about what's going on in the market. Hey, did you see this? Hey, did you see that? Check this out. Oh, this is up.

This is down. We're bringing you those conversations every week. And then we're also bringing you an interview with insiders in the worlds of market, finance, economy. And your most recent guest was Robin Hood co-founder and CEO Vlad Tenev. He joined you and your co-host Gunjan Banerjee in the studio to talk about the company and its plans. Active traders are people that want to be at the forefront of technology and innovation and trading and financial services. They care about really amazing tools.

They want low latency. They want data and performance. But it's a niche market, one that we value, and we want to win that market, and we're growing market. So why him, and why now? Robinhood has really just become such a central part of the discussion about our markets today and that is because they are a funnel for retail investors, for individuals who want to get into markets

and start to think and trade about markets to start to do that. They're also just an interesting company, breaking the mold a little bit in some ways about how they build their brokerage business. And we're in a moment where, look, those people who didn't already know Robin Hood probably got to know them at the beginning of 2021 during what we all call now the meme stock mania, right? Remember GameStop and all the wild trading, you might have seen

the, you know, documentary on Netflix. That was a big moment and really put Robin Hood on the map, them being a character in that drama. And I think that what's happening now in markets is interesting because we're not going through the same exact memestop mania, but I think that we are in a moment where retail investors are really out there in force and they are trading around the election. They are participating through prediction markets. Robin Hood now before the election launched event contracts. People are trading crypto, we've seen Bitcoin hit $100,000. And a lot of that is being driven by small investors or at least small investors are very closely following that and watching that.

And so we just thought this was a great time to bring Robinhood Robinhood also is a public company and they just had their first investor day in which they sort of present their vision for their business to investors. And so there was a ton of just stuff to talk about coming out of that as well. The word used a lot about Robin Hood is disruptor. What put Robin Hood on the map? What first got our attention at the Wall Street Journal about Robinhood was its accessibility and the audience that it was bringing in.

It was just really associated with people who were trying out markets for the first time. They were very mobile focused, and so that was a little different from traditional brokers. And they also made investing kind of fun and exciting. And that cut both ways for them. On the one hand, that sort of maybe differentiated them from what seemed like stodgy other kind of brokerage brands but it also drew a lot of criticism toward them because it made it seem like have they made investing too fun and too

accessible and have they gamified what should be a serious business and that's something that they've had to deal with and that's something that we also talked with flat about How does that user experience with Robinhood influence the type of investor it attracts? Who exactly is a customer in Robinhood is evolving. What Robinhood told investors at this investor day was that one of their core customers is not just the newbie who wants to YOLO and, oh, I heard Tesla's a great stock, I want to buy it.

Right? That isn't necessarily their core customer or the engine of their business. They want to go after what they call active traders, and that is people who are serious about trading and investing. They're semi-professionals, essentially. And what Robinhood has done is they have sunk a lot of money into developing tools for that type of investor. But also the tools that those people demand are things that they can then filter through

to everyone else. That Robinhood sees its audience as really, you know, those active traders are at the center of it. In your interview, you and co-host Gunjan Banerjee also asked him about something new that they're offering, prediction market trades. What did he say about that? These prediction market contracts have really been around in some form for a while. But what has happened more recently is that there are now readily tradable futures products and

other contracts that are available to people not through specialized offshore venues like they used to be that were difficult for the average person to use. Now, in your Robinhood app, and in Interactive in interactive brokers another company that offers Prediction contracts these are now like in your pocket And so it's a wider audience of people that are getting into this it comes in a few different flavors But you will buy something that pays out if X or Y happens you are essentially betting But Robin Hood sees that product as just part of the kind of trading ethos that's at the heart of the business that draws people in and gets them interested and excited about

participating in the markets. Last week on your money briefing, we talked about how a disproportionate number of younger men are placing risky bets on things like crypto and meme stocks, and it's influenced by the popularity of sports betting. Did Vlad express concern about the level of risk that some investors are exposing themselves to? Robinhood sees as part of what it does education and trying to educate people about investments and markets and risk.

But it will definitely be an interesting thing to watch in the future to the extent that there are people who trade actively not just as an investment, not just because, okay, I'm saving for retirement or I want to build up my down payment or something, but that people who invest because they find it exciting or- It's the art of the chase. The art of the chase, right? And certainly for some people that's part of it.

And the idea of the world around you is tradable is something that is going to continue to be both a tailwind to Robin Hood's business, right? It's going to help them, it's going to funnel more people toward them, but also I think continue to make them scrutinized and people will continue to say what kinds of guardrails are there around letting people do whatever they want. Look, it's up to you. Caveat, emptor, you take the risk you're comfortable with. So I think that's gonna continue to be a pretty interesting conversation. Conversations like the one you had with Vlad

are all happening on WSJ's Take On the Week. Tell us, what can we expect in future weeks? We wanna build a show that brings you topics in the news and that is interesting for people who are both maybe currently actively investing, but also are curious about investing and want to understand better about what makes markets and stocks and bonds and things like that tick before they get into it to educate themselves about that.

There's all of those things are investment stories. And so we want to take the ones that are most pressing, that are the hottest ones right now that people on Wall Street are talking about and bring those conversations to you and explain how those things are lenses on investment. That's WSJ columnist and co-host Telus Demos. You can find new episodes of WSJ's Take on the Week on Sundays wherever you get your podcasts. And that's it for your Money Briefing. This episode was produced by Ariana Asparu with supervising producer Melanie Roy.

I'm JR Whalen for The Wall Street Journal. Thanks for listening. This podcast is brought to you by CME Group, the world's leading derivatives marketplace, offering the widest range of global benchmark products across all major asset classes. CME Group, where risk meets opportunity.