Latest / Cheeky Pint / Robinhood CEO Vlad Tenev on tokenizing private companies, changing the SEC, and Frank Slootman

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Robinhood CEO Vlad Tenev on tokenizing private companies, changing the SEC, and Frank Slootman · Cheeky Pint

• John Collison: So you grew up in Bulgaria, moved to the U.S. You're a math nerd. You studied math undergrad, you dropped out of a PhD? Vlad Tenev: I dropped out, yeah. John Collison: And then you started an HFT firm that became-ish Robinhood over time? Vlad Tenev: Yeah, sort of. It was a relatively fast failure, the HFT firm. But we learned a lot. John Collison: But the experience was useful. We'll get to Robinhood, but first I want to know, tell me about the hoarding of copper pots in Bulgaria in the '90s. Vlad Tenev: Oh, yeah. So when I was a child, Bulgaria had the unfortunate distinction of having the highest inflation rate in the world. I think in 1997 we went through hyperinflation. John Collison: What was the inflation rate? Vlad Tenev: I think it was something like 2,000%. John Collison: Wow. Vlad Tenev: If I remember correctly, and maybe even higher than that. But there were a few echoes of high inflation before the big moment. Ultimately, Bulgaria ended up having a lot of debts in foreign-denominated currency, which creates a problem.Then if your currency devalues even a little bit, it creates this death spiral. But the Berlin Wall fell, communism collapsed in Eastern Europe, and in 1991, when I was still living there, I was four years old, the inflation rate was like 150%. So then, my grandfather was actually like, "This country is not going in a good place." He told my parents, "You should try to figure out how to get out of here." And the good thing was after the Iron Curtain was lifted, my dad had an opportunity to go to the University of Delaware for a master's. We were able to eventually all move over there. It was first my dad, then my mom, and then I lived with my grandparents back in Bulgaria for a bit. But then they had enough resources to send for me. And about five years in, we had this hyperinflation bout. So my grandparents' pensions, they had recently retired, went to essentially zero. I had a savings account in Bulgaria that they had opened for me. It was funny, I was in Washington a couple weeks ago for the Invest America Child Investment Accounts Initiative, and I opened up an old briefcase that my dad had and it had the slip for my savings account, which basically showed when I was born they put $2,000 equivalent in there and then they added money over time. And then, 1997 it was down to $10 and then they just stopped adding money. Pensions went to zero. My grandfather at the time, he was a doctor for the Bulgarian maritime forces, kind of like the Navy. So he knew some people on port that had copper cookware. He didn't have anything like Robinhood, didn't have any way to invest in stocks. So he had this closet in his apartment in Varna, Bulgaria where he just opened the door and copper cookware would fall out. John Collison: So that was the store of wealth? Vlad Tenev: That was the store of value. Yep. John Collison: This presumably must inform your views of crypto where there's a general trend in a bunch of emerging markets with currencies that have historically seen hyperinflation where people want to keep their money not in the currency because of just the experience you had with the savings account. It feels like that is a big part of the early product market fit around the world. Vlad Tenev: The surprising thing about what you said to me is that Bitcoin was originally thought of as the store of value and this way to escape local hyperinflation, but people don't seem to be using it for that or quite as much. And if you look at stablecoins, stablecoins have gotten a lot of traction overseas because you have this need to have U.S. dollars. Everyone just wants U.S. dollars. It has a very strong brand as a safe, stable currency. Part of that might be an education thing, but it's hard to counteract that. John Collison: I think partly people in these countries have some familiarity with U.S. dollars already, so you've less of a unit of account confusion and things like that. Vlad Tenev: I think that's right. Crypto has become a really good mechanism to store your wealth, but it's not necessarily the only one. I think U.S. stocks and a diversified portfolio of companies could also achieve the same goal. The problem is it's lagged because the infrastructure has been so bad that it's actually quite difficult for you to get access to U.S. stocks if you live outside the U.S. John Collison: So I was going to ask about that. There's a strong home country bias in investing. Pieter Levels was here and he talked about his parents buying a Royal Dutch Shell stock in the Netherlands. My parents would've owned Irish bank stocks in Ireland. And so traditionally, that's what people do. A lot of markets have underperformed the U.S. and maybe there's more desire for people to own either the S&P 500 or the MSCI Global Index. And so, is part of Robinhood's strategy, letting people escape the home country bias in investing? Vlad Tenev: The plan is to give you access to every asset. So eventually, over time, we're going to integrate with the London Stock Exchange, Hong Kong, all the major markets. John Collison: But doesn't that mean you are escaping the home country bias? Again, I would posit that people invest too much in their home country today. Vlad Tenev: Yeah, I think that there's a conflicting interest here to some degree, because if you talk to the governments, they always want to encourage investment in the home country. And I think that's reasonable because, at the end of the day, the citizens should benefit from that, is the idea. But from the customer standpoint, the best customer experience is just to get the best stuff. And if you talk to someone in Europe, they also would like to invest in Tesla, NVIDIA— John Collison: Totally. So as I think about how Robinhood broke out and became really popular. Clearly, a mobile-first experience is a big part of it. Again, Stripe was not the first payments company. Robinhood was not the first online brokerage, even discount brokerage guys like E-Trade and stuff like that. And so, when you come into a market where you're not the first, you need a significantly better value proposition. Having a really good mobile experience was a big part of that. What else allowed you to take so much market share versusE-Trade and all those other guys? Vlad Tenev: The zero-commissions was a big thing. I think that we did two things that were difficult and differentiated simultaneously. One was lowering the commissions to zero. When we started, it cost 7.95 to 9.95 to place a single trade, which I think was a problem for two types of customers. One is, someone getting started with 100 bucks, if 9.95 is your commission, once you get in and out of trade, that's a 20% drag on your portfolio. So that's a problem. Basically made it so that you couldn't get started with under $2,000. And by the way, most of them had account minimums of $2,000 anyway. So we got rid of that when we eliminated the commissions. And then, the second group of people that it's a problem for is the active trader. If you're trading somewhat actively, you could be paying tens of thousands of dollars or more a month in commission fees. So when we launched, those types of customers who are really poorly served by the existing offerings just flocked to it. So that was one thing, innovating on the pricing and the structure, which led to a bunch of other downstream things. From the very beginning, we were like, "In order to make this work, we have to make our costs as low as possible. Which means we have to automate everything, and we have to streamline all processes from onboarding customers to customer service elements, to processing payments, linking bank accounts." It was actually quite innovative for many years to do automated account approvals in brokerage. We would interview people from other brokers. When we launched they all wanted to come join us, and they were like, "How do you do it? We've been trying to do this for decades." John Collison: So the tech and computerization revolution had not fully hit brokerages where they hadn't the level of automation and technology which would allow for a lower cost structure and more scale that they should have had if they were taking this trend this seriously? Vlad Tenev: Not at all. These were all mainframe. I think a lot of them are still running on mainframe. So they are three technology revolutions behind. And actually, that was our observation from the first business, the high-frequency trading firm that ultimately wasn't successful. But our observation was, "Well, you've got our software and then a team of three engineers that can manage a book that's trading billions of dollars a day. So why do these brokerages have these gigantic operations departments, and why are they charging customers 9.95?" Part of it is certainly the technology just wasn't there, so it cost them much more to process each trade. Part of it is also that there wasn't any new entrant in the space that was actually providing pricing pressure. So I think we were able to do that. John Collison: It's so obvious when you say it in hindsight. You created a sophisticated tech platform that allowed for lower marginal cost and passed that onto the consumer in the form of lower fees. And then you had a good mobile app, and that's probably 80% of it. Vlad Tenev: Yeah, and mobile I thought was big too. I think each of these things could have probably led to a good decent sized business. If we just had the best mobile app and we charged 4.95 a trade or if we just had zero commissions. But it worked really well and the mobile app maybe was shit. I think that probably also would've worked. But two of them together I think led to an outlier level of success. John Collison: So the thing that allows you, or at least allowed you in the beginning, to do the zero-commission trades is the payment for order flow. And I find the whole narrative around payment for order flow crazy, where you'll have politicians out there on the pulpit railing against this front running that's happening and how this is unfair to consumers. Whereas actually, Matt Levine has written extensively about it, it seems pretty clear that the reason that payment for order flow exists is the adverse selection problem. Where when you are trading you care about who your counterparty is, and if your counterparty is Ken Griffin you're like, "Hah, what does he know that I don't?" Whereas for the kind of consumer retail order flow you have, people are very happy to trade with those parties. And so, as a result, you can just get... Well you're required to get the best price, but you can get a better price by selling the order flow because there isn't that adverse selection problem versus what is out there on the market where you don't know, is it someone who's super sophisticated, who knows something you don't? Vlad Tenev: Well, I would say one thing. I think the narrative got a little bit away from us. The truth is, at the beginning, we didn't care about payment for order flow, and we actually did not think that it was going to be a big source of revenue because it was so small. And actually, for the first several years, we weren't self-clearing and we were relying on a third party to even route our orders. So we cleared through Apex. Apex had a vendor relationship with Instinet, which routed our orders. So if you look at the early pitch decks for Robinhood, we thought we would make money from API access and a premium subscription offering that was yet to be undefined, and margin lending. And then, we saw that we had all these active traders, and then, payment for order flow became a larger and larger revenue stream. But that was really just because we got so much bigger, so much faster on the trading side that even this tiny revenue stream became quite meaningful over time. All of the competitors offered it or took advantage of payment for order flow. If you look at TD Ameritrade before they moved to zero commissions, their average revenue per trade was something like $12 or maybe $11-$10 of it was commission, $1 was payment for order flow, and of course we deleted the $10 bit. And when they had to match our pricing, their stock went down 35% on a day, which was crazy. They couldn't survive as an independent company. They had to be merged into Schwab. E-Trade got gobbled up by Morgan Stanley, and then the narrative somehow became, "Oh, they're making even more money from this other payment for order flow thing than they would've made if they were charging commissions." John Collison: But that's my question on payment for order flow. How did the debate get so wacky and so disconnected from how the markets actually work? Vlad Tenev: I think the way it happened, and this was a little bit of unfortunate timing on our part. When we announced Robinhood, our initial waitlist in 2013, there was this book that came out “Flash Boys.” And it was basically coincident with the announcement of Robinhood— the Michael Lewis book. John Collison: Sure. I've read it. Vlad Tenev: It was interesting because as a high-frequency trader, a former person in the space, I read that book and I was like, "Man, this is a sensationalized account." But basically, if you think about—He was setting this up as a good versus evil battle, but the good people in this story were the big banks who were unable to keep up with this technology that were getting picked off by the MIT kids with all the new software. John Collison: Those evil MIT kids. Vlad Tenev: And I was like, "Man, this is an amazing piece of jujitsu, how you can make the big legacy banks that are making tens of billions of dollars of revenue feel like the victim here." But he threw this payment for order flow thing in there that I think somehow made you think that the victim was a retail consumer. Because you have to tie it in to make the story work well. John Collison: So that kind of started the meme. That's interesting. Vlad Tenev: I think that poisoned the well a little bit around this whole thing, and it made it something that we had to contend with even from the time we launched. From the time we launched, you look at Reddit threads or Hacker News threads and it's like, "Oh, but there's payment for order flow. I just read Flash Boys by Michael Lewis. You got to get this book if you really want to know what's going on.” John Collison: So now the equities part of the business and payment for order flow is one of the smaller business lines where options is bigger, interest income is bigger, maybe crypto is bigger. I don't know. And so you've created many other successful revenue lines. Interest income is a significant part of the revenue stream. Doesn't that make the business very interest-rate sensitive? Maybe that's just like, "Yes, we're like a bank in that way, and that's just a fact of life for the business." But how do you think about the fact that you have now more volatility in the business? I mean, I guess you had volatility previously with trading volumes, but— Vlad Tenev: It’s more volatility before. If you zoom out, in financial services, there's not so many ways that you can make money. You can make money on the transaction, you can make money on interest on the assets, whether it's cash and you're earning a small spread on that or securities lending for securities that we hold. And then, for the industry, that's pretty much been it. And all these things that we've discussed fall into one of those two buckets. We also have subscription through Robinhood Gold, which is not common in the brokerage industry. I think since we've rolled that out, people have tried to replicate aspects of it, but in the beginning, when we started with subscription, everyone's like, "No, in the brokerage industry, it doesn't work. Nobody does it." And I said, "Well, let's just see. Let's see if it works." John Collison: It's interesting to me how it feels like many of the neo-financial services are moving towards subscription models as a way to segment the high-quality customers essentially. Like Revolut has a bunch of different subscription products, you guys do, and it seems like maybe a good idea because previously banks would not do that. And as a result, I think they didn't have a way of actually segmenting the product offerings in this good way. Vlad Tenev: I don't know if it's segmentation. We have one subscription tier. And a lot of people—I think that subscription is more of a... There's a loyalty element to it, which is a little bit more psychological. John Collison: People feel like they've invested in this product and they want to use it. Vlad Tenev: Exactly. So our general flow is someone comes to Robinhood and usually they come because they want to buy a stock or they want to buy some crypto. There might be some other reasons, but those are the simple dominant ones. Then we tell them about the Robinhood Gold subscription. and we make it clear that that's basically a no-brainer. You get eight things. And they might not be interested in each of those eight things, but then they become a Robinhood Gold member. And then, I think the natural tendency is, "I'm already a Robinhood Gold member. As long as I'm peripherally aware that Robinhood offers a product in the category that I need, I'm going to check that first because I feel like I'm already invested." John Collison: People want to get use from the bundle that they have purchased. Vlad Tenev: Yeah, "I want to get use from the bundle. I want to get a good deal." And if we can communicate that, if you're a Robinhood Gold member, you don't really have to think about anything. You should just assume that you're getting the best deal in the market. Then I think you get Amazon Prime, Costco effect where that just becomes your go-to place for financial services. John Collison: You have investing. You have now the card with Robinhood Gold and the 3% cash back. Do you at some point essentially become people's primary bank account or primary financial account, however you want to call it, where they get their paycheck deposited there and then they have a card that they can spend that money on or they can go invest it? It seems like you have a lot of the ingredients already to become people's–Consumers' primary financial home, which again, I would characterize as the place that they're getting their paycheck deposited. Vlad Tenev: Yeah, we've been thinking about this for a while, and we're launching Robinhood Banking actually in the coming months. John Collison: Oh, that's cool. Vlad Tenev: We announced that at our Gold Event a couple of months ago with a few innovative features including cash delivery, which I'm very excited about. John Collison: As the armored truck rolls up to your house? Vlad Tenev: Yeah. Or the small Tesla Model 3. John Collison: I want an armored truck. I think that's better aesthetics. Vlad Tenev: Armored truck… We would have to do the armored truck if you want a delivery of $250,000. John Collison: Exactly. Vlad Tenev: It's very expensive for the $100-200 average ticket charge for an ATM transaction. John Collison: So you are doing consumer banking, and the features that you think are important for that are… Cash delivery is one. What else? Vlad Tenev: I think having a good, high APY. Also there's an opportunity to make it really easy to switch from one bank to the other. Part of the reason it's hard to make it as a bank that doesn't cater to the low end is you have to move all of your stuff from your existing bank to the new one. And you've got a lot of bills. You have direct deposit from your paycheck. So if we can make that process frictionless, if you can just push a button and we take care of everything— John Collison: That's cool. Vlad Tenev: I think that would be really powerful. John Collison: Sorry, how do you press that button and take care of everything? Have you built migration software from other banks.What does the button do? Vlad Tenev: Yeah. So it's not out yet, but what it will do initially is, it's kind of like a lot of custom migration software. Vlad Tenev: That links into your payroll providers and things like that. But over time, as these AI models get better and better, you should think of it as your family office CFO. And you don't have to do all of the migrations for you. You just call this person and then they deal with it. John Collison: Oh, that's cool. Vlad Tenev: I think there's no reason we can't deliver that experience within the next one to two years. John Collison: Oh, do you have any funny stories from the GameStop saga? You must have had some just surreal moments in there that make for a good memory now—type 2 fun. Vlad Tenev: I guess to come up with something maybe a little bit more interesting that hasn't been reported on too widely before, most people that follow know about the capital requirements and the regulatory stuff. But I think one of the interesting things was, back in 2020 when COVID started and there was a huge influx of retail investing—one of the things that differentiated Robinhood was that we were giving free stocks to people, and we still do this. But it was a great way to get started. You get your free stock if you refer someone, it was bidirectional and you get one share. Now, one of the stocks that was actually very popular at that time was GameStop. So if you joined in 2020, there was a good chance that GameStop was the stock that welcomed you to Robinhood. We had millions of customers joining in 2020. In hindsight, this whole movement—and a lot of people are still angry at me, as I could tell, every time I talk to another journalist or anchor from a channel that I haven't been on a bunch of times, the first reaction I have is, "Whoa, you've got a lot of fans that are all about GameStop. Maybe I should spend more time with you." To some extent, that whole thing wouldn't have happened without us. We made possible, this whole thing. John Collison: As in, you feel a lot of long pressure on the GameStop stock? Vlad Tenev: I wouldn't even put it on the technical market aspects, but I kind of feel like these people's father in a sense. Just psychologically, I feel like they grew up with our product. John Collison: You gave a lot of people their first GameStop share. Vlad Tenev: I think it's time for—some of them are angry, they've left home, they've gone out in the real world. We've grown too, so I think it's time for them to just come home. I think it's enough rebelling. John Collison: But were there any moments during that saga where you were like, "I can't believe I'm having this call right now. I can't believe I'm in this position?" Vlad Tenev: Oh, yeah. Yeah. The whole thing was also very weird because it was all remote. And at that time it was one year into COVID and I, at least, was itching for some real human contact. I think it was maybe two days after the GameStop—the trading restrictions. It was Saturday or Sunday. And one of the really cool things was my investors, my friends, they were calling me. They were offering help. A bunch of people that probably wouldn't have given me the time of day were offering to get on calls and help me navigate this whole situation. Marc Benioff was very nice. Mark Zuckerberg. I never talked to Mark Zuckerberg, but he's like, "Hey, maybe I can help you with this thing. I've had my share of PR issues." So we workshopped some stuff. John Collison: So these were people reaching out to be supportive? Vlad Tenev: Yeah, Elon Musk connected with me too. John Collison: That's really nice. Vlad Tenev: And I was always a big Elon Musk fan, early Tesla adopter. So I think I got connected to Antonio Gracias through one of my investors, and he was like, "Well, I can help you with this. You're probably going to get asked to testify before Congress. You should try to see if you can get out of that." Ultimately, I didn't end up getting out of it. So that was a great conversation. He was very helpful. Then he called me back 10 minutes later and he's like, "I've got Elon here. He wants to talk to you." And Elon was very intense. He's like, "You're being an asshole to the people. What you've got to do is full transparency, 100% put it all out there, play-by-play, full transparency." And so then, he was doing this Clubhouse, I don't know if you remember it. It was his— John Collison: Yeah, the Vlad the Impaler Clubhouse. Vlad Tenev: Yes. So that was a scheduled thing with Sriram and Aarthi on that Good Time Show. They were blowing up— John Collison: Back when we had scheduled Clubhouses, back in that period of the pandemic. Vlad Tenev: So everyone was very, very excited about this. And so I text him after my calls, like, "I've got this crazy idea. How about I just go on Clubhouse and we lay it all on the line?" That was a spur-of-the-moment decision to hop on that 1:00 AM clubhouse. But I think it ended up being quite good. John Collison: So as we talk about this GameStop saga, professional investors say that the rise of retail and their increased relevance has really changed the investing business. What's your view on that? Or do you have any perspective from your seat? It's just interesting to me as you hear people who run hedge funds or people who are professional investors that it's just, it's different versus 5 or 10 years ago. Vlad Tenev: One of the values that we had on the Robinhood website from the very beginning was the importance of individual, direct participation in the markets. We had this feeling that everything was getting a little bit abstracted. You're not investing in a company, you're investing in some retirement fund or pension fund, and then that's being handled by an asset manager. Maybe they're putting it into an ETF. So you're probably four steps removed from actually investing in the real company. And I thought that was kind of a degenerate case when you think about it, because you have all sorts of weird things happening. Like something happens with tariffs, and now suddenly, a stock like Palantir or something that's completely unrelated to tariff action is taking a huge hit. And you can understand it when you go through this indirect thing. Someone's making a macro decision, they're rebalancing their portfolio and these individual companies that maybe have nothing to do with it are just collateral damage. So I think as we were going to this more abstracted world, the signal of, "I'm buying this stock because I believe in this company and I think their future prospects are very good," was getting more and more diluted. And I think retail provides a counterbalance to that. I think that's why recently with the whole tariff saga, retail ended up doing quite well because— And I think sometimes this is criticism, sometimes it's praise, but retail is known as dip buyers.Because they're like, "Oh, well, this stock is at a discount. I believe in it, I'm going to buy it." But I think they end up looking quite smart because they take advantage of this macro headwind that ends up disproportionately impacting stocks that really don't get harmed from it. Then I think when that stuff washes out, they've ended up benefiting disproportionately. So I'm a fan of it. I think more direct ownership is generally healthier and less stacks and stacks of misdirection. John Collison: Do Robinhood users vote their stock ownership in the proxies? Vlad Tenev: They do. I mean, they have the ability to. John Collison: Because that seems like a good trend where it's been much decried, the fact that everything's in index right now, and then you have ISS and the shareholder services companies where you have a very small number of random firms making recommendations on how mutual fund managers should vote versus people directly making— Vlad Tenev: The voting thing, I think there's a lot of people, including us, that are keen to figure out how to make that a bigger thing. I think there's two problems with it. One is that most proxy votes are just not super interesting. If you look at it, it's incomprehensible things that don't really get retail very excited. If there's some kind of proxy war and you're voting the CEO out— John Collison: Sure. But it's usually not that. It's usually something totally soporific. Vlad Tenev: It's usually not that. Maybe you'll get one per year or one every two years. The other thing is, the decision to vote on something versus just selling the stock. So as retail, you have the option where you can just sell the stock. And in some ways, that can be an easier outlet for the feeling that you're not happy with the company. Whereas if you're a fund manager, you're in that stock because you don't have a choice. You're subject to some algorithm that says you have to buy it, and then you end up accumulating so many of the shares, but you can't just sell easily. So that's why those guys are particularly motivated to vote because that's actually their only outlet to expressing a point of view about the company. So I think in order for voting to become bigger, we have to solve both of those problems. It might be possible if you make it more delightful and if you incentivize it to solve the first one.But you're competing with users being able to sell the stock, which is a powerful alternative. Should I go first? Crew: Yeah. John Collison: So 15. Vlad Tenev: 27. John Collison: 12, 27. If we think about who owns companies in America, there's insider ownership, there's ETFs, there's direct retail holdings, there's mutual funds and hedge funds—maybe you merge those,lump those last two together, but those are the way in which stocks are held. Where is Robinhood taking share from? Are people taking dollars that they would've invested in a mutual fund and investing instead directly in companies? Is it new dollars coming into the stock market? I'm just curious how I should think about that mix. Vlad Tenev: It's been a while since we've done this analysis. I think the last time we did it, we found that it was mostly new dollars coming in. That money that customers are investing would've very likely been spent or consumed in some way. And then maybe at some point someone's investing it, but not that retail investor, which is why the whole gamification narrative rubbed me the wrong way from the beginning because it's like, "Oh, are you making it too easy?" Vlad Tenev: For a while it was like, that money would've just been spent. That would've been spent on entertainment. It would've just been—People were buying trinkets on Amazon. We're taking money from the spending bucket and moving it into investing. Now, of course, over time, as we do more and more, we're helping you with your spending. We're helping you with your retirement. So it's becoming, like you said, a more comprehensive financial services company. But at least at the beginning, that was always my irk with the gamification thing. John Collison: But presumably part of what triggers those narratives is, it feels like every few years there's a Robinhood headline around zero-day options or Super Bowl contracts or whatever, or the stuff that's on the more speculative end of the investment market, and that's what ends up causing these narratives? Vlad Tenev: I think that's true—well, you're probably right. Although I think the narrative originated well before we had any of these things. I think it actually originated right when our zero-commission model became universal. So it was end of 2019, everyone dropped commissions to zero. And then I think before then, the answer for why Robinhood was successful was pretty simple. It's like, "Oh, they're not charging commissions. Everyone else is." But then the industry matched us. In 2020, we grew our market share at an accelerated pace, and the business itself grew 3-5x. And then the story for why Robinhood is successful became a little bit more complicated. It's no longer the commissions. Maybe it's a better product, but saying it's a better product is not as salacious as saying, "Oh, this gamification, they gamify." And it makes it much more nefarious. So I think the media ran with that narrative because it was more effective. John Collison: So you want to tokenize private companies. I have a lot of questions. Vlad Tenev: Yeah, let's talk about that. John Collison: First off, how do you actually do it? Because aren't you kind of nakedly short the position where you owe the customer the appreciation of the underlying company, but you can't guarantee that you're going to be able to get your hands on the stock because it's a private company, and so how do you actually mechanically manage that? Vlad Tenev: First, before we tokenize it, we have to make sure we have the underlying stock or exposure if there is no stock, whatever the equivalent is that we're giving the customer. In all cases thus far, which is the tokenized public stock where it's easy, and also the SpaceX and OpenAI giveaway, that's backed by holdings that Robinhood—Has on the balance sheet. John Collison: But doesn't that mean that you're then limited in the rate in which people can come into these positions? Because if you get a billion dollars of interest flooding in for OpenAI, you have to go acquire a billion dollars of OpenAI stock, which you might not be able to do at the drop of a hat. Vlad Tenev: There's a similar product that we have called IPO Access. And the way IPO Access works is a similar situation. Retail expresses interest. We collect it. Typically it's massively oversubscribed, and then the company hands us out. Most of the time they don't give us very much. Other times, if they like us, if they like the idea of retail, they give us a little bit more. We've had some IPOs that customers have wanted over the years. I think it's a good offering for us. But generally speaking, we don't fill the retail demand. It's massively oversubscribed. John Collison: I see. So there are cutbacks. And so you have the concept of, "There's only so much allocation that we can grant here." Vlad Tenev: But we are thinking about this. And there's a way to... It's kind of a chicken and an egg problem. Do we collect the retail demand first? Do we get the supply? And I think one of our strengths is we have a large balance sheet, so we have some flexibility here. John Collison: You can act as an underwriter. Vlad Tenev: Or a venture fund in the private sense. So we're thinking a lot about how to do this. You know that I'd love to tokenize or otherwise make your stock available to retail. John Collison: And you know that I'm skeptical. And I guess… I’ve a number of skepticisms, but one of them is, we have decided at a policy level, as society, that there's a certain set of disclosures and regulations that companies selling stock to the public should be subject to. And so, they need to release their quarterly financials in this way, and they need to make these adaptations. They need to run in a certain way and all these things. And so, don't you end up just running around that and having regulatory arbitrage where private companies get to act as public company or get to sell stock to the public, which is not something that we want to have happen. Vlad Tenev: I disagree across a few axes. I think these rules, these public company disclosure rules, which were created— John Collison: And everyone agrees that we should improve the public company rules. Vlad Tenev: Yeah, but I think that's very, very hard. I think once a process gets to a certain level of sophistication, you basically have to... It's very, very hard to just rip it up and make it efficient again. And I think there's two things working against companies going public more. One of them is the process and the costs of going public have started to outweigh the benefits in a lot of cases. I'm sure you guys probably experienced that directly. And I'm one of the cases where I think the benefits outweigh the cost actually, because my entire business is public companies. John Collison: Exactly, you are a public stock trading company. Vlad Tenev: But for you guys—for many companies, it's probably a little bit more of a nuisance at least now. The other thing is, it's just easier to raise private capital. You can get infinite private capital, and the only thing that would maybe compel you to go public is restrictions on number of shareholders, things like option grants, these minor technical things. And you look at retail. So you gave a retail-protection argument, which is that you don't want retail investors getting into things where they don't have the full disclosures and information. What I’d tell you is that retail investors have the unrestricted ability to YOLO into memecoins. It's kind of a silly juxtaposition to say, "Any meme coin is okay, open season, there's hundreds of thousands of them, put however much you want into this. But SpaceX and OpenAI and Stripe are too risky." I think there are problems with disclosure. And I think the origin of these accredited investor rules, the thinking behind it is, "Okay, if you have a million dollars, you can hire someone… You can hire a trained professional to think about this for you," which confers an element of protection. But now you have AI, you have all these tools that give intelligence and data basically for free to you, so I think they do need to rethink. And I think we should figure out how to safely give retail investors access to these names, which are some of the most innovative companies. And I think we can handle the disclosure elements fairly neatly actually. John Collison: How far do you want to go with this? Should Chick-fil-A be tokenized? Should a family farm in California be tokenized? What is this universe of companies that should be tokenized? Vlad Tenev: I think there's two things that are interesting. One is late-stage privates, and I think the customer base is a little bit different because late-stage privates is more like employees that are looking for secondary. So you, as the founder, are probably not the person that's championing for that unless you really like retail access. And some people believe in that very, very strongly and they're excited by it. But I think that's the late-stage private opportunity. And then there's early-stage, which is almost like capital as a service. And I think there's some talk about on-chain issuance and, "Oh, this will never work without on-chain issuance." I think that's all bullshit. Nobody gives a shit about on-chain issuance. They just want a button to deliver money so that they can raise for their venture as easy as possible.If blockchain technology is the easiest and most direct way to do that, then it'll win. But nobody's buying on-chain issuance at the earlier stages. They're just worried about growing their business. John Collison: So you would like to see this as a tool for capital formation where startups are able to raise money in this way. Vlad Tenev: Yeah. I think that's the end state. John Collison: We have seen countries play with frameworks for this, like equity crowdfunding in the UK, some frameworks around that. But there are— Vlad Tenev: It's been very effective in some cases. It's still a little clunky and it's limited to that market. But Revolut, for example, did multiple equity crowdfunding rounds in the earliest stages, which ended up working quite well for those. Let's talk about Stripe. Have you thought about whether there would be some mechanism where we could either tokenize your stocks or make it available to retail? I can present a couple of options to you, a menu of options. John Collison: This is my podcast. Vlad Tenev: I have a menu of options. One is, obviously we can tokenize it directly. The other is, you can put it in a diversified fund, a little bit less exciting. John Collison: So kind of less price action essentially? Vlad Tenev: Yeah, but price action would be obscured because there would be five companies, let's say. John Collison: I think— Vlad Tenev: You seem excited. John Collison: Exactly. You can tell, I'm incredibly excited. There's multiple things. One, again, we do not sell equity to the general public today. Our view, just as a practical legal matter, is that the SEC takes a dim view of that. And so, that's one set of obstacles. But then, the deeper one is just that Stripe is not a capital-consumptive business. We're not out there raising many billions of dollars to build out, presumably more data centers. Vlad Tenev: That million-GPU data center, right? John Collison: Exactly. And so, there are these highly capital-intensive endeavors that, as a result, it probably does make sense to go out and raise from the deepest pools of capital. Stripe is not that. It is a pretty capital-light business. And so, the current set of owners, if you leave aside early investors, are employees. And we like that model. We like the idea that it's owned by the set of people who are building it and creating the value. And then we've solved the employee liquidity question through tenders. And so I think it would be a solution looking for a problem. Vlad Tenev: But what the problem is normal people can't get access to it, right? So what if the tenders, instead of being purchased by institutional venture capitalists, could be a little bit more democratized? John Collison: I'm never that sympathetic to that argument. The main reason is just, if you look at the underlying ownership, it's normal people through a different lens. And so, who are the LPs in a company like Stripe? It's generally college endowments. It's CalPERS, it's pretty broad ownership underneath. It's not... When you're saying being owned in a diversified vehicle, that's essentially what Stripe is today, where the underlying owners that are not people who work at the company or have worked at the company—it's generally funds. And those funds are generally people's money managed in some way. We also have a few mutual fund owners or something like that. It actually strikes me as a pretty sensible ownership structure. The other thing that we're getting into in these discussions, and when you announced the OpenAI tokenization, it struck me as a prediction market on the future of a specific company. I'm curious, you're getting now more into prediction markets, and I'm curious what the world looks like where prediction markets become much more relevant because that's one of the biggest changes of the last five years. Vlad Tenev: I think prediction markets are awesome. It is fundamentally a little bit different than this. We'll get into the prediction markets thing.But one of the criticisms that maybe the tokenized stocks or the stock tokens offering has had is, while these are just counterparty swaps with Robinhood, but it's not exactly that because they are backed by the underlying asset. In a sense, if you think about stablecoin, it's the same mechanism. There's different paperwork surrounding, which we can debate— John Collison: You have ownership of an underlying pot of assets. Vlad Tenev: But yeah, you've got a bucket that you put some stuff in, and then you put tokens against that. And that becomes a tradable instrument on blockchains. So I actually don't think there's any criticism that you can apply to stock tokens that doesn't apply to stablecoins. Stablecoins have crossed the Overton window where nobody's really talking about these things. But I think effectively, from a practical process standpoint, they're identical. Prediction markets, to your point, are derivatives in the ultimate sense. And I think what's exciting about prediction markets is, not just the fact that customers can trade them, although that is great for us and it's been a growing business. But also that there's a use case that's mass market outside of trading. You can just look at it, and it becomes an alternate source of news. That's why I resonate with this idea that prediction markets are truth machines. John Collison: Where do you use prediction markets outside of elections to get news? Vlad Tenev: I was at Wimbledon a couple weeks ago, and we had a great Wimbledon prediction market. There's a Bulgarian tennis player who I happen to know a little bit, Grigor Dimitrov. I don't know if you saw this match. He was playing Jannik Sinner who ended up winning. Now, Grigor Dimitrov was up two sets to zero, and he was actually winning the third set, so he was going to clean the match up. And then, you look at the prediction markets, I think at the time it was like 55:45. So it was very, very close. Anyone who was a casual observer— John Collison: Just watching the score. Vlad Tenev: Would be like, "It's got to be 95:5. Nobody ever comes back from this." But it was pretty much even. And I think that's interesting. I think that the score itself doesn't tell you the full information. There's all sorts of information like injury history, prior experience, that if you tie it into one number becomes a useful prediction. I remember watching the Jake Paul-Mike Tyson fight as well. If you're watching the fight—I was watching it on Netflix at the time. It was the third round, and they were like, "Oh, Mike Tyson could win this with one punch. It's very, very close." They were trying to keep you entertained, so you keep watching it. You look at the prediction market, I think I was looking at Polymarket at the time, it was 92% Jake Paul. So I think it's broadly applicable. I think you can also look at it for these one-time events. The Pope one was very popular. There's a lot of AI-prediction markets, which I'm personally very keen on. Like when is AI going to achieve different milestones. So sometimes, at least for me, I just want to know what the answer is. What the most likely answer to a very specific question is. And you just can't get that from the news, because the news has become a little bit corrupted because the model is to keep you engaged and entertained, which is contrary to giving you the immediate answer to the question that you're looking for. John Collison: What would you change if you were running the SEC? Vlad Tenev: I think Paul Atkins is great. I have a lot of confidence that he's going to do all of the things that I think are important. In general, I've been pretty impressed by the efforts coming out of the administration. I know it's difficult to say something like that, but when you compare that to the previous administration, I think they're focused on the right things. John Collison: Are you thinking about the Invest America initiative? Vlad Tenev: I think the Invest America initiative, that originated in the private sector with Brad Gerstner. The administration took that on, and I am hugely bullish. But I don't think it's just that. I think the AI plan that came out today was very good. I know you and I are in the same chat groups that discussed that, but to think that the U.S. is pushing open source… It's just a very, very good thing. On the SEC side, I think private markets and tokenization are the biggest things that I care about. And I think they're keen... I mean, the past couple of weeks, there's been a lot of talk. The SEC is very receptive to trying to make that work. And so, I'm feeling good about it. But if we end the year, or even if it happens next year with comprehensive crypto asset security tokenization framework and some solution that's workable, better than what we have today, about private company access, I think a full redo of accreditation, frankly, is what's needed. John Collison: It seems like everyone agrees that the current accredited investor regime is not that sensible. How does Robinhood shift so fast? Vlad Tenev: I think that it's just a matter of where we're focused. Let me think what the useful thing to say is without spilling all of my secrets to my competitors. John Collison: No, please spill the secrets. Vlad Tenev: If you let me tokenize your shares, I will. I think you have to want to shift fast. A lot of people say that they want things, but then, when they actually break it down into what that entails, they're unwilling to do those things. You have to be confronted with the harsh reality that sometimes the things that are needed to ship fast are not comfortable things. John Collison: What are the uncomfortable things people are unwilling to do? Vlad Tenev: I think that you have to create culture with the right talent. You have to hold yourself to a really high performance bar. You have to have the right environment for people, which I think, in our case, we emphasize the in-person experience. We found that that makes a big difference. We've made mistakes across all of these vectors that we've then had to revert, which is I think the benefit of doing this for a while. You get to try a bunch of things and quickly change. We announced we were a remote-first company in 2022, and then I regretted that pretty much immediately. I was like, "Oh gosh, that was the wrong decision." Everyone said it was a one-way door, but it turns out it's a two-way door. You can reverse pretty much anything. John Collison: Are you guys fully in-office now? Vlad Tenev: I think we emphasize in-office. It's obviously not 100%. John Collison: But it's the main way that you work. Vlad Tenev: Yeah. We do this thing where, if you're a senior leader or an executive, you're five days; if you're a manager, four days; if you're an IC, three days. And I think it's good because if you're an individual contributor and you're doing work, it's very nice to know that your manager is going through more pain than you. That's also a general principle for shipping fast or for motivating. I think it has to start at the top, and you have to be willing to do yourself, to an even higher degree, what you ask of everyone else. What we do is, we very much concentrate rewards with our top performers. If you're one of the best people in the company, you get rewarded very, very well. Promotions are zeroed in on those people. I have a founder's community too, which isn't just the people that report to me. I think that's the degenerate case where you end up creating a group of the most important people of the company, and it ends up being the people at the top of the— John Collison: Org chart. Vlad Tenev: The org chart. So we have to have systems that fight against that. John Collison: So sorry, how does this founder's community work? Vlad Tenev: Basically, if you're in the top 150 people in the company by impact across all levels, it's a real community. So it started out as compensation. John Collison: Is this model modeled after the Apple Top 100? They do this event that's the top 100 people do some offsite, I think once a year, and again, by impact and across all levels. And I think it gets a lot of noses out of joint. Vlad Tenev: I have heard about that. But I think the idea is that, it started out as being compensation-centered. So it was like, "Okay, if you're the best people, we have discretionary budget that we allocate towards that." But over time, it's grown into an actual community where, if I go through the updated strategy or vision, we get those folks together, we get their feedback. We try to incorporate. We do events. We have events in each city, and we get them together for dinners. John Collison: Is it a way to make Robinhood as a larger company still feel like a smaller company? Vlad Tenev: When I induct people into this community, I usually give a spiel, which is basically, "If there was a disaster, some kind of apocalyptic scenario, and we had to rebuild Robinhood with 150 people, you would be in that group." That's how I think about it. I think that you always have to be aware of who your best people are. John Collison: You described in 2021 growing too fast and then doing the visualization exercise of, "What would Frank Slootman do if he took over my company?" What did you do keeping Frank Slootman in mind? Vlad Tenev: That was a funny exercise. We’d just had, it was either a bad earnings or a bad board meeting. One of the ones where you just feel got punched from all directions. So I sat with my team and I was like, "Well, if they brought in..." It was kind of a morbid question, but, "If they brought in a CEO who really cleaned this place up, what would they do?" And there were a few observations. I think the first thing that came to mind is, Frank Slootman would be like, "What is this remote work nonsense? Let's get people in the office and working." And I think it was a good exercise to figure out. If you made a decision, it's hard to reverse that decision. I think there's a natural reluctance to not feel like a flip-flopper. John Collison: Totally, you don't need to feel prisoner to your previous decisions. Vlad Tenev: That's one of the things that's actually a benefit to swapping people. John Collison: Yes, yes, totally. Vlad Tenev: If I take myself out of it and I'm like, "All right, I'm an independent board of directors here making a decision about the company," one of the benefits of swapping someone out is they can just reverse all of this guy's bad decisions, which they don't want to redo. But if you're willing to do that yourself, I think that could be very powerful. John Collison: Patrick is my version of this joke was, when private equity takes over a company and they're like, "Wow, look at what these previous idiot managers did." And there's no reason we can't say that. It's like, "Get a load of what these previous management did. Isn’t that us? Shh, shh, shh, shh." Vlad Tenev: Exactly. People are unwilling to do that. John Collison: You can just decide to be inconsistent. Vlad Tenev: Oh, good. I've got a shot. Okay. John Collison: Oh, 26. Vlad Tenev: What did I get? John Collison: 27. Vlad Tenev: I think the other thing, which was also true is, there were some obvious things that we knew were the case that we were just ignoring. I think the big one for us is the active-trader market. I think we noticed, fairly early on, maybe as early as 2019, that we have a big active-trader business and a disproportionate amount of revenue was generated by a relatively small group of customers. We had attracted them incidentally. So, we built a product targeting first-time investors. We wanted to make it as easy as possible to get started with $100. Incidentally, that value prop also appealed to someone who is paying the $10,000 a month in commissions and was trading quite actively. And so we attracted all these people. But then, of course, the market moved. Everyone matched our commission offering, and we had these competitors that were building great tailored active trader experiences. John Collison: So your Pro offering wasn't good enough, essentially? Vlad Tenev: It wasn't good enough. And at first we didn't have a Pro offering. It was just Pro customers in our regular offering. John Collison: So your Pro offering was nonexistent? Vlad Tenev: Yeah, we didn't have a Pro offering. Actually, there were all sorts of scenarios where if you got too active on our platform, and hence generated a lot of revenue for us, we would force you to churn. John Collison: That seems bad, that you were rejecting your best customers. Vlad Tenev: Yeah, we didn't have good handling and our entire business was geared towards the first-time investor. So these customers didn't even really show up in the data. Every time we'd do our standard surveying process, we'd be like, "Oh, a very small percentage of our customers care about this issue." So we did some very simple things first. We were like, "We care about active traders. This is what's supporting the entire business. We have to make sure they're happy." It was the reverse. The more active you were, the less happy you were with the platform. When we grokked that, it was a nightmare scenario. So I think that's another Frank Slootman thing. You'd be like, "Where are you making your money?" It's obvious, "Where are you making your money? How much are we investing? Why are we investing so much in this thing that doesn't make any money and very little in the actual core of the business?" John Collison: What were the non-core things you cut at that time? Vlad Tenev: I think we were working on a lot of things that I think were good, reasonably well-motivated, but it just wasn't the right time for. Our cash card offering, probably the best example. We had a debit card tied with a money transmitter account, similar in nature to a Cash app, Chime. It was a product for the paycheck-to-paycheck customer. It didn't work very well. It worked a little bit. But the Robinhood customer is not a paycheck-to-paycheck customer generally. You have to have a little bit more than that in order to become interested in investing. Our best customers weren't benefiting from the offering, they tended to be credit-primary. And once you go to credit-primary, it's very difficult. You're basically not going back to moving your spend onto a debit card, generally speaking. So I think that didn't work. There were also a bunch of little things. We were peanut-buttered and spread across all these initiatives, we were generally inefficient. We were functionally organized. So at that time I moved us to a GM structure. My feeling there was, I was feeling a lot of stress because everything rolled up into me, all these other businesses. And I had to decide which one was more important. And the product people cared about the product being good. The finance folks, they care about costs for the particular product area. The engineers just cared about it getting built. And I wanted more people to feel—to get the sleepless nights of having the product not working.I think with the GMs, we got that. When we moved to GM structure and we gave full accountability to the business lines and the revenue to the GMs, it immediately improved. Because I could look around, I could see Johann, our Crypto GM, he's sweating. He's like, "If crypto is not going—" John Collison: So you have individual accountability? Vlad Tenev: Yeah. And that's worked very well for us as well. I think the events have worked well. That's more of a recent thing. John Collison: The marketing events? Vlad Tenev: The product launch events. You asked what's worked well to get shipping cadence. I think it's always good to have, on top of all the other things that you need to do to make it possible, it's always good to have an event. John Collison: Stake in the ground. Vlad Tenev: Stake in the ground. You're either going to make it for this event or you're not. And I think that can be pretty motivating to people. John Collison: Totally. Vlad Tenev: Because everyone wants to present well. They don't want to be the folks letting down the other people in the event. John Collison: We find that with Sessions, our headline customer event as well, it's very clarifying for getting products out the door. For sure. Vlad Tenev: And we started with one last year and now we're doing 4+ a year. John Collison: That's cool. Maybe last question, how's it going with Harmonic? You started a mathematical super-intelligence lab. Vlad Tenev: It's going very well, actually. Those guys have been— John Collison: You've cracked super-intelligence? Vlad Tenev: Not yet. Not yet. We're getting there, though. We've cracked my intelligence at solving math problems. And I was a math PhD student, so I went to UCLA to do a pure math PhD to study with Terry Tao. But when I was in high school, I got to AIME level. If you're familiar with that, it's two rungs below the International Math Olympiad. So in the past year, we've exceeded my intelligence by a considerable margin. So I think we're on the way. Probably another 10X and we'll be at something that you can consider super-intelligence. John Collison: Is it a for-profit endeavor? Is it a nonprofit? And what's the revenue model? Vlad Tenev: It's a for-profit endeavor. We want to get really, really good at solving math problems. And the unique spin on it is that we're using formal mathematics. We use a language called Lean. We translate natural-language math into Lean. And what that gives you is verification. And I think verification has been a big problem outside of the AI space. Obviously, if you are relying on AI for something mission critical, verification is important. But even in math, some of these proofs can be hundreds of pages.And mathematicians have to debate in a colloquium for years. Like Fermat's Last Theorem probably a good example. It took two years for that proof to be certified. So I think the verification problem is a real problem, and it's only going to get worse as the output of artificial intelligence systems becomes more and more voluminous. John Collison: Why is the proof of Fermat's Last Theorem so long when the theorem itself is so short? Doesn't that suggest to us that it's not the final proof, that just a shorter one should be possible? Vlad Tenev: Not necessarily. If you think about what's widely considered the deepest theorem in mathematics, the Riemann hypothesis. You can write the Riemann Hypothesis. It’s one sentence on a chalkboard. But you ask any mathematician and they're like, "We're not even close. We don't even have a strategy. New math has to be invented to solve this thing." So that's the holy grail. And that's actually what motivated Tudor and I to start Harmonic. The vision would be— John Collison: The Riemann hypothesis specifically? Vlad Tenev: Yeah. To have a smartphone app with our AI model to take a picture of a statement of the Riemann hypothesis on a chalkboard, and then it just cranks it out and gives you a formally verified proof. John Collison: That'd be a pretty handy app. Vlad Tenev: It would be cool. That would be a nice viral moment when all these conjectures end up going on social media. John Collison: Exactly. For your '27 product launch event, we're launching the Riemann hypothesis, is now the Riemann Proof. Vlad Tenev: Hopefully it gets some retweets. John Collison: All righty. Vlad, thank you. Vlad Tenev: Thank you so much.