Latest / Masters in Business / Luana Lopes Lara on Kalshi’s CFTC Approval Journey

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Luana Lopes Lara on Kalshi’s CFTC Approval Journey · Masters in Business

0:00
Speaker 1: M. This is Mesters in Business with Very Results on
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Speaker 1: Bloomberg Radio. This week on the podcast, I have an
0:11
Speaker 1: extra special guest, Luana Lopez. Laura is a co founder
0:16
Speaker 1: of CALCI. They are a derivatives trading marketplace where you
0:21
Speaker 1: can go and trade event contracts on such disparate occurrences
0:27
Speaker 1: such as COVID nineteen, economic outcomes, interest rates, Federal Reserve, politics,
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Speaker 1: climate and weather, culture, the Oscars, the Grammys, science and technology,
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Speaker 1: all sorts of really fascinating places. They are the only
0:44
Speaker 1: such marketplace that has been approved for this sort of
0:47
Speaker 1: events trading by the Commodities Futures UH Trading Commission, the CFTC,
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Speaker 1: which makes them both fascinating and unique. There's nothing else
0:57
Speaker 1: like them. UH. This pro vides away for individuals and
1:02
Speaker 1: institutions to hedge all sorts of really interesting events and
1:08
Speaker 1: as opposed to having think about, well, if this happens,
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Speaker 1: what's the ramification in gold or oil or inflation or
1:18
Speaker 1: interest rates, you can actually bet on that exact event
1:22
Speaker 1: and hedge your business or your portfolio. It's really quite fascinating.
1:27
Speaker 1: I thought this was a really interesting conversation and I
1:30
Speaker 1: think you will also so with no further too, my
1:33
Speaker 1: conversation with cal She co founder Luana Lopez Laura. This
1:41
Speaker 1: is Mesters in Business with Very Results on Bloomberg Radio.
1:48
Speaker 1: My special guest this week is Luana Lopez Laura. She
1:51
Speaker 1: is the co founder of Calci, one of the only
1:55
Speaker 1: derivative trading marketplaces that allows the trading of a event
2:00
Speaker 1: contracts in order to hedge against major business and political events.
2:05
Speaker 1: CALCI is the only marketplace to receive approval from the
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Speaker 1: Commodity Futures Trading Commission, who regulates the trillion dollar derivatives industry.
2:15
Speaker 1: Luana Lopez Laura, Welcome to Bloomberg. Thank you so much.
2:19
Speaker 1: I'm very happy to be here. So so let's start
2:23
Speaker 1: just with that unusual UM intro. You're the only CFTC
2:28
Speaker 1: approved way to trade on the outcome of events. Explain
2:33
Speaker 1: that a little bit right exactly, UM. Cal She is
2:35
Speaker 1: a financial exchange that allows people to trade on the
2:38
Speaker 1: outcome of a lot of different events. UM. So things
2:42
Speaker 1: from will inflation keep going as high as it is
2:45
Speaker 1: right now? Will the Feds raise rates to like? Will
2:49
Speaker 1: twenty twenty two be the hottest year on record? Um?
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Speaker 1: And already sets us A part is that we're the
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Speaker 1: only the first and only ones regulated by the CFTC
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Speaker 1: to do this um in the United States. So let's
3:00
Speaker 1: talk about that, because I love this story about you guys,
3:04
Speaker 1: you and your co founder. You start calling attorneys and
3:08
Speaker 1: one day you end up calling like sixty or seventy
3:10
Speaker 1: lawyers in a single day, and pretty much every one
3:13
Speaker 1: of them said, people have been trying to do this
3:16
Speaker 1: since the nineteen eighties. It's never been approved. Just forget
3:20
Speaker 1: about it. It's not happening to tell us about that, right. So,
3:24
Speaker 1: we really wanted to build Cauchi the right way, so
3:26
Speaker 1: to be that exchange that is sustainable and can be
3:29
Speaker 1: a pillar of the financial world. UM. We wanted to
3:32
Speaker 1: make this really big, get the right partners on board,
3:34
Speaker 1: and really try to build something that's gonna out last
3:37
Speaker 1: seeing me, you know, like c's around there for like
3:39
Speaker 1: a hundred fifty years. And the way to do that
3:41
Speaker 1: for us was to build a proper financial exchange, build
3:44
Speaker 1: this right. Uh. And we knew that getting regulated was
3:47
Speaker 1: the first step in like figuring out how to do
3:49
Speaker 1: it right. But obviously me and my co founder of
3:51
Speaker 1: both computer scientists, we knew nothing about regulations. So we
3:55
Speaker 1: sat down and put on a spreadsheet that names and
3:58
Speaker 1: and emails of five different lawyers that we thought maybe
4:02
Speaker 1: could be related to this, and we called one by one.
4:04
Speaker 1: I think we split who was gonna call um who,
4:07
Speaker 1: and all of them were just like, that's not gonna happen.
4:10
Speaker 1: The CFC won't allow this. It has already they already
4:12
Speaker 1: said no to this in the past. Um. But because
4:16
Speaker 1: of a friend of a friend of a friend, we
4:18
Speaker 1: ended up getting to Jeff Benman, who works with us
4:21
Speaker 1: to today. Uh, he's an ex official the CFTC, and
4:25
Speaker 1: he really understood the commission and helped us navigate started
4:28
Speaker 1: helping us start navigating the entire situation. Um. And Yeah,
4:32
Speaker 1: it was two years of of that entire engagement and
4:36
Speaker 1: iteration of the CFTC with all their core principles and
4:39
Speaker 1: concerns that they had that to address them and really
4:42
Speaker 1: end up getting regulated in November. So it sounds like
4:47
Speaker 1: it wasn't so much that the CFTC was against the
4:50
Speaker 1: idea of event contracts in order to hedge on these circumstances.
4:57
Speaker 1: They just didn't like what was um presented them previously
5:01
Speaker 1: over the previous forty years, or did something change that
5:06
Speaker 1: they suddenly said Oh, we used to think this was
5:08
Speaker 1: a bad idea, and now we think it's a good idea.
5:10
Speaker 1: I think it was it's more of the first I
5:13
Speaker 1: think it was about presenting to them why we thought
5:16
Speaker 1: event contracts were so important and how they could really
5:19
Speaker 1: be used for hedging um and every day hedging like
5:23
Speaker 1: like retail and Americans every day can hedge things like inflation,
5:27
Speaker 1: like rates, the risks that we see and read about
5:30
Speaker 1: like in the news or or on TV every day. Uh.
5:33
Speaker 1: And it was really like presenting to them and getting
5:35
Speaker 1: them to comfort with how these markets work, how they
5:38
Speaker 1: weren't easy to manipulate, how the rules could could operate.
5:42
Speaker 1: So really getting them to comfort with how the exchange,
5:45
Speaker 1: the markets, and all of our contracts could could operate.
5:47
Speaker 1: And that's what took that long. It wasn't um in
5:51
Speaker 1: my opinion. It was more like explaining what we wanted
5:53
Speaker 1: to do. They were fantastic from the beginning to really
5:56
Speaker 1: listening and working with us. UM. It wasn't that they
5:59
Speaker 1: were just like, no, wait, we're never going to do this.
6:02
Speaker 1: I think it's interesting that it took people from outside
6:04
Speaker 1: of the world to finance to bring an idea into
6:08
Speaker 1: finance from a technology perspective and say, whatever the logistical
6:13
Speaker 1: hurdles we have to meet in order to receive regulatory approval.
6:19
Speaker 1: That wasn't like an ideological problem to you, was a well,
6:25
Speaker 1: this is a logistical problem that we have to solve,
6:27
Speaker 1: and once we solve it, we can get this going.
6:29
Speaker 1: So how long did the back and forth with the
6:31
Speaker 1: CFTC take to get approval? Yeah, it was two years
6:36
Speaker 1: or two years and a half. Um. And yeah, we
6:38
Speaker 1: used to say, it's like we were climbing a very
6:41
Speaker 1: high mountain, and then as we would started climbing more,
6:44
Speaker 1: we would see it's actually so, I says high, and
6:46
Speaker 1: we would keep and it would keep multiplying. Because the
6:49
Speaker 1: thing is we would go to them and they would
6:51
Speaker 1: have concerns and issues, so we would go back and
6:54
Speaker 1: solve the issues. A lot of it, as you mentioned,
6:56
Speaker 1: was related to technology really doing analysis and similar markets,
7:00
Speaker 1: what we could do and view the surveillance systems and
7:02
Speaker 1: all of those things, and going back to them and
7:04
Speaker 1: then they're like, okay, that's fine, but we have all
7:06
Speaker 1: these other issues now, and then we would go back
7:08
Speaker 1: and and figure them out and do that one by one. Um.
7:12
Speaker 1: It was like walking in the desert a little bit.
7:14
Speaker 1: We didn't know where where the end was, but it
7:16
Speaker 1: ended up working out. So so let's talk a little
7:18
Speaker 1: bit about your platform. This is unlike futures, and it's
7:22
Speaker 1: unlike derivatives in that when you are purchasing a contract,
7:27
Speaker 1: you're putting up the full dollar amount. It's not like
7:30
Speaker 1: where you're putting up ten cents on the dollar or
7:33
Speaker 1: one cent on the dollar. If you're making a thousand
7:36
Speaker 1: dollar bet, you were posting a thousand dollars. How much
7:40
Speaker 1: did that factor influence the CFTC that this wasn't just
7:45
Speaker 1: going to be reckless speculation and people um falling around.
7:49
Speaker 1: This was really hedging right. So we are fully cash collateralized.
7:53
Speaker 1: So every as you said, every dollar that you can lose,
7:56
Speaker 1: every dollar that you your trade, you have to have
7:58
Speaker 1: it with us before UM. And I think this really
8:01
Speaker 1: helps with the safety off the platform, and it really
8:03
Speaker 1: started from us. UM. We really want to start in
8:06
Speaker 1: a way that it's very safe for everyone and we
8:07
Speaker 1: can really understand the system before going like too far ahead. UM,
8:12
Speaker 1: and we really see this as very important. So all
8:15
Speaker 1: the funds are fully cash collatalized, but obviously from from
8:18
Speaker 1: the CFTC perspective. It adds to their comfort to the
8:20
Speaker 1: fact that there can be like leverage or marginal more
8:24
Speaker 1: risk added to the system that all the money's collatalized
8:27
Speaker 1: and the retail is protected because of that. So equities
8:30
Speaker 1: you can put up half the dollar amount. Two to
8:33
Speaker 1: one futures are something like ten to one options. If
8:37
Speaker 1: you go out of out of the money and far
8:40
Speaker 1: enough into the future, it's it's a hundred to one.
8:44
Speaker 1: Is there ever a plan to move away from the
8:46
Speaker 1: one to one dollar for dollar Maybe not option hundreds
8:50
Speaker 1: on one, but certainly margin and equity market seems to
8:53
Speaker 1: be pretty reasonable at two to one UM. At the moment,
8:56
Speaker 1: we really focused on retail and fully cash collateralization fullick
9:00
Speaker 1: being fully cash colatalized UM. But at in the future,
9:03
Speaker 1: as think, our goal is to be like the New
9:05
Speaker 1: York Stock Exchange for events, so having being really the
9:08
Speaker 1: central place of the ecosystem and having like different brokers
9:12
Speaker 1: and institutions, hedge funds, market makers plugged into us the exchange.
9:16
Speaker 1: At that point it would make sense to start considering
9:19
Speaker 1: UM something like that, But right now we're completely focused
9:21
Speaker 1: on retail and UM having a fully cash glatalized stuff.
9:25
Speaker 1: Once it becomes a big institutional exchange, then then you
9:28
Speaker 1: can explore that. So since it's retail, let's talk a
9:31
Speaker 1: little bit about retail. Gamification is a real big issue.
9:35
Speaker 1: We've seen robin Hood do this, We've seen a number
9:37
Speaker 1: of other UH sports gambling platforms doing this. What are
9:41
Speaker 1: your thoughts about gamification when it comes to events trading. Yeah,
9:45
Speaker 1: I think the gamification question is a very interesting one
9:48
Speaker 1: because I think it's less about the asset class and
9:50
Speaker 1: more about the actual platform and the mechanics. So, for example,
9:54
Speaker 1: you can trade equities on robin Hood or Charles shob Um.
9:57
Speaker 1: The conversation about gamification is a lot more on Robin
10:00
Speaker 1: hood Um then Altarl shrob even though the underlying like
10:04
Speaker 1: it's the same, you're trading equities. So we really believe
10:06
Speaker 1: event contracts are have a very big economic purpose and
10:11
Speaker 1: can be used for hedging and all of those things
10:13
Speaker 1: that we talked about, and the gamification would come only
10:16
Speaker 1: in the platform. But we're very, very um focused on
10:20
Speaker 1: beauting a platform that's safe, easy to understand and to use,
10:23
Speaker 1: but not not gamified. So let's go over some of
10:26
Speaker 1: the type of events that you guys trade. You could
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Speaker 1: you can make bets on COVID nineteen and vaccination, on economics, inflation,
10:35
Speaker 1: mortgage rates, politics, climate and weather, world culture, science and technology.
10:41
Speaker 1: Let's let's uh, let's take some examples from this. I
10:44
Speaker 1: love the idea, will the thirty year fixed rate mortgage
10:48
Speaker 1: be above three point nine percent on April fift In
10:52
Speaker 1: other words, if I'm buying a house and closing on
10:55
Speaker 1: it and concerned that rates might rise, I could take
10:59
Speaker 1: a trade against that and hedge that position. And I
11:03
Speaker 1: don't have to be a billion dollar hedge fund. I
11:07
Speaker 1: could just be someone buying a house exactly. I think
11:10
Speaker 1: all of our contracts UM have economics purpose and they
11:13
Speaker 1: can really be used for hedging. UM. For example, all
11:16
Speaker 1: of our COVID markets during the omicron wave, you could
11:19
Speaker 1: really see, like even before the news started reporting it
11:22
Speaker 1: UM the amount that it was ticking up, and then
11:24
Speaker 1: we would talk to the users and there, oh wow,
11:26
Speaker 1: like I might not be able to go back to school.
11:29
Speaker 1: I want to hedge like that that situation and all
11:32
Speaker 1: of that UM. SO a lot of the contracts I'm
11:35
Speaker 1: very interested in. For example, is the half point rate
11:38
Speaker 1: hike for for March. I think it's it's a market
11:40
Speaker 1: that went up a lot to during I think one
11:43
Speaker 1: of the there was some news that that he was
11:45
Speaker 1: going to go up by that and then he went
11:47
Speaker 1: down again, and and um. Other ones are GDP and inflation.
11:51
Speaker 1: Really just getting into the economic situation we have in
11:54
Speaker 1: nowadays number of Americas. So these are all yes or
11:57
Speaker 1: no contracts, pretty clearly determined. It's black and white. Will
12:03
Speaker 1: two hundred and fifty four million Americans be vascinated by
12:06
Speaker 1: May one? But I saw a contract will America achieve
12:11
Speaker 1: her immunity by September one? Who is the determiner of
12:16
Speaker 1: whether or not her immunely? How do you define those terms? Yeah,
12:20
Speaker 1: that's a great question. All of our markets are like
12:22
Speaker 1: legal binding documents, so they're like forty pages determining what
12:27
Speaker 1: the real rules are, uh to really make sure that
12:30
Speaker 1: there's no room for indeterminacy or anything of the sort.
12:33
Speaker 1: Uh So this market specifically, I'm not exactly sure. I
12:36
Speaker 1: think it's definitely the CDC or some number around there.
12:39
Speaker 1: But if you like all of our rules, if you
12:41
Speaker 1: go to our rule book, it has very specifically defining
12:44
Speaker 1: um where which number we're using, how we're using, which target,
12:48
Speaker 1: if it has to be above or below a certain
12:50
Speaker 1: number and it ends up being very determined. But for
12:52
Speaker 1: COVID markets, we're using CDC numbers for settlement sources. So
12:56
Speaker 1: I mentioned world culture. Um, that's kind of interest thing.
13:00
Speaker 1: Is there a lot of activity in who's gonna win
13:03
Speaker 1: Best Picture or who's going to be the best actress
13:05
Speaker 1: at the oscars? How is that a seasonal thing when
13:09
Speaker 1: each year or how does that trade? Yeah, the launching
13:12
Speaker 1: the oscar markets were was very important for us because
13:15
Speaker 1: they were the very very first regulated derivatives I guess
13:19
Speaker 1: in the entertainment industry and in academy awards. Um. We
13:22
Speaker 1: have traded more than a hundred and fifty thousand contracts
13:26
Speaker 1: in the oscars so far, and it's only been a
13:27
Speaker 1: couple of weeks, and we really expect the trading there
13:30
Speaker 1: to to be a lot higher closer to to the
13:33
Speaker 1: ceremony or during the ceremony. UM. But it's interesting a
13:36
Speaker 1: lot of people say that the oscars are are dead
13:38
Speaker 1: or irrelevant, but the movie industry is so big to
13:42
Speaker 1: nowadays that there's so much so many people that are
13:45
Speaker 1: so impacted by the results of these awards and things
13:48
Speaker 1: of the sort. Um. And yeah, well this is analogy point.
13:51
Speaker 1: I think The interesting thing about the entertainment industry is
13:54
Speaker 1: that you have awards, for example, like the Oscars or
13:56
Speaker 1: the Grammys, that we also have markets on. But you
13:59
Speaker 1: have weekly things, for example, album sales numbers, UM billboards,
14:04
Speaker 1: charts and things like that that that we offer markets
14:07
Speaker 1: on every week and have a lot of room for
14:08
Speaker 1: like modeling and aupha and things of the sort. So
14:11
Speaker 1: so I know, studios spend a lot of money on
14:14
Speaker 1: marketing and promoting leading up to the Oscars, because if
14:19
Speaker 1: let's say a small independent film wins Best Oscar, it
14:23
Speaker 1: seems a you it gets a huge uptick in subsequent
14:27
Speaker 1: box office and other sales or streaming rights. I'm wondering
14:33
Speaker 1: if part of their marketing plan is going to include
14:36
Speaker 1: hedging on Best Oscar. They can not only spend you know,
14:40
Speaker 1: a million dollars on promotion, they could buy a contract
14:43
Speaker 1: that offsets not winning Best Oscar. Yeah, that's our goal.
14:48
Speaker 1: Let's forget all of them to come and really hedge
14:50
Speaker 1: all this risk that they have. So so where's the
14:53
Speaker 1: volume today? Where are you seeing the most amount of activity?
14:57
Speaker 1: Is it? Is it inflation and fed activity? Is a GDP?
15:02
Speaker 1: What where where's all the money flowing? On your platform. Right.
15:06
Speaker 1: It's actually interesting because when we launched, we really expected
15:09
Speaker 1: it to be categories specific or concentrated in specific UM
15:13
Speaker 1: categories or economics, UM, entertainment, transportation, technology, But it really
15:18
Speaker 1: is about what what the news are, So what's top
15:21
Speaker 1: of the New York Times, what's in the newspaper the
15:24
Speaker 1: whole day? Uh, what's in the news? And right now,
15:27
Speaker 1: as you mentioned the Fed March meetings, is is very
15:32
Speaker 1: is a very uh is a market with a lot
15:34
Speaker 1: of right, it's very hot, yeah, for sure. But for us,
15:38
Speaker 1: we've we've seen this like news based activity, a lot
15:42
Speaker 1: like the onm ground wave um as like Dojo and
15:44
Speaker 1: the infrastructure bill was passing, there was a lot of
15:46
Speaker 1: activity over there, or when j. Powell was going to
15:49
Speaker 1: get renominated, there was a lot of activity in that market.
15:52
Speaker 1: So it's really about what's in the news and what
15:54
Speaker 1: people see UM there was associated with and and where
15:56
Speaker 1: they can they think there's most room to make money.
16:00
Speaker 1: And right now the Federates UM people are really disagreeing
16:03
Speaker 1: on that and there's a lot of volume of volatively
16:05
Speaker 1: on that market. So so you guys didn't exist when
16:08
Speaker 1: Brexit had come up. That was before your time. But
16:12
Speaker 1: you have been around with Russia and Ukraine and I
16:15
Speaker 1: noticed there's not a lot of activity there. Why not
16:19
Speaker 1: do a futures contract on will Russia. It's obviously too
16:22
Speaker 1: late today, but in January or December you could have
16:26
Speaker 1: done a will Russia invade Ukraine by February one, March
16:30
Speaker 1: first April one. Right, we avoid any contract that's related
16:34
Speaker 1: to war, terrorism, assassination, or violence of any kind. Um.
16:38
Speaker 1: We don't want to have those those markets on our platform. Um.
16:42
Speaker 1: But we do have markets there are adjacent to that.
16:46
Speaker 1: So for example, markets on the price of ruble or
16:48
Speaker 1: or the price of oil natural gas in the US
16:51
Speaker 1: and Europe, So we have markets that adjacent. We just
16:53
Speaker 1: don't want to have markets directly related to war, terrorism, assassination,
16:57
Speaker 1: or makes sense, you don't want to incentivize anybody misbehave.
17:02
Speaker 1: In the past, I've heard futures described as a marriage
17:05
Speaker 1: between hedgers and speculators. So if you're an airline, you
17:09
Speaker 1: want to hedge the price of oil, but someone's got
17:13
Speaker 1: to be on the other side of that trade, so
17:15
Speaker 1: incomes the speculators. Are you seeing that same sort of
17:19
Speaker 1: relationship amongst CALCI clients. Yeah, I think she is one
17:23
Speaker 1: of the most pure forms of exactly this hedging and
17:26
Speaker 1: speculation UM match. I think one a very simple example
17:30
Speaker 1: to understand this. If you think of rain in New
17:32
Speaker 1: York City right like you can have like an ice
17:35
Speaker 1: cream truck buying. UH. An ice cream truck will be
17:38
Speaker 1: ready really hit if if it rains for like a
17:41
Speaker 1: lot of days, because people will buy less ice cream,
17:44
Speaker 1: so they can buy a guess contract to really hedge
17:47
Speaker 1: that offset that they have UM. On the other side,
17:50
Speaker 1: there can be someone that is going to speculate and
17:52
Speaker 1: seeing there's a forecast of for rain UM in the
17:56
Speaker 1: next couple of days, and they're willing to take UM
18:00
Speaker 1: the no side because they think that there's only twenty
18:03
Speaker 1: percentages it's going to rain, and it seems like they
18:05
Speaker 1: can make money. So then you can really have a
18:07
Speaker 1: match of like people that actually need to have a
18:09
Speaker 1: contract for hedging almost like insurance, and people who who
18:12
Speaker 1: because of forecasting and probability and what they think the
18:16
Speaker 1: fair value is, is going to take the other side.
18:18
Speaker 1: And then at the settlement, for example, if it does rain,
18:21
Speaker 1: it ends up being that everyone is happy because the
18:23
Speaker 1: speculator makes money because they work correct. UH. The head
18:27
Speaker 1: is protected against and the speculator on the trade right
18:31
Speaker 1: exactly and exactly, you got it totally right. So let
18:35
Speaker 1: that raises a really interesting question, who are your clients?
18:39
Speaker 1: Are they hedge funds and institutions, are they retail investors
18:43
Speaker 1: or is it a whole spectrum of people. Um, we
18:45
Speaker 1: really focused now on on retail, and our our biggest
18:48
Speaker 1: amount of users right now is the traditional option trader,
18:51
Speaker 1: like informed retail option traders. UM. But the way that
18:56
Speaker 1: we see this this growing is we want to keep
18:59
Speaker 1: growing within the so trading an options trading community. And
19:02
Speaker 1: then our next steps getting brokerages on board so that
19:05
Speaker 1: you can now go and trade on event contracts for
19:08
Speaker 1: your interactive brokers or each trade account um. And then
19:11
Speaker 1: after debuting enough liquidity to start bringing more prop shops
19:14
Speaker 1: in and smaller firms, and then hedge funds and and
19:18
Speaker 1: then institutions and mimic can have maybe um burger king hedging, UM,
19:23
Speaker 1: I don't know, price of plastic draws or something like that.
19:25
Speaker 1: So so the platform eventually becomes an exchange exactly exactly.
19:29
Speaker 1: I think we see it as a beaut up of
19:31
Speaker 1: liquidity from from retail. That's like smaller amounts, but but
19:35
Speaker 1: but higher velocity to to higher bigger and bigger institutions
19:39
Speaker 1: all the way to become like a full flash financial
19:43
Speaker 1: exchange like the New York Stock Exchange or seeing me.
19:45
Speaker 1: So let's talk a little bit about how you guys,
19:48
Speaker 1: you and your co founder created Calci. You kind of
19:53
Speaker 1: were the opposite of Facebook. You know, Mark Zuckerberg famously
19:57
Speaker 1: said move fast and break things. Companies like you and
20:02
Speaker 1: coin base and block fi spent a lot of time
20:05
Speaker 1: getting approval from the regulators. Tell us a bit about
20:09
Speaker 1: why you took that approach as opposed to moving fast
20:13
Speaker 1: and breaking things. Yeah. I think a lot of times
20:16
Speaker 1: UM people are making the short term trade off for speed.
20:19
Speaker 1: UM and in finance, I think it's different. You can,
20:22
Speaker 1: obviously you go to market faster if you choose the
20:24
Speaker 1: unregulated route, but with financed there's been like a lot
20:27
Speaker 1: of historical examples of unregulated platforms getting meaningful volume and
20:32
Speaker 1: then being shut down by regulators because they weren't properly
20:35
Speaker 1: regulated and doing things right from the start. UM. We
20:38
Speaker 1: really think that the opportunity really shrinks if if you
20:41
Speaker 1: don't take regulation into account, because then you can't get
20:43
Speaker 1: real money in the platform, you can't get real good partners,
20:47
Speaker 1: as we just talked about brokers, market makers, hedge funds
20:50
Speaker 1: on board. Sometimes you can't even offer products to you
20:53
Speaker 1: ask customers. You really boxes into something small very quickly.
20:57
Speaker 1: And and that's for us to be the New York
20:59
Speaker 1: chockics change for events, because that's our goal. The only
21:02
Speaker 1: way to do that was to do uh A right
21:04
Speaker 1: from the start, going through the regulated path and and
21:08
Speaker 1: eating on the cost of the two years and a
21:09
Speaker 1: half waiting, but but making sure that we're set for success.
21:13
Speaker 1: So you're your co founder, Turek Monsour. He was an
21:16
Speaker 1: equity derivatives intern at Goldman Sachs in the same year
21:22
Speaker 1: you were a quantitative trader at Citadel Securities. So you
21:25
Speaker 1: guys both had a pretty bright career path had you
21:29
Speaker 1: not decided to go out and launch this whole new platform.
21:33
Speaker 1: Tell us what motivated you to say, Goldman Citadel, that
21:37
Speaker 1: looks too easy, let's let's launch a new startup. Well
21:41
Speaker 1: that that's funny because actually most of our M I
21:44
Speaker 1: T time we were both very focused on just getting
21:46
Speaker 1: finance jobs and never even thought about um starting a company.
21:50
Speaker 1: But yeah, we were both very interested in math, financial
21:53
Speaker 1: history finance from from the very start of our school years,
21:58
Speaker 1: and and we worked at various finding show firms as
22:00
Speaker 1: you Man Shtaric worked at Goldman UM, I worked at
22:03
Speaker 1: Bridgewater UM, Five Rings Capital, which is a small prop shop,
22:06
Speaker 1: and then Citadel Securities UM. At the internships, we really
22:10
Speaker 1: saw the behavior that we say is the cowship behavior
22:13
Speaker 1: over and over again. It's like firms making trading decisions
22:17
Speaker 1: based on events. As we think the European Central Bank
22:20
Speaker 1: is gonna raise rates, Let's take this massive position already
22:22
Speaker 1: find the structure to make that work. But the idea
22:25
Speaker 1: really crystallized in our heads when we were working both
22:29
Speaker 1: together at Five Rings and there we were playing this
22:32
Speaker 1: game almost the whole day. It's called the makeup market
22:35
Speaker 1: game that people that the everyone would be putting like
22:38
Speaker 1: bids and offers in the probability of something UM, and
22:41
Speaker 1: then the other person can only tighten the spread or
22:45
Speaker 1: or trade against you UM. And there was a single
22:48
Speaker 1: there was a day that we were just trading, playing
22:51
Speaker 1: this game the entire day. And then I, I don't
22:53
Speaker 1: remember exactly what market it was, but I took a
22:57
Speaker 1: massive position on Trump doing something I don't remember exactly
23:00
Speaker 1: what it was UM, and everyone thought I was crazy
23:03
Speaker 1: and and debated me a lot on that, but I
23:04
Speaker 1: ended up being right UM. And then when I was
23:07
Speaker 1: we were walking back to to where the insurance were staying,
23:10
Speaker 1: it was stuck in my head like why isn't there
23:12
Speaker 1: a place for people to do this? Like we love
23:14
Speaker 1: doing this, We do this the whole day, like we
23:16
Speaker 1: see in every place we work at, like very big
23:19
Speaker 1: positions people were trading based on events, Like why is
23:22
Speaker 1: there no place to do this? And then I sat
23:25
Speaker 1: down and started talking to talk about it, like why
23:27
Speaker 1: isn't there, why don't why don't we do it? Um?
23:30
Speaker 1: And we stayed the whole night up talking about it,
23:32
Speaker 1: and it was just something we were so passionate about
23:35
Speaker 1: UM from the finance side, the product side, everything we
23:38
Speaker 1: always loved and if it was gonna be someone to
23:41
Speaker 1: figure it out, I was gonna be us. It just
23:42
Speaker 1: didn't leave us the idea for another six months up
23:45
Speaker 1: until we were like, okay, like this is a calling,
23:48
Speaker 1: we have to do it. So when you say your
23:51
Speaker 1: desks are and you guys are trading back in trading events,
23:57
Speaker 1: you couldn't incredibly bet any sort of volume on events
24:01
Speaker 1: like cal she does today, you had to go to
24:04
Speaker 1: secondary or tertiary markets. So you're betting on gold, if
24:08
Speaker 1: you're thinking about inflation, you're betting on oil. If you're
24:11
Speaker 1: concerned about war, it's it's always once removed, which raises
24:15
Speaker 1: the issue. Even if you're right, it may not express
24:18
Speaker 1: itself in a market the same way that the bet
24:20
Speaker 1: was supposed to go right exactly. I think that in
24:23
Speaker 1: the beginning of COVID you had this exact thing happening
24:26
Speaker 1: with the economy and how we would think about the
24:28
Speaker 1: smp UM and the beauty about it in contracts is
24:31
Speaker 1: that is direct exposure and what you think there's not
24:33
Speaker 1: like a lot of variables for you to keep track
24:36
Speaker 1: of or or think about are things that can go wrong.
24:39
Speaker 1: That's why we also think it's very it's the most
24:41
Speaker 1: like natural way of investing, especially if you think for
24:44
Speaker 1: retail they can't like keep track or have food desks
24:47
Speaker 1: of people trying to understand what's going on. It's a
24:50
Speaker 1: lot easier to do when you have one opinion and
24:52
Speaker 1: you have a very clear way to get the exposure
24:55
Speaker 1: on what you believe and being right or wrong. So
24:58
Speaker 1: so you've spoken about the gambling industry and how incentives
25:02
Speaker 1: are somewhat cloudy. Um, how does your platform correct for that? Right?
25:07
Speaker 1: The key part about gambling is that the house takes
25:10
Speaker 1: the position in the bets, So the house has an
25:13
Speaker 1: interest on the outcome of of the bet or or
25:16
Speaker 1: the market if you want to call it that, but
25:17
Speaker 1: it's more just the beat. We are just a financial exchange,
25:20
Speaker 1: so you can think of Guacha as a matching engine.
25:22
Speaker 1: We match people that believe something will happen with people
25:26
Speaker 1: that believe something will not happen. Um. If they have
25:28
Speaker 1: equivalent prices, we match them. So we have no uh
25:32
Speaker 1: interest in in in whether the market will go away
25:34
Speaker 1: in a certain way. We do have an affiliate trader
25:36
Speaker 1: that's there to provide liquidity so that people can trade,
25:39
Speaker 1: especially as we start the exchange, but the exchange doesn't
25:42
Speaker 1: take any positions ever, we're simply matching other participant orders,
25:46
Speaker 1: so there's no conflict of interest between us and our members.
25:48
Speaker 1: So so when you look at a race track and
25:50
Speaker 1: the odds are set on horses, those odds don't quite
25:54
Speaker 1: add up, and the shortfall is the house take, so
25:57
Speaker 1: it's never quite fifty fifty. What is it costs to
26:01
Speaker 1: trade on this platform. What what's the so in other words,
26:05
Speaker 1: if I'm betting a hundred dollars that something is going
26:07
Speaker 1: to happen and I win, do I get two hundred
26:10
Speaker 1: dollars back? Or how how does that work? Right? So,
26:13
Speaker 1: so the way that it works is that the yes
26:15
Speaker 1: and the noe prices are from one to and whoever's
26:19
Speaker 1: right gets one dollar. UM. So let's say I'm buying
26:23
Speaker 1: a yes for forty cents. It means there's someone buying
26:25
Speaker 1: a no for sixty cents UM and if I am correct,
26:28
Speaker 1: I make one dollar, which means I'm profiting sixty cents,
26:31
Speaker 1: which is from my counter party. Right, what's the cost
26:34
Speaker 1: of that trade? Meaning? How does calcie make money? And
26:37
Speaker 1: I assume, since it's fully collateralized, there's a float that's
26:41
Speaker 1: going to be a good source of revenue UM over time. UM.
26:45
Speaker 1: We don't make money on float. All of our are
26:48
Speaker 1: all of the user member funds are in a fully
26:51
Speaker 1: regulated CFTC clearing house which is f t x UM derivatives,
26:55
Speaker 1: the US derivatives there are clearing house UM and we
26:58
Speaker 1: make money on the transaction and fee. So we have
27:00
Speaker 1: a small transaction fee that varies on the price of
27:03
Speaker 1: the contract. What is it average bullpark? What does that cost?
27:06
Speaker 1: I think alright, So we will have a conversation after
27:09
Speaker 1: we're done, and I will show you that. UM I
27:13
Speaker 1: think it was Schwab when they moved to free trading,
27:17
Speaker 1: their float became fifty seven percent of the revenue. So
27:20
Speaker 1: we'll have a conversation. We'll see if we can help
27:23
Speaker 1: raise your your revenue target and we'll go from there.
27:26
Speaker 1: Because especially it's one thing if you're looking at events
27:30
Speaker 1: that are days and weeks out, but if you're making
27:33
Speaker 1: bets on will be the hottest year in history. Hey,
27:38
Speaker 1: you're sitting with that money for twelve, eleven, ten months.
27:42
Speaker 1: There's a lot of top line to be gained from
27:45
Speaker 1: from a little float. We'll we'll work that out with
27:47
Speaker 1: the SEFTC. That'll be that'll be easy. You guys raised
27:50
Speaker 1: thirty six million dollars in a series A. Sequoia Capital
27:55
Speaker 1: was the lead, probably the most storied venture capital firm
27:59
Speaker 1: in Silicon Valle. Charles Schwab not the entity I was
28:02
Speaker 1: talking earlier about Charles Swab in the float, but Mr
28:06
Speaker 1: Charles Swab was an investor. Henry Cravis is an investor
28:11
Speaker 1: Silicon Valley angel Um is one of the early investors.
28:15
Speaker 1: And were you at y Combinator when you were first launching. Yeah, so,
28:18
Speaker 1: so that's quite an esteemed list of of people who said, hey,
28:23
Speaker 1: there's some value here. Tell us a little bit about
28:26
Speaker 1: the experience UM at ye Combinator and then doing an
28:30
Speaker 1: a round with some really bold faced names. Yeah, our
28:33
Speaker 1: experience at White Combinator was actually very different from most
28:36
Speaker 1: of the other startups. Like we were measuring regulatory traction
28:40
Speaker 1: um and other start ups are measuring user growth or
28:44
Speaker 1: revenue or or things things of the sort. Um. Yeah,
28:47
Speaker 1: and about the Series A, getting a d c M
28:50
Speaker 1: was was a key part of of that Series A.
28:53
Speaker 1: I think cow she is really one of those asymmetric
28:55
Speaker 1: type of investments. Um, We're going to face obviously a
28:58
Speaker 1: lot of challenges, and but we if we execute against
29:01
Speaker 1: the challenges, we're got to have massive outlier potential. And
29:04
Speaker 1: we were really trying to find partners and investors. They
29:09
Speaker 1: really understood the long term vision of the company and
29:12
Speaker 1: shared that obsession that we have with event contracts and
29:15
Speaker 1: and buting this entire trading ecosystem. UM. So Alfred from
29:19
Speaker 1: Sequoia is one of those people he did a PhD
29:23
Speaker 1: in these types of markets. He really really understands it
29:26
Speaker 1: and sees the potential and obviously it's it's it's Sequoia, Sequoia,
29:30
Speaker 1: as you said, So that was that was definitely something
29:32
Speaker 1: we thought about. But but Alfred specifically has historically invested
29:36
Speaker 1: in a lot of like paradigm shifting companies like Airbnb
29:39
Speaker 1: and door Dash, so he really thought it was a
29:41
Speaker 1: good it was a good fit. Um. And then after
29:43
Speaker 1: Sequoia was our lead investor, we were really trying to
29:46
Speaker 1: feel the round with Wall Street investors that could really
29:49
Speaker 1: help us navigate this industry. UM. So yeah, talk my
29:52
Speaker 1: co founder. He's obsessed with barbarians at the gate. So
29:57
Speaker 1: so when um right, So when when one of our
30:02
Speaker 1: seating vessels, Joli Barto vi Um said he could intro
30:06
Speaker 1: and we could talk to Henry, I think um Taric
30:08
Speaker 1: was just like absolutely fascinated and they had a fantastic conversation.
30:12
Speaker 1: He was very interested from from the very beginning, and
30:15
Speaker 1: with with Charles Schab it was something similar. It was
30:17
Speaker 1: also Ali Bartovi introguing us too. To him also very
30:21
Speaker 1: interested from the start, and he actually told us that
30:24
Speaker 1: our early days that call she looked very similar to
30:26
Speaker 1: his early days starting Charles Schwab, So that was very
30:29
Speaker 1: exciting and and yeah, they help us so much to today,
30:32
Speaker 1: so it's fantastic. The funny thing about Schwab is people
30:35
Speaker 1: don't realize the guy you see with the gray hero
30:37
Speaker 1: and commercials, that's Charles Swab. That's not an actor. He
30:41
Speaker 1: really exists and has been running the company. Now I
30:44
Speaker 1: think he's UM chairman, but that was really him for
30:48
Speaker 1: for a long time. So so let's talk a little
30:50
Speaker 1: bit about vent hedging. And I like this quote. These
30:54
Speaker 1: markets are a little like an aggregator of public opinion
30:57
Speaker 1: in real time. So so what are the implications of
31:01
Speaker 1: this And is that the sort of stuff your UM
31:04
Speaker 1: lead investor at Sequoia was studying when he went to school, right, Um, yeah,
31:10
Speaker 1: this is a very important part of our vision UM
31:12
Speaker 1: over time, we really want CALCI to become the sorts
31:14
Speaker 1: of truth for forecasting these events that we have markets
31:17
Speaker 1: on because because the prices that call should go from
31:20
Speaker 1: one to n cents, they directly translate to the probability
31:24
Speaker 1: of the event happening. So let's say, uh, the market
31:27
Speaker 1: might be saying there's a twenty percentions there's a recession
31:30
Speaker 1: this year. UM. It means the twenty cents means that
31:34
Speaker 1: there's a twenty percentions that the market believes there's a
31:36
Speaker 1: twenty percentions that there will be a recession this year.
31:39
Speaker 1: And the amazing thing is that there's a lot of
31:42
Speaker 1: theoretical and empirical evidence that they are the most effective
31:46
Speaker 1: and most accurate ways of forecasting the future. They're way
31:49
Speaker 1: better than polls, way better than like pundits on on
31:51
Speaker 1: the news trying to uh say what's going on? Um.
31:54
Speaker 1: And it's mainly for two reasons. I think. The first
31:56
Speaker 1: one is because when people put money where their mouth is,
32:00
Speaker 1: they are more more likely to say what they really
32:02
Speaker 1: think and actually do research and everything. And the second
32:05
Speaker 1: one is that markets really aggregate the wisdom of the crowds.
32:08
Speaker 1: You're getting a lot of different people's opinions when they're
32:11
Speaker 1: putting money behind their opinion and really aggregating that, and
32:14
Speaker 1: which makes there's a very powerful tool. And I mean
32:16
Speaker 1: any market lover understands what I'm saying, um and yeah,
32:20
Speaker 1: making and and part of our our vision and what
32:23
Speaker 1: we really want to do long long term is make
32:25
Speaker 1: these forecasts score to people's lives. UM. It's really part
32:28
Speaker 1: of our mission with with event contracts becoming more widespread,
32:32
Speaker 1: we really hope that people we use data in their
32:34
Speaker 1: lives to prepare better for the future, addressed uncertainty, inform
32:38
Speaker 1: themselves better, and like try to address a little bit
32:41
Speaker 1: of the very biased world and not very data driven
32:44
Speaker 1: world that we live in nowadays. UM. So we're trying
32:47
Speaker 1: to get started with that. We're already trying to get
32:49
Speaker 1: We have market tickers like any other UM equity or
32:52
Speaker 1: things like that. We have takers for all of our markets.
32:54
Speaker 1: So we're trying to have tickers and prices be used
32:56
Speaker 1: by news and things of the store to really try
32:58
Speaker 1: to get this very important data that we believe is
33:01
Speaker 1: very important data out there. But for Alfred specifically, I
33:06
Speaker 1: think he was doing more than like mathematical and like research.
33:09
Speaker 1: He was doing a status PhD. So someone related to this,
33:12
Speaker 1: but not really on the on the on this side.
33:14
Speaker 1: But yeah, so so let's let's talk a little bit
33:16
Speaker 1: about prediction markets that are out there. Historically they've only
33:20
Speaker 1: done a so so job, partly because they're not very broad,
33:25
Speaker 1: they're not that very deep, and the dollar amounts that
33:28
Speaker 1: are traded have been modest. I saw an overlay of
33:32
Speaker 1: about half a dozen different prediction markets before the Russian
33:36
Speaker 1: invasion of Ukraine, and you would think they would all
33:40
Speaker 1: be kind of similar, but they weren't. They were all
33:42
Speaker 1: over the map. Do you have to get to a
33:45
Speaker 1: certain scale that will fix that problem of prediction markets
33:50
Speaker 1: being kind of thin and easily I don't want to
33:52
Speaker 1: say manipulated, but one big trade really has an impact
33:57
Speaker 1: on on how those UM markets trade, right exactly. I
34:01
Speaker 1: think we need a base level of liquidity and volume
34:04
Speaker 1: for for the forecast to really work and be really useful.
34:07
Speaker 1: In a lot of these, like UM other prediction markets
34:10
Speaker 1: out there, as as we talked about their unregulated they
34:13
Speaker 1: have UM, they're very new. They just pop up, especially
34:16
Speaker 1: the crypto ones, every other day UM, and it's hard
34:19
Speaker 1: to build liquidity and proper volume like that. But UM,
34:23
Speaker 1: we really think the prediction markets are the way to
34:25
Speaker 1: go to have these these very good forecasts of events.
34:28
Speaker 1: But it needs liquidity and needs volume, and that's what
34:30
Speaker 1: we're working on. Huh. Really really kind of interesting, which
34:33
Speaker 1: which raises the question, UM, how are you going to
34:36
Speaker 1: scale this up? How are you going to get to
34:38
Speaker 1: a hundred million and then a billion and then who
34:41
Speaker 1: knows what from there. Right, we have a lot of
34:43
Speaker 1: ways to to scale the exchange. It's kind of what
34:46
Speaker 1: we talked about with with building up liquidity. Right now
34:49
Speaker 1: we're really focused on retail, so getting UM we have
34:53
Speaker 1: a lot of options traders are like what we call
34:55
Speaker 1: informed retail traders in the platform, trying to go in
34:58
Speaker 1: more deeper into different communities and trying to get them
35:01
Speaker 1: into test the platform brings off the sword, and then
35:04
Speaker 1: the next step for us is getting brokers in to
35:06
Speaker 1: offer our markets in their platform, so UM E trade,
35:11
Speaker 1: interactive brokers, all of those um and then bringing up
35:15
Speaker 1: the volume we can bring up like actual liquidity providers,
35:18
Speaker 1: prop shops, hedge funds, and then up until UM I
35:22
Speaker 1: guess insurance companies even um off floating some risk or
35:26
Speaker 1: or like actually big institutions natural hedgers bringing them in.
35:30
Speaker 1: So the way that we're seeing is really starting to
35:32
Speaker 1: build with retail with getting more and more of the
35:35
Speaker 1: current users that we have which are options traders, and
35:38
Speaker 1: having more retail as we go to the to the
35:41
Speaker 1: I guess brokers. So so how big can this get?
35:44
Speaker 1: I mean, is this ever a billion dollars a month.
35:47
Speaker 1: How how large can this sort of event hedging scale
35:50
Speaker 1: up to? Right, so, event contracts are a lot more
35:53
Speaker 1: like tangible, relatable, and more direct as we talked about UM,
35:57
Speaker 1: then all these other assets that that preceded it UM.
36:01
Speaker 1: So we really think when we actually plug it in
36:03
Speaker 1: the financial ecosystem, it can properly scale. Obviously, it takes
36:07
Speaker 1: a lot of time to get there because we need
36:08
Speaker 1: to be the entire ecosystem around events a completely new thing.
36:11
Speaker 1: But once it's properly plugged in the financial system, UM
36:15
Speaker 1: I can give you some numbers to give some idea, right.
36:17
Speaker 1: I think you mentioned that in the beginning with the
36:19
Speaker 1: CFTC regulating a trillion UM dollar industry like grain futures
36:23
Speaker 1: are seven trillion dollars industry commodities to any trillion. Interest
36:28
Speaker 1: rate swaps are around I think trillion UM. So I'm
36:31
Speaker 1: not exactly how big the market is, but I think
36:33
Speaker 1: as we expand, event contracts definitely has a potential to
36:36
Speaker 1: be one of these interest rate swaps are five billion
36:40
Speaker 1: or trillion trillion Really that's the notational, not the but
36:45
Speaker 1: at that point that's a giant amount of money. Right, So, really,
36:49
Speaker 1: startups have a tendency to have this defining moment in
36:53
Speaker 1: their lifespans where they sort of either pivot or just
36:56
Speaker 1: a moment of clarity and you could see the whole
36:59
Speaker 1: roadman up laid out. Um, did you guys have that
37:02
Speaker 1: sort of defining moment at Calcy? I would say the biggest,
37:06
Speaker 1: the earliest defining moment we had was actually before we
37:09
Speaker 1: really started the company. We went to a white Combinator
37:12
Speaker 1: hackathon UM because before we were like fascinated by it,
37:16
Speaker 1: but we didn't think it was got like gonna work.
37:18
Speaker 1: It's like it seems so complicated and like are we crazy?
37:21
Speaker 1: I think that was a big question our head, like
37:23
Speaker 1: are we going crazy? We're here? Um. Then we went
37:26
Speaker 1: to a combinated for a hackathon and there were like
37:30
Speaker 1: these teams with like a bunch of servers, crazy computers
37:33
Speaker 1: like and it was just me and Taragraph are like
37:36
Speaker 1: MacBooks like trying to to go like a demo. Before
37:39
Speaker 1: we were talking about UM And then we first presented
37:42
Speaker 1: to Michael them, the CEO of y C, and he
37:44
Speaker 1: really didn't like what we were saying from the beginning.
37:46
Speaker 1: He cut us like the first five seconds He's like
37:49
Speaker 1: that like this is illegal, Like what are you doing UM?
37:53
Speaker 1: And then we would get very upset. We went in
37:54
Speaker 1: like we I think Tara even started drinking UM beer.
37:58
Speaker 1: He's like, there's no way we're gonna be in the
37:59
Speaker 1: top ten, which had to present again, and we ended
38:02
Speaker 1: up being in the top ten. We presented again, and
38:04
Speaker 1: then we ended up being in the top three, which
38:06
Speaker 1: were the winners of the hackathon. And I remember that
38:09
Speaker 1: night when we're going back to to our friends place
38:12
Speaker 1: where we were staying in San Francisco UM for the hackathon,
38:15
Speaker 1: we were like, wow, like maybe we aren't crazy like
38:18
Speaker 1: we should like maybe like people believe in what we're doing.
38:21
Speaker 1: And it was a very like happy moment for us.
38:24
Speaker 1: And I think right after that we actually got into
38:25
Speaker 1: the White Combinator batch and it was one of the
38:28
Speaker 1: happiest moments we've we've had UM we've had of the company.
38:31
Speaker 1: So that was really like motivating and encouraging because I
38:34
Speaker 1: was like, told you, we never thought about being founders.
38:36
Speaker 1: We thought about being like he was going to be.
38:39
Speaker 1: We were both going to be traders UM full time.
38:42
Speaker 1: So it was like a big shift for us. So
38:44
Speaker 1: that was a very exciting moment. Huh, really really interesting.
38:46
Speaker 1: Let me throw a couple of curveballs at you. Uh.
38:49
Speaker 1: You and your co founder Tarik both were named to
38:53
Speaker 1: the Forbes thirty Under thirty list in in the Finance category.
38:57
Speaker 1: Tell us a little bit about that. What was that parents, Like, Yeah,
39:01
Speaker 1: I know, it was very excited. We were very honored
39:03
Speaker 1: to be to be to be nominated, especially being like
39:07
Speaker 1: the head up of the of the finance category. Um,
39:10
Speaker 1: we were really excited after all the work we've done.
39:12
Speaker 1: And actually a funny story is that because of the
39:14
Speaker 1: four of study under Dirty, I went Vio in Brazil
39:17
Speaker 1: for a little bit because the Brazilian Forbes wrote wrote
39:22
Speaker 1: a piece about how Brazilian was in the American fourb
39:25
Speaker 1: study under Dirty and that because it's very rare to
39:28
Speaker 1: have resilience in the list here. So that was that
39:31
Speaker 1: was that was a funny story. But yeah, because of
39:33
Speaker 1: the four study under Dirty, we also um ended up
39:36
Speaker 1: ringing the opening bell at the Nasdak, which was very exciting.
39:40
Speaker 1: And one more, one more curveball. You were a ballet
39:44
Speaker 1: dancer with the ball show. You studied ballet tell us
39:48
Speaker 1: about that, right, so very different from what I do
39:52
Speaker 1: now for sure, But um, I'm from Brazil originally and
39:55
Speaker 1: I just came to the US for college, and most
39:57
Speaker 1: of my life before college, I was split between ballet
40:00
Speaker 1: and school. What what I really loved about ballet was
40:03
Speaker 1: the intensity of it all. Um, it was extremely hard
40:07
Speaker 1: to get to the top. It's extremely competitive, uh. And
40:09
Speaker 1: there's nowhere to hide. You need to be completely on,
40:11
Speaker 1: you need to give it your all. And yeah, and
40:14
Speaker 1: I studied at the Bolshoi Ballet School and it was
40:17
Speaker 1: extremely intense and and um we had to be extremely disciplined,
40:21
Speaker 1: like measuring our food down to like a fourth of
40:23
Speaker 1: a strawberry before this rehearsal to be able to get there.
40:27
Speaker 1: But that was that was one part. And the other
40:29
Speaker 1: part my my parents are both um um engineers and
40:33
Speaker 1: have stand backgrounds. Uh, so I was surrounded by that
40:35
Speaker 1: outside of ballet, doing like math, olympiads and all of that.
40:38
Speaker 1: I also had to get a hundred on everything on
40:40
Speaker 1: the math and science side. So I used to do
40:44
Speaker 1: like normal school, I guess from like seven am because
40:47
Speaker 1: Brazil schools hours are different, so seven am to like
40:49
Speaker 1: one pm, and then ballet from one like one thirty
40:52
Speaker 1: pm to like nine ten pm, and then I would
40:55
Speaker 1: actually go study. So that was a very intense part
40:58
Speaker 1: of my life. But I think it really set me
40:59
Speaker 1: up for for being able to go to M I
41:01
Speaker 1: T and and and and injure everything there. And it's
41:05
Speaker 1: something that talks very similar to me. He was actually
41:07
Speaker 1: professional skier before going to college and and we have
41:10
Speaker 1: very similar backgrounds. And I think that level of intensity
41:13
Speaker 1: and discipline is really what help us get through the
41:17
Speaker 1: regulatory process and be where we are today. So tough times,
41:20
Speaker 1: but it's good now. I do the same thing. I
41:23
Speaker 1: measure my food input down to the quarter strawberry. You see,
41:28
Speaker 1: It's how I maintained my girl. So, so we only
41:32
Speaker 1: have a certain amount of time left. Let me jump
41:34
Speaker 1: to my favorite questions that I ask all of our guests,
41:38
Speaker 1: starting with what kept you entertained during lockdown? What were
41:41
Speaker 1: you streaming, watching, or listening to? Right? Um, I listened
41:46
Speaker 1: to All In and I'm very into American politics nowadays.
41:49
Speaker 1: So I'm finishing up the ten American President's podcast. Um,
41:53
Speaker 1: But on TV, I think I'm more mainstream. So I
41:55
Speaker 1: just love Succession, House of Cards, West Wing, and so on. Uh.
42:00
Speaker 1: Let's talk about your mentors who helped shape your career. Um. Right,
42:04
Speaker 1: So I think at M I T. I had two
42:06
Speaker 1: professors are very UM impactful in my career and to me.
42:10
Speaker 1: I think the first one was Patrick Winston. He was
42:12
Speaker 1: my adviser and professor of UM a lot of our
42:14
Speaker 1: Fisher Intelligence classes. He really helped me navigate m I
42:17
Speaker 1: T and set me up to and set my mindset
42:21
Speaker 1: to where I wanted to be to like really start CauSci.
42:24
Speaker 1: And the other great mentor was Peter Kempthorne. He's also
42:27
Speaker 1: a professor of stats and really I started being interested
42:30
Speaker 1: in finance in his classes, and funnily enough, he's actually
42:33
Speaker 1: one rectors off of Cauch nowadays. Because we kept very
42:35
Speaker 1: close contact UM and we talked a lot to him
42:38
Speaker 1: about like the dynamics of markets and all that stuff
42:41
Speaker 1: we talked about UM. And since we started the company,
42:44
Speaker 1: I think our biggest mentors have been Michael's the CEO
42:47
Speaker 1: of y C up until today. He's helps us so much.
42:50
Speaker 1: And Ali Partovi, who's who runs NEOUM, is one of
42:53
Speaker 1: our seat investors, and they have been really instrumental and
42:57
Speaker 1: like making us better founders UM, not just like making
43:00
Speaker 1: the company succeed, but better founders and how to like
43:02
Speaker 1: do have employees growing company like growing pains, negotiation, all
43:06
Speaker 1: of those things that you like. M I ten Nerds
43:08
Speaker 1: didn't really know what to do. So let's talk about books.
43:11
Speaker 1: What are some of your favorites and what are you
43:13
Speaker 1: reading right now? Right? Some of my favorite, um, my
43:16
Speaker 1: favorite book is is this book called Americana, but it's
43:19
Speaker 1: not a novel. It's actually the four year history of
43:22
Speaker 1: American capitalism. But whenever I say American and everyone thinks
43:25
Speaker 1: it's the novel. Um. And the other one is this
43:27
Speaker 1: book called predict Predictably Rational um, which is right, yeah,
43:33
Speaker 1: and it's it's very uh some. It has a lot
43:35
Speaker 1: to do with what cow she does, and I think
43:37
Speaker 1: it's one of the early books I read on prediction,
43:39
Speaker 1: markets and decision making, and I thought it was a
43:42
Speaker 1: fantastic book. Um. And at the moment I am finally
43:45
Speaker 1: Tart would be very happy to hear this. I'm finally
43:47
Speaker 1: reading Barbarians at the Gate after he told me for
43:50
Speaker 1: years that I should, but I barely started. So yeah,
43:54
Speaker 1: and Americana is boo swing enough Boston and might pronounce
43:59
Speaker 1: it right, he was a asked here a couple of
44:01
Speaker 1: years ago. I love that book. That book because people
44:05
Speaker 1: think that oh, all these companies were, you know, freestanding.
44:10
Speaker 1: It was a public private partnership for a long time.
44:14
Speaker 1: That that is a fascinating book. And I'm surprised someone
44:18
Speaker 1: as young as you has found it. It's sort of
44:20
Speaker 1: off the beaten path. Yeah, no, it's a it's a
44:22
Speaker 1: fascinating book. It made me, especially in not being American,
44:25
Speaker 1: I think it made me understand the country and how
44:28
Speaker 1: it works so well. I think UM way better. So
44:31
Speaker 1: so this is the first time I'm going to ask
44:33
Speaker 1: this question of somebody who is so recently out of college.
44:38
Speaker 1: But you're twenty five now, is that right? So what
44:42
Speaker 1: sort of advice would you give to a college student
44:46
Speaker 1: or a recent college grad who is interested in a
44:49
Speaker 1: career in either startups and technology or finance and derivative training? Right?
44:57
Speaker 1: I think the finance industry is very there's a very
45:00
Speaker 1: traditional path that people can take. UM And what really
45:04
Speaker 1: helped me and and Tart understand and and really come
45:08
Speaker 1: up with the Cauchy idea and and and understand it
45:11
Speaker 1: and work on it. But then we got a lot
45:13
Speaker 1: of exposure to a lot of different types of firms
45:15
Speaker 1: and a lot of different types of roles as well,
45:17
Speaker 1: Like we did I did more of the engineering side
45:19
Speaker 1: than in a bit of the trading than a bit
45:21
Speaker 1: of research and tart that like all types of different tradings,
45:24
Speaker 1: because he also worked at Citadel and Five Rings and Goldman.
45:27
Speaker 1: And I think that giving yourself a lot of breath,
45:30
Speaker 1: especially when you're in college, is very important to just
45:33
Speaker 1: understand the industry as a whole, understand in their gaps
45:36
Speaker 1: and and seeing like finding patterns like how we found
45:39
Speaker 1: the coucil behavior. So I really think it's about putting
45:42
Speaker 1: yourself out there, trying to learn different things, do different things,
45:45
Speaker 1: and trying to get a global vision of of what
45:48
Speaker 1: the industry is and why you want to do um
45:51
Speaker 1: and and not be too tied to like the traditional
45:53
Speaker 1: path of like entering us like this level and then
45:56
Speaker 1: going up in a big firm and and things like that.
45:58
Speaker 1: And our final question, what do you know about the
46:00
Speaker 1: world of trading and hedging and investing today that you
46:05
Speaker 1: didn't know? What do I say four years ago when
46:08
Speaker 1: you guys were first starting out even doing it since
46:11
Speaker 1: so let's call it six years ago, right, Yeah, So
46:14
Speaker 1: what we're really doing is is enabling trading and investing.
46:17
Speaker 1: But if I were an investor. What I think I
46:20
Speaker 1: would have liked to know a couple of years ago
46:23
Speaker 1: is that bold bets are I would take a lot
46:25
Speaker 1: of both bets. I think generally, uh, that's the best
46:28
Speaker 1: that seem ridiculous efforts and there's a lot of debate
46:31
Speaker 1: and there's no way that's gonna work. Are usually the
46:34
Speaker 1: ones that achieved, like the large outlie results. Definitely, I'm
46:37
Speaker 1: biased because caw she is hopefully one is going to
46:40
Speaker 1: be one of those bets for a lot of our investors.
46:42
Speaker 1: But I really think it's about seeing what the world
46:45
Speaker 1: can be in the future and taking both beats to
46:48
Speaker 1: get there. I think a couple of years ago they
46:49
Speaker 1: very if I were an investor a couple of years ago,
46:52
Speaker 1: they're very scared to do that. But now I would
46:54
Speaker 1: think that's the way to go to really do meaningful investing. Huh.
46:57
Speaker 1: Quite fascinating. We have been speaking to Luana Lopez Laura.
47:01
Speaker 1: She is the co founder of Derivatives Training marketplace CALC.
47:06
Speaker 1: If you enjoyed this conversation, be sure and check out
47:09
Speaker 1: any of the previous four hundred interviews we've done over
47:12
Speaker 1: the past eight years. You can find those at iTunes, Spotify,
47:17
Speaker 1: wherever you get your podcast fix. We love your comments,
47:20
Speaker 1: feedback and suggestions right to us at m IB podcast
47:24
Speaker 1: at Bloomberg dot net. You can sign up for my
47:27
Speaker 1: daily reads at Ridolts dot com. Follow me on Twitter
47:31
Speaker 1: at rid Halts. I would be remiss if I did
47:33
Speaker 1: not thank the crack staff that helps put these conversations
47:36
Speaker 1: together each week. Sean Russo is my research assistant. Mohammed
47:42
Speaker 1: Mui is my audio engineer. Paris Wald is my producer.
47:46
Speaker 1: Atika val Bron is my project manager. I'm Barry Rihlts.
47:50
Speaker 1: You've been listening to Masters in Business on Bloomberg Radio.