00:00:00
now wait um vlad you have to turn your camera off
and then i'm going to do my little bit where the
00:00:04
bestie guesting door knocks oh no jason no
that's not silly this is silly here we go i
00:00:10
can do it it's very easy for me don't worry
about it don't worry about these guys don't
00:00:13
want to do it they don't like my they don't
like my bets three two let your winners ride
00:00:22
rain man david source it to the fans hey everybody hey everybody welcome to
another episode of the all in podcast
00:00:42
with us again the queen of quinoa
himself david friedberg the rain man definitely counting cards yeah burn baby david
sacks is with us chamoth polly hopper tia
00:00:58
the dictator by the way and by the way go ahead
jkl i'm j cow aka baby seal j cal could you take
00:01:06
longer with the intros i mean this is like this
is like your one moment to shine torture i know i
00:01:12
like to do a little branding here i'm branding you
guys as characters on the show i do want to i do
00:01:18
want to give a big shout out and congratulations
for david freeburg uh wedding his beak in a big
00:01:23
way the story by the way we should actually have
uh founder uh crazy founder stories and we should
00:01:31
have friedberg tell the story of metro mile but it
closed its uh spat transaction and went public and
00:01:37
it's doing great and uh congratulations thank you
thanks guys well golf club thanks for the support
00:01:42
thank you thank you very nice and uh
joining us this week as our second bestie guestie after a triumphant performance
by draymond green on the last all-in podcast
00:01:55
is vlad tenniv who is the co-founder and ceo of
a new startup we wanted to introduce everybody to
00:02:04
it's called robinhood flat tell everybody what
is robinhood and what's the mission of this new
00:02:11
startup you've you've got thank you for for having
me uh having me here hanging with you guys robin
00:02:17
hood's mission is to democratize finance for all
it's somewhat new we've been around for a little
00:02:22
bit over five years and we have a mobile
app and a website that allows customers to
00:02:29
uh invest in stocks options crypto currencies
we offer a debit card and a high yield savings
00:02:35
product as well um commission free and with no
account minimums vlad i think you've done an
00:02:40
amazing job building this company and you guys
have done an amazing job uh democratizing access
00:02:45
to uh to to the ability to trade can we fast let's
fast forward to to the issue that i mean this
00:02:52
we discussed i guess a few pods ago because um
there was intense interest in this i think it's
00:02:57
our highest rated pot ever was discussing the
game stop issue so you had these these traders
00:03:02
from wall street bets these redditors who like
you said they perceive themselves as the heirs
00:03:07
to occupy wall street they're they're
trading for profit also for revenge and um and then you know you guys i guess get a call
in the middle of the night from the clearinghouse
00:03:18
and you have to freeze the buy side of the trade
the next day i guess let's fast forward to that
00:03:23
because that was the thing that you know got
everybody up in arms could you ex i guess talk
00:03:28
to us about kind of what happened and i'm sure
you didn't want to have to freeze trading right
00:03:34
but you were being compelled by this
clearinghouse can you kind of explain what they told you and why you had to do it
and and and why not just ask them to give you
00:03:44
the order in writing so you can post on your
website so everybody would know you didn't
00:03:49
have a choice could is that something you could
have done um well i think the challenge was that
00:03:55
uh no doubt we could have communicated
this a little bit better to customers right
00:04:01
by the time by the time we restricted these
securities to pco and it was 13 securities that we
00:04:10
limited to sell only that process is actually
operationalized within robinhood so it's uh we do
00:04:17
it from time to time under various circumstances
like corporate actions so when something has a
00:04:24
reverse stock split or something like
that we can pco it for a little bit so there's a button and a dashboard that
you know you can click and automated emails
00:04:32
get sent out so it's a it's an operational process
that i think in hindsight we probably should have
00:04:39
exceptionalized to to make it to make it
clearer why we were doing this just given
00:04:45
all the swirl around all these meme stocks online
um but by the as soon as those emails went out
00:04:51
the conspiracy theories immediately started uh
started coming so my phone was blowing up with
00:04:58
you know how could you do this how could you
be on the side of the hedge funds and of course
00:05:02
we're not on the side of the hedge funds i mean
we're we're building products for our customers
00:05:08
and we just had to do what we did to meet our
deposit requirements because if we didn't do that
00:05:14
we would be in violation and the consequences
of that could have been much much worse than
00:05:20
simply halting buying in the 13 stocks i think
that's where you know when you were on cnbc with
00:05:26
sorkin people either thought you were obfuscating
or you were lying um you know and part of it is
00:05:32
sort of the the guts of your business is that at
some point as well you guys decided to self-clear
00:05:39
right and then going into self-clearing you
become liable for every single trade that
00:05:43
happens on your platform um like if you look back
on those two audience what self-clearing means
00:05:50
it means that you know typically you can work
with a wholesaler to offload the risk so vlad
00:05:55
acts as a transaction layer and as a ui and
somebody else is responsible at some point
00:06:00
these guys for economic reasons decided to take
that responsibility on themselves but when you
00:06:05
do that you take on the full-fledged liability
of the value of every single trade on behalf
00:06:10
of your customers yeah i would think about it i
would explain it as there's like pre-trade right
00:06:17
then the trade and then post-trade so robin hood
obviously does pre-trade with uh that's the app
00:06:23
and what's called the introducing broker dealer
our market makers do the trade so we route it to
00:06:29
you know all the firms like citadel execution
services two sigma and then robinhood securities
00:06:34
does the post trade the clearance and settlement
so we manage the exchange of cash and stocks
00:06:40
that happens on t plus two so two days after
after the trade is made so what was not
00:06:48
i mean if you had to give that answer again when
sorkin said you have a liquidity issue was the
00:06:54
answer yes we have a liquidity issue and here's
why or is it still the same answer it was then
00:06:59
so i i stand by what i said and i'll explain
it and thank you by the way for giving me a
00:07:04
chance to explain it um first of all restricting
securities restricting the buying of securities
00:07:13
is something that every pretty much every broker
did to some degree during this week right so
00:07:19
when you say the l word in financial services it
reminds you of lehman brothers where you literally
00:07:25
are not able to operate your business we met all
of our deposit requirements the new capital that
00:07:30
we raised the 3.4 billion wasn't to meet our our
ongoing deposit requirements we had met them and
00:07:37
in order to relax them and eventually unrestrict
them we needed to raise some more capital and
00:07:43
eventually have uh more cushion so that if we keep
seeing the type of growth that we kept seeing we
00:07:49
didn't have to impose position limits again so i
stand by what i said i think if you describe that
00:07:55
as you know the l word every pretty much every
broker would have had that issue and i think at
00:08:00
that point the word kind of loses its meaning
and the gotcha factor that uh the journalists
00:08:06
are trying to to get out of it do you think that
um the the risk in the business went up when you
00:08:11
decided to self-clear or would this risk have
been the same if you work through a wholesaler
00:08:16
well i think a lot of the um a lot of the other
brokers who relied on clearing firms had the same
00:08:22
issue right um you know there's there's firms like
apex clearing uh which has introducing brokers uh
00:08:29
cash app for example clears through a third party
as well and they they all had this issue and of
00:08:35
course um their response was um they kind of
threw their clearing firm under the bus right so
00:08:42
obviously we're not going to do that because
our clearing firm is robin hood securities
00:08:47
um but i think understanding the space a little
bit better since robin hood securities is you know
00:08:53
a subsidiary of of my company um i realized these
clearing firms had to do what what they did like
00:09:01
there's no it's not negotiable uh to meet your
deposit requirements of course we can ask what
00:09:07
can we do are these deposit requirements sensical
what can we do to drive change in the system and
00:09:13
i think that's my what's that who sets those
requirements that's the clearinghouse right is
00:09:19
that the dtcc yeah it's the the dtcc and a lot of
this stuff is actually spelled out in dodd-frank
00:09:25
so if you look at dodd-frank uh you'll see
descriptions of the var charge and the various
00:09:30
special charges there um but i do think um one
thing that i'm very excited about is you know not
00:09:38
going beyond just talking about our problems right
we can i've talked about our problems a lot but
00:09:44
talking about solutions and how we can create a
better financial system in the future and i really
00:09:49
think if you if you understand the underbelly of
what t plus two settlement is you immediately ask
00:09:55
yourself why aren't we settling trades in real
time and i wrote a post on that i had a tweet
00:10:00
storm i'd also say you know some of the feedback
that i've gotten is you know here's vlad from
00:10:06
robin hood telling us about you know trying to
change t plus two so that he can meet he can lower
00:10:10
his deposit requirements i think there's lots
of other systemic issues that fall out of that
00:10:16
in particular right now you can short sell more a
stock than the shares that are outstanding right
00:10:22
so you know some of these stocks had 140 short
interest right so more more shares were shorted
00:10:28
than actually outstanding and i just think that's
pathological and it stems from the fact that
00:10:35
you know these shares are tracked on pieces
of paper so they're basically not tracked
00:10:40
and someone can you you can i can lend you my
shares you can short them the person that's buying
00:10:46
them from you can lend them again and you can
do that multiple times and you end up with this
00:10:51
situation that could destabilize the financial
markets right so what okay so t plus moving from t
00:10:58
plus two to t plus zero that's one issue um where
do you think uh margin that's what i was gonna ask
00:11:06
where where is your margin what's your what's
your thoughts on margin yeah well so margin
00:11:10
wasn't involved in this particular situation in
fact there was an escalation path uh not a lot of
00:11:18
people noticed until thursday but pretty much all
the brokers including robin hood were ratcheting
00:11:24
up the margin requirements for for all these
securities um until they got to a hundred percent
00:11:31
so by the beginning of the week they were pretty
much all at a hundred percent which means you
00:11:35
can't use margin to buy them you have to you
have to have them a hundred percent covered
00:11:39
um so do you guys have a more specific question on
marketing i meant more like i meant more like so
00:11:46
for example i think it's true but you tell me if
this is not true you guys paid like a 65 million
00:11:53
dollar fine to the sec for gamifying robin hood
right and it's not not exactly true but go ahead
00:12:01
okay do you want to do you want
to just tell us what the truth is yeah well so the the fine wasn't for gamifying
robin hood it was for payment for order flow
00:12:12
and business model related uh related
things um the gamification one is the massachusetts securities securities one which
is a separate thing and look on the sec thing um
00:12:27
we're a fast growing company we obviously scaled a
lot between the period in question um obviously uh
00:12:36
the the securities and exchange commission uh
felt like we could have done things better and
00:12:41
and i own that i think that we're fine being held
to higher standards we have to hold ourselves to
00:12:46
higher standards um and what we can do is just
do some of the things we've done staff up our
00:12:52
compliance team staff up our legal team we brought
on a new chief legal officer who was a former sec
00:12:58
commissioner two new chief compliance officers
for robin hood securities and financial who had
00:13:04
decades of experience and the level to which
we're investing in compliance i mean the goal
00:13:09
is to build the finest legal and compliance team
that the financial industry has seen let me tie
00:13:14
it back flat to what to what we were talking
about before so do you think that it's okay
00:13:21
if we're trying to build a generation of
investors to give them access to margin as
00:13:28
easily as some apps including robinhood does
and then separately allows them to trade
00:13:35
highly transactional high vol instruments like
options on top of that with margin why do you
00:13:41
think about that just as a general philosophy
forget business building for a second well and
00:13:45
then also can you say what the margin you allow
is for a new account because i don't think people
00:13:50
understand what that is maybe a little definition
there well there's a couple of things i want to
00:13:53
clear up number one you can't trade options
on margin so options are all fully paid for
00:13:58
right um margin is not suitable for everyone um
i'll admit that you have to understand it and you
00:14:06
also have to be a robin hood gold customer which
means you have to sign up and pay five dollars a
00:14:11
month most brokers don't gate margin behind a
premium offering so we're already a little bit
00:14:18
more restrictive on that front you have to have 2
000 dollars in your account before you can borrow
00:14:25
and in december we did lower our margin rates
to 2.5 which is very a very competitive low rate
00:14:32
but let me tell you a use case for margin that i
actually think is quite powerful so obviously one
00:14:38
use case is kind of the typical one of buying
more stock with your money but if you build a
00:14:44
large portfolio you can actually use margin as a
line of credit and we offer this feature with our
00:14:50
debit card you can turn on what's called margin
spending and what that means is if you invest
00:14:56
in your portfolio you can borrow collateralized
by your portfolio at a very low rate which is one
00:15:03
tenth of what you would borrow through a credit
card so i actually think it's a it's a powerful
00:15:08
tool certainly customers have to understand it
and be suitable for it but um it unlocks the
00:15:14
type of borrowing not just for buying stocks but
for for for meeting your daily purchasing needs
00:15:21
that um i think is is very useful if somebody
puts two thousand dollars in vlad can they trade
00:15:27
four thousand dollars six thousand dollars eight
thousand dollars and does it matter what equities
00:15:31
they're holding how does it work yeah the the
actual calculations are um uh there's no blanket
00:15:39
formula i can give you because it does depend on
the securities that you buy so the example i gave
00:15:44
was for example gme and some of these other meme
stocks we raised the requirement on those to a
00:15:49
hundred percent so those have to be fully paid
for other stocks have an initial requirement
00:15:57
as low as 25 if it's one that you know is deemed
by the operational staff and our processes as not
00:16:04
being super volatile and it can it can go in
between so 25 percent initial requirement all
00:16:10
the way up to so you can trade four times your
money if it's a really blue chip secure stock um
00:16:18
more or less yeah with some nuance around that you
know time and again vlad there's studies that show
00:16:24
that it's really difficult to beat the market
and make money you know trading in an efficient
00:16:28
market um like the market we have for stocks or
options or what have you there's a lot of players
00:16:34
there's a lot of liquidities a lot of people
with information it's um you know these great
00:16:38
fund managers over time underperform just the
s p right and um you know i i think i mentioned
00:16:45
this when we had that pod a few ago that i was
involved in a forex trading company and 60 60
00:16:51
of accounts eventually ran out of money can you
share with us what percent of robin hood accounts
00:16:56
run out of money and and you know do we mask
generally and i'm not accusing robin hood uh
00:17:03
specifically of this but do we mask the idea of
investing in businesses um as you know a way of
00:17:11
kind of highlight of a way of hiding that people
are really just using this to trade in and out
00:17:16
and try and make money in the short term and
ultimately the majority of them end up losing most
00:17:21
of their money because the fees and the spread
and the margin or whatever it is that that kind
00:17:25
of adds up you know wipes out the account that's
what i saw this forex company i was involved in
00:17:30
can you share with us you know in a very candid
way like how many accounts do you eventually go
00:17:34
bankrupt at robin hood and how much of that do
you really see first of all i'd say forex is a
00:17:39
little bit different because the leverage you
get in forex is like orders of magnitude yeah
00:17:43
i'll admit to that it was like 10 to 50 to one
leverage so you're totally right yes exactly so um
00:17:49
i i do think the businesses are a little bit
different most of our customers don't use leverage
00:17:54
most of our customers aren't active traders
or trading options and if you look at some
00:17:59
of the features that we've rolled out the the
theme of this year has been how do you turn a
00:18:04
first-time investor into a long-term investor
so fractional shares recurring investments
00:18:10
drip these tools allow someone to create a
diversified portfolio of individual stocks
00:18:16
and recurringly buy into them over time so is
that the majority of users today or the minority
00:18:24
you know are you how many accounts do you see
kind of cycle down to zero over what period of
00:18:29
time i think a very small percentage of accounts
uh have that have that property i mean i think
00:18:37
if you look back in 2020 we had a huge increase
in growth and interest in investing right at the
00:18:44
bottom of the market crash in march right and uh
i think people have taken advantage of that and uh
00:18:53
our customers in general have benefited from the
recovery very very significantly so i i wouldn't
00:18:59
i would reject the the means that you know robin
hood customers are active traders that are just
00:19:05
you know churning their accounts and and losing
all their money that's that's just simply not
00:19:09
what we're seeing i know sax has a question but
one question i had with the conspiracy there is
00:19:15
that i would just love to hear like a yes no to
did citadel call you and say stop this madness
00:19:20
because they had exposure through one of their
hedge funds with gamestop and did sequoia call
00:19:25
you and say hey stop this madness or just refresh
it and you forgot you forgot the white house one
00:19:31
no no this was a formulaic decision uh made by
robin hood securities dude so citadel didn't
00:19:38
call and ask nikoi didn't call and ask did
the sec call you and say this has to stop
00:19:45
no but the clearinghouse did right yeah well
they called and they said here are the deposit
00:19:50
requirements and we worked with them to lower the
risk so that we could meet the deposit requirement
00:19:56
got it and and so just let me pick up on that
so at the same time that was happening um and
00:20:01
i i know this wasn't robin hood that's not your
company but but discord and reddit were receiving
00:20:06
reports uh that the wall street bets forum was
engaged in hate speech and there was an organized
00:20:13
effort to get them censored and taken down and
discord basically fell for it and took down wall
00:20:18
street bets read it yeah to their credit did not
do you have a take on you know what happened there
00:20:26
and uh i mean i assume you you don't think
wall street best was engaged in hate speech
00:20:31
well um so that happened wednesday i believe
um and yeah we were watching it it was first
00:20:38
it was like oh wow discord discord shut down
and then i think wall street bets went dark
00:20:44
on reddit for a little bit as well but i'm not
quite sure of the the reasoning behind that um
00:20:50
look i i mean i disavow hate speech
misinformation um i i'm not you know judging
00:20:57
which of the posts are hate speech or or not i
think that's the social media companies that that
00:21:03
that should take a look at that the mods i think
the mods closed down reddit for like uh a little
00:21:08
bit and then turned it back on yeah yeah i mean
a lot of these things get triggered if 10 people
00:21:13
reported at the same time it just it sets off well
it seems it seems certainly yeah it seems to me
00:21:18
that and certainly this is if you want to call it
a conspiracy theory it seemed like you had this
00:21:23
wall street bets group they were on one side of
the trade you had these wall street hedge funds
00:21:27
on the other side of the trade and there was an
effort to weaponize the speech rules of reddit
00:21:32
and discord to cut off the lines of communication
of wall street bets because the only way that wall
00:21:37
street bets as a decentralized group of millions
of traders can can stick together and compete with
00:21:43
these hedge funds is if they can communicate with
each other by these services and so um you know
00:21:49
it seems like there was an organized effort to
try and take them down at the exact same time
00:21:54
that um that they were frozen
out of the buy side of the trade vlad do you think that there should be more
transparency in the financial markets meaning
00:22:02
everything from payment for order flow how much
money companies make lending out their stock
00:22:09
which company is short which stock which company
is long which stock on a more frequent basis
00:22:14
how much margin people are running do you think
like we should move to perfect transparency in the
00:22:19
financial markets i i do think that there should
be more transparency and i'm glad you you brought
00:22:25
up payment for order flow because it's something
that i'm trying to take on you guys might have
00:22:31
noticed i i plug i published a post on payment
for order flow i started a tweet storm that um is
00:22:38
meant to just start the conversation around it i
want to understand kind of the misconceptions and
00:22:43
the theories and and knock them out one by one and
i think that'll lead to some positive discourse
00:22:48
around it and there certainly might be things that
will have to change um and i think the the first
00:22:53
step is actually engaging in the conversation and
kind of connecting the people that understand the
00:22:59
details with the people that have issues with it
um and i don't think that's been happening enough
00:23:04
so for sure but what about stuff like margin
shorting you know uh short like do you think that
00:23:11
we should move all of this stuff so that it's just
out out front for everybody to see well i think i
00:23:16
think if we if we migrate to a better settlement
infrastructure and move to real time settlement
00:23:22
you get a lot of that stuff for free right so you
do get um and i know a lot of the crypto people
00:23:27
came out after i published my post and said you
know crypto solves this you could just put it on
00:23:32
on a blockchain and everyone could see publicly
what's going on and which share which shares are
00:23:37
are being being held short where they are who's
owning them um so i think i would be in favor of
00:23:44
of uh more transparency i'm not sure at what point
uh there's sort of like negative secondary effects
00:23:50
i haven't kind of unspun the thread fully but i
think we can we can keep taking it one step at a
00:23:56
time and and see uh more transparency generally i
think is much better hey vlad when you guys um go
00:24:03
public you've talked about having a listing
at some point here soon why would you not
00:24:08
have all of your shares sold in the ipo through
robinhood to your retail users why would you sell
00:24:16
any shares to institutional investors wow good
questions it is a an interesting question it's
00:24:23
it's one that i probably that that's probably
the one i can't give too much detail on
00:24:28
hopefully you guys understand my recommendation
if you're going to democratize access do it all
00:24:32
the way [ __ ] the hedge funds and the big guys if
that's the if that's the point and you give retail
00:24:38
equal access you know in all these transactions
as you know institutions get get all the access
00:24:44
and the reasons have your entire listing done
through retail it would be a it would be a
00:24:50
game-changing transaction yeah so i mean a lot of
this it's really interesting that this turned into
00:24:56
uh you know individuals versus hedge funds because
i i think that's a really powerful story but you
00:25:01
also have large institutions like fidelity that
are holders of all these stocks right you have
00:25:07
individuals on a lot of platforms that were short
selling them as well not robin hood because robin
00:25:12
hood actually doesn't doesn't allow short selling
by individuals but a lot of the other brokers do
00:25:18
and you have you had statistics um statistics
coming out that actually show retail versus
00:25:24
institutional and you know there was some
counter-intuitive results so i i think if you
00:25:29
actually look deep into the plumbing the story
of you know long individuals short institutions
00:25:36
uh on opposite sides i think uh there's
a little bit more nuance to it than that
00:25:40
flat um if you had to do it over or actually
forget about the past think about the future
00:25:46
um what do you change inside the company
well let's see um i think the 3.4 billion
00:25:53
in extra capital certainly helps um i think
i'm very proud of the transition that we made
00:25:59
between thursday and friday so thursday we
had the blunt hammer of pco in these stocks
00:26:05
right which obviously was not ideal by friday
we had moved to a much more sophisticated system
00:26:11
where intraday we adjust the position limits in
uh it was up to 50 stocks and we published that
00:26:18
on our website so that that gave us a lot more
granular control over it and is a better system
00:26:24
and we're going to only improve that and kind of
take the learnings to other parts of the business
00:26:29
so i think um the great thing about you know
these sorts of crises is um sort of months and
00:26:38
and years worth of work get compressed and people
are just like super aligned on the key priorities
00:26:43
we need to do to to move the business forward
and we saw that and then the third thing i'd put
00:26:48
is just maybe you guys have seen um you know i i
feel like i've evolved as the chief executive and
00:26:55
as a leader i didn't used to be on social media
telling our story very much but um i'm out there
00:27:01
trying to encourage more transparency i would say
much better today than with elon much better with
00:27:06
elon than sorkin so progress has been made i have
a just a basic question i know we got to wrap soon
00:27:12
when things get superheated and you have this
viral momentum where i don't know how many people
00:27:17
tried to sign up on that day but maybe you could
give us an idea on that wednesday or thursday was
00:27:21
it you know five figures six figures or seven
figures worth of new accounts why not throttle
00:27:26
the new accounts and say hey we're you're on
the wait list we on board 10 000 people a day
00:27:32
your day is going to be next thursday so that
you don't get caught in this you know everybody
00:27:38
uses the fact that it's friction free to sign
up to do an emotional bat in a you know let's
00:27:44
call it mob behavior right like this turned into
a mob and i guess some people believe it's a good
00:27:49
mob to go up against the hedge funds uh but
it could have equally been something you know
00:27:55
something more deranged and even more edge case
is going to happen so when that does happen
00:28:00
and a million or 10 million people sign up can't
you just pause it and say we're not going to do
00:28:04
any new accounts today we've reached our limit
we actually did do that so we have been pausing
00:28:10
new account approvals off and on uh depending
on on the load and um you know customers have
00:28:16
been experiencing in some cases short delays uh
with account approvals obviously not an ideal
00:28:22
solution from our standpoint but you know if if we
have to do that we will do it and we have done it
00:28:29
how many people signed up on that wednesday like
just ballpark like was it hundreds of thousands
00:28:33
millions jason are we are we running an ad for
robin hood stop no i'm just kidding none of us
00:28:38
cares none of us cares last question hit me hey
listen um if you had to pick two different ceo's
00:28:44
reactions to how you dealt with it let's say
tim cook on one end of the spectrum and zuck
00:28:48
on the other how do you think they would score
what robin hood did and what they are doing
00:28:55
tim cook zuckerberg you know i'm not sure um i
think that um i think i'm proud of of of how the
00:29:06
firm navigated this i think uh obviously there's
ways to improve upon it um i think that you know
00:29:14
any time you get a phone call in the middle
of the night saying you have to put up three
00:29:18
billion dollars all sorts of things run through
your head right i've had it happen i know that
00:29:26
was just money from the cage for poker i got a lot
of people reaching out to me um which was amazing
00:29:33
if you had to do it over again why not just post
a blog that morning saying hey we got a call in
00:29:38
the middle of the night we have to do this is
that is is that the thing you do over again
00:29:45
no because he'd be throwing his own company under
the bus he'd have to say robinhood securities is
00:29:49
telling robin hood the broker to post this money
because robinhood securities is being told by
00:29:54
their downstream clearing so it's like you're
you're in you're in it you're in a different way
00:29:58
you're saying it now so better to say it uh at
the time it all happened and it would have defused
00:30:03
the whole crisis right well first of all i'm not
throwing anyone under the bus had we did the team
00:30:08
did what they had to do um i don't think there was
any way to navigate that differently i think the
00:30:13
automated emails that went out to customers
saying uh your stocks are you're restricted
00:30:20
from buying these stocks probably could have been
handled a little bit better we probably could have
00:30:25
offered more detail into that with the foresight
that maybe customers would think that a hedge fund
00:30:33
forced us to do it or something like that so
certainly um certainly there's areas we can
00:30:38
improve upon across the board and one an early
investor called me throughout this and said hey
00:30:44
chin up you know navigating a crisis successfully
unlocks the next level of value creation for the
00:30:49
company and um i've had that in mind uh the entire
time and i'm just doing what i can to to make that
00:30:56
future a reality both for robinhood and for the
financial system i think that this could lead to
00:31:01
some really positive change industry-wide yeah and
i'll just just one last softball here this is not
00:31:07
about what happened uh that with gamestop uh we've
had a debate on this pod it got kind of heated
00:31:13
between uh chamath and jason about the nature of
jason's investment in robin hood uh can you tell
00:31:19
us can you tell us your side of the story of what
happened at antonio's nut house okay and how much
00:31:25
how much stumbling was involved precisely okay
i'm i'm very glad you brought this up because i've
00:31:30
been meaning to call jason out on it he has this
great story of uh how you know we met at antonio's
00:31:37
nut house and he actually wrote a check i think
the the real story is that um on robinhood launch
00:31:47
day um which was a saturday and um we violated
every rule of pr and marketing by launching
00:31:53
inadvertently on a saturday i got a reach out
from uh from launch who who was one of the first
00:31:59
uh one of the first outlets to cover our launch
on saturday and uh jason's uh jason's friend uh
00:32:07
simon ex-employee who uh ended up running social
for us for a bit um was a big fan of robin hood so
00:32:15
um he joined us as kind of our first social person
he introduced me to jason i met jason at sequoia
00:32:24
jason where you agreed to invest and then six
months later we met at antonio's nut house when we
00:32:29
were raising our series a and i think you uh you
gave me the advice to to go with index ventures
00:32:36
no i know i said sequoia all
the way don't get me in trouble i promise michael moritz dougliotti
whoever's watching i totally was sick
00:32:45
sequoia was great they they unfortunately passed
on our series a as as did a lot of other funds wow
00:32:52
all right listen uh thanks for coming on the pod
uh we really appreciate you taking the time and
00:32:56
continued success and um but i'm really glad we
didn't give you a job offer back in 2008 sounds
00:33:02
like uh it was the right move for you funny
how things worked out yeah well apparently i
00:33:07
interviewed him in 2008 for a job and you didn't
get the job it was you and alex alex michalka
00:33:14
was my my main interviewer but um it's funny
i graduated with a math degree right i was i
00:33:20
was doing pure math which in 2008 made
me unemployable we were the only people hiring at that point yeah yeah you were
the only people that would interview me
00:33:30
yeah everyone else was like where's your computer
science degree can you code so i ended up going
00:33:35
to math grad school which was one of the few
options that i had and ended up dropping out and
00:33:41
and here i am so funny how things work well
good for you all right continued success and
00:33:45
thanks for coming on the pod we'll see you soon
thanks thanks for having me vlad's back wait
00:33:53
vlad's back sorry i i i actually i thought i was
supposed to leave i didn't know if you guys know
00:33:58
you could stay i was saying you can stay i was
saying after a year of jason asking us to run
00:34:05
ads he's found a way of trying to make this a
45-minute infomercial for robin absolutely i
00:34:10
listen i'm ride or die glad you know that i'm
right or down my founder we're just trying to
00:34:16
keep uh keep everything up and let all the people
safely and who have been banging on our door how
00:34:23
how much have you been sleeping vlad have you
been able to sleep i mean this gotta be exhausting
00:34:28
uh oh my god really can you ask him something
like at least semi semi-fucking challenging
00:34:34
honestly that's not why that's why you guys are
here if you're walking down the road and a robin
00:34:40
hood customer this is a tough one i'm sorry
you thought you were over this but you logged
00:34:43
yourself back in so and a robin hood customer that
lost all this money when they got locked out of
00:34:49
trading that day comes up to you and screams and
cries i lost all my money what do you say to him
00:34:55
you know i got completely destroyed my life
savings is wiped out i mean i've read a bunch
00:34:59
of these comments on different boards and
so on like what do you say because i i know
00:35:04
that's a tough one to swallow and i know that
you know we've heard the the story around what
00:35:07
happened but but what do you say to that person
well first of all i'd be very very empathetic
00:35:14
i'd probably want to understand how someone
could lose money um when they couldn't buy
00:35:20
a stock at the all-time high so i think the
details around that i mean if you look back
00:35:26
uh and obviously this had nothing to do with the
decision right but thursday was the all-time high
00:35:32
yeah yeah but that's but the reason for that
is because the ability of wall street bets to
00:35:37
continue the trade was was basically interrupted
right they were they were engaged in a short
00:35:42
squeeze against these big hedge funds and in order
for this to keep driving the squeeze up and up
00:35:48
and up they needed it basically to to be able to
buy and then once they got frozen out of all the
00:35:52
online broker accounts not just you guys but all
of them that was that that that broke the trade
00:35:59
right maybe that's why that's
what i call hypothetically but that's what they're so but that's
what they were so upset about is because
00:36:06
they got they got locked out of the buy side of
the trade they weren't locked out of the sell
00:36:10
side right they got locked out of the buy side and
that allowed that the big hedge funds 24 hours to
00:36:16
regroup and uh and cover the trade the price went
down and that basically cracked the whole thing
00:36:23
right well i'm not sure about the uh the exact
details there on the on the hedge fund side or
00:36:27
what happened look what i can say is uh we're
gonna do our best to uh make sure that we get
00:36:35
better and we serve our customers uh whenever
whenever they wanna buy stocks and we'll do that
00:36:40
and we're going to get better and better every day
and the truth is if you had had the money in the
00:36:45
bank account to for dtcc to be compliant you would
have been like you weren't trying i mean you're in
00:36:51
the business of letting people without question
yeah you make nothing if people stop trading
00:36:58
you need people to trade the core of the business
right yeah this wasn't you know a value judgment
00:37:03
or some kind of uh moral stance and we weren't
pressured into doing it by anything other than
00:37:09
our regulatory deposit requirements what do you
think is the future of payment for order flow
00:37:15
and revenue sharing on um sort of like the
the ways in which like meaning how much do
00:37:22
you think of that payment for order flow
revenue should you share with customers
00:37:27
yeah that's a good question i mean this is all
highly regulated and uh it's it's become the
00:37:33
industry standard business model right so i'm not
sure we're we're excited to have a conversation
00:37:39
about it um i do think exchanges are here to stay
market making is here to stay market making is
00:37:47
a profitable enterprise and so some level
of revenue share between the market maker
00:37:52
and uh and the broker makes sense and uh
it is regulated um so i'm not quite sure
00:37:59
what if any changes need to come but hopefully
this will be part of the conversation that
00:38:04
that we can we can help create and uh and work
through and i think part of the problem is just
00:38:10
the opacity of it you know it's it's kind of like
interchange does anyone know that interchange
00:38:16
is this sort of like hidden piece of revenue
every time you transact with a debit card or
00:38:21
a credit card it's it's sort of analogous in a
way right well i think i think more people do
00:38:27
just because the technology companies that have
come around like you know stripe and others will
00:38:32
eventually just try to take it to zero um and so
if anything i think what the the business model
00:38:38
or at least the business strategy of all these
companies is when you find to your point these
00:38:43
opaque pools of revenue the innovation is just to
give consumers power by taking these costs to zero
00:38:51
if you vlad decided tomorrow to do um robinhood
pro you know higher level than gold and charge
00:38:58
50 bucks a month for 50 trades and then five
dollars each trade after that would solve
00:39:04
anybody's misgivings about this right
you could just offer both options well i think it's it's payment for order
flow enabled commission free trading right
00:39:15
it helps cover the costs of the business
that that that leads to our ability to
00:39:21
offer commission free trading and moreover
it allows um smaller investors to participate
00:39:28
so certainly i think that model would work
but the the consequence would be smaller
00:39:34
investors would uh yeah right if the option is
there it'd be like facebook saying we have an
00:39:40
option for you to pay and not see ads and be
tracked right it would just be great option
00:39:46
what do you think is the difference between
investing and trading and what do you think has to
00:39:50
happen so that you know back to where you started
if you want people to close the inequality gap
00:39:56
how do you allow them to do
it trading versus investing well i think the difference between trading and
investing investing is a little bit more about
00:40:07
accumulation so typically you're buying
uh more stock and building up positions
00:40:12
over time um trading comes into play um i think
when when you're selling right when you're selling
00:40:20
sort of strategically and um you're doing it not
driven by outside needs for them for the capital
00:40:29
but more for uh for sort of like uh intrinsic
needs um so i think the question is would we
00:40:37
would we ever prevent people from selling ideally
not i mean people have various needs that uh that
00:40:45
they could have for getting out of positions and
i think as a platform we have to allow for that
00:40:51
awesome uh your pr people are literally
gonna come freaking out breaking your glass in your house your pr
person is literally running from hq
00:41:03
she's gonna start bagging on the back window
you cannot be on this pod uh no great job vlad
00:41:07
um and uh remember use the or code
bestie and get your first free mob well thanks for having me gentlemen all right
thanks thanks man great job take care thank you
00:41:21
thank you thanks for answering our questions
yeah thank you for coming you're going to log
00:41:24
back in two minutes right yeah okay yeah come
back for the chesaputen gavin newsom recall news
00:41:31
your pr people will be delighted if you comment
on that yeah are we gonna do a debrief the debrief
00:41:39
from my opinion is that um i i think that they're
half they have to really tighten two things one is
00:41:46
they need to make a decision
how do they want to make money um because i think this is the third time these
issues have come up it's probably not going to
00:41:54
be the last and because there's going to be more
market volatility not less and so you just got to
00:41:59
decide how you want to make money because there is
no amount of money that's possible if you're going
00:42:03
to build a successful business and run into these
margin constraints right you can't there's just
00:42:08
no amount of money that you could have meaning if
you look at the folks that didn't get called we're
00:42:12
folks that have like schwab accounts why because
schwab is investing and if you look at the folks
00:42:16
that did have these margin issues because robin
hood wasn't the only one they're all the trading
00:42:20
and and sort of like high frequency shops and so
you know that's the decision and then it's back
00:42:26
to what david said which is like once you make a
decision you have to be able to tell people like
00:42:30
this is what you want to stand for and you
have to have the right internal controls and
00:42:34
governance and so you know if he gets these things
right maybe they can be on the other side of it
00:42:39
otherwise they're just going to continually
step on this stuff and i think that the
00:42:44
you know uh if folks lose enough money
they're going to be pretty upset i think
00:42:48
sounded to me like david uh freeberg you had
a good point about offering the the robin hood
00:42:55
consumer base the ability to buy the shares i
think a hundred percent of it should go to the
00:43:00
the retail investors he didn't say no and he kind
of i kind of got the inclination that he was going
00:43:05
to do that 100 he will not yeah this came out in
the past where he said they were going to offer
00:43:11
some of the ipo shares to robin hood customers
and so that was a few months ago i i think i
00:43:16
said publicly on twitter why don't you offer all
your shares to ipo customers like why take any of
00:43:22
them directly i mean could he technically become
a clearinghouse and ipo people but then would it
00:43:27
be like a partnership in it yeah like why don't
you just take um you know if fidelity wants to buy
00:43:32
shares let them buy shares on the open market like
all the retail customers are forced to do and then
00:43:36
the fidelity argument is well we're buying 50 100
million blocks at a time so we don't want to have
00:43:40
to be in the market doing that but the marginal
cost of buying a single share versus the marginal
00:43:45
cost of buying a million shares is much much
higher and you know that's that's the challenge
00:43:50
with um you know with retail access in financial
markets that robin hood has set out to solve
00:43:56
as have many others and it would be a really
powerful statement if they said you know what
00:44:00
we're going to show the world that the market can
all go direct and be efficient and actually make
00:44:05
all of their ipo shares available and then you
know what if the big block trade guys want to
00:44:09
buy some go ahead and buy it from the retail guys
in the open market or do 50 50. you know offer
00:44:14
everybody who's a robin hood shareholder i just
think that they would if they could fill their
00:44:18
demand their demand on their book for their
ipo from retail do that and let anyone else
00:44:23
let fidelity sign up for robinhood account and
buy their share through robinhood you know like
00:44:28
um the fact is the big block buyers always get
a discount right they pay wholesale pricing in
00:44:34
these markets um and that's also part of why it's
so difficult for retail to actually find a footing
00:44:39
um and so it would be a really powerful
statement for them to kind of go all the way
00:44:43
sure i think it's almost certain they're going
to give some of the shares available on the ipo
00:44:47
to robin hood customer it's a great uh it's a
great kind of uh you know publicity point but um
00:44:52
but it would be really powerful if they shifted
the whole the whole thing i mean years ago when
00:44:56
i was at google we did the ipo i don't know if
you guys remember this but it's the first time
00:44:58
we try to do this dutch auction so the reverse
pricing so anyone any individual any retailer
00:45:04
and a retail customer and any institution could
bid on google shares and then there was a clearing
00:45:09
price that was hidden everyone got their shares at
the same time so there wasn't this order book that
00:45:13
was built by going to the big guys that the banks
all know and love like fidelity and hero and so on
00:45:18
selling them big discounted shares it
was it was it was a true market auction and the direct listing is the new model for this
that totally democratizes access to the shares
00:45:26
creates fair and transparent pricing for everyone
and so you don't end up with these like discounted
00:45:30
shares that pop 80 on day one okay saks what
is your debrief on the vlad appearance so i
00:45:36
think vlad did a pretty good job handling our our
questions um answering answering some deflecting
00:45:44
some i think that i look i i think i i don't think
vlad's a bad guy i think he's a good guy i think
00:45:50
robin hood wanted to do the right thing i don't
think they had any reason to want to freeze their
00:45:54
own users out of their accounts i don't think
they wanted to do what they did i think that there
00:46:00
was a little bit of a blind spot there on his
part in terms of understanding the consequences
00:46:06
of that freeze out right because it did break
the buy side of the trade for wall street bets
00:46:11
and then that that basically allowed the hedge
funds to recover and that was that moment
00:46:16
you know and so um that was that was a
big deal i think the consequences of that
00:46:19
decision were a big deal but it's a counter
factual right we don't know we'll never know
00:46:25
of course look it was it was that thursday
where the short squeeze ended because
00:46:30
wall street vets couldn't keep buying they
couldn't keep engineering their side of the trade
00:46:34
obviously that's why it cracked right and
robinhood was a big part of that whole thing
00:46:38
collapsing now it was going to collapse at some
point there's no question that the air was going
00:46:43
to go out of the balloon right but would have gone
to five or 600 is the question yeah but but but
00:46:47
how much money the hedge funds were going to lose
whether they're going to get busted out of the
00:46:50
game for good and who is going to get left holding
the bag those were all questions that got answered
00:46:55
in a completely different way because robin
hood did what it did now i i don't believe that
00:47:00
they had a choice i think they did it because
they were forced to do it um but it did have huge
00:47:06
consequences i thought he did he's doing a better
and better job explaining this highly technical
00:47:11
stuff and uh you know obviously if they can't
talk about their ipo that does tell you certain
00:47:16
things i don't have any inside information but he
obviously there's thing what i get from this is
00:47:21
there are things he can talk about and there are
things he can't talk about there might be either
00:47:26
things with the ipl or things with confidentiality
between them and some of these parties like
00:47:32
i have a feeling people are not allowed to
talk about this dtcc and what goes on there
00:47:36
because there might be i would have liked i that
that was an area where i really wanted to hear
00:47:40
more details and get more clarity because i mean
i believe look the order came down in the middle
00:47:45
of the night from the dtcc right and so that's
why i kept asking why wouldn't you just say
00:47:50
to the dtcc talk about them okay that's what i'm
reading into it and i don't think i think it might
00:47:56
be one of these non-disclosures where you can't
mention the non-disclosure which we've all maybe
00:48:01
maybe but but but but see that was the heart of
my question is if you're ordered by somebody in
00:48:06
the middle of the night to take an action that
is you know adversarial to your own users well
00:48:11
i would ask them for that in writing and post it
on your website post it on your blog so to show
00:48:15
that you don't have a choice i mean i believe
that he didn't have a choice but why didn't
00:48:19
he say that from the very beginning right i mean
that's what caused all the problems for them yeah
00:48:25
all right there you have folks
everybody go to thesyndicate.com all in boys i love you i gotta go great job talk
to you soon talk to you guys later love you guys
00:48:34
love you bestie all right we'll see you all
next time bye-bye and they've just gone crazy
00:49:13
it's like this like sexual tension
that they just need to release your feet oh