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
00:00:38
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
00:00:50
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
00:01:47
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
00:03:12
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
00:03:39
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
00:04:28
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
00:12:05
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
00:12:19
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
00:21:57
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
00:32:41
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
00:33:26
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
00:36:02
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
00:39:09
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
00:40:01
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
00:40:56
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
00:41:17
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
00:41:50
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
00:45:21
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
00:48:28
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
00:49:20
your feet oh
