Building Robinhood, Surviving GameStop & A $500 Million Phone Call | Vlad Tenev

David Senra 0:01 [typewriter sounds] You and I have a mutual friend in Micky Malka. I'm a massive fan of his. I, in fact, I called him this morning, and we were talking about you. Why is Micky so special? Like, why do you think he has the reputation he has with the founders? You know a bunch of founders that know him, just like I do, and it's just like you, you... It's very hard to find anybody that has a better reputation with founders than Micky Malka.

Vlad Tenev 0:23 Yeah. Micky Malka and I have known each other for a long time. You know, Ribbit, uh, got started basically around the same time as Robinhood. Uh, I remember meeting those guys, uh, Ribbit, when they were working out of the Social Capital office in downtown Palo Alto. They didn't even have their own office yet. I probably shouldn't be telling you this, but, um, uh, they actually passed on Robinhood at first. So, you know, we, we were excited to meet them. I pitched, uh, Micky, Nick, and Nikolai. This was our seed round at a ten million cap, and it didn't end up getting done, even though, uh, I was very excited because it's like, this is a fintech-focused firm. Fintech wasn't even a thing when Robinhood got started. You can look at the Google Trends. It was, like, zero, and then-

David Senra 1:19 [laughs]

Vlad Tenev 1:20 ... you know, a couple years later, people started using the term. You know, and, and he'll give me excuses about why they didn't do the deal at the seed. Uh, like, "Oh, you know, we weren't set up. It wasn't in our mandate. It was too early stage for us." But you and I both know Micky's the type of guy, when he wants something, he'll find a way to get it done, right? I mean, he invested, uh, over half a billion in, into Robinhood in, in the span of probably thirty to forty-five minutes in 2021. I think that with Micky especially, but also with, with all of our investors, the best ones, there was a period of us sort of like getting to know each other and earning each other's mutual trust. And with that one, you know, I'd say the relationship kinda grew and compounded over time. So they ended up investing in the Series A with Index and becoming board observers.

Vlad Tenev 2:19 And I remember having a particularly contentious discussion with Micky around that time because, I forget exactly what we were talking about, but I think he wanted more protections than I was willing to give. He either wanted to be on the board or wanted to be an observer. You know, as a founder, especially early stage, you're kind of taught to be extremely protective about board rights, so I was kinda negotiating against him. And I remember I was, like, walking around i- next to our office. There was this little park in South Palo Alto, and, uh, I was just doing paces around this tiny park, and he's like, "You know, Vlad, you're gonna learn this about me. I'm gonna be, you know, the only investor that you're actually, five years from now, ten years from now, you're gonna say, you know, 'I wish you were more involved,' and you're gonna want me on your board." And of course, at the time, I'm like, okay, well, everyone probably says this exact same shit. But, um-

David Senra 3:19 [laughs]

Vlad Tenev 3:20 Yeah, I think ti- time and time again, in the moments that mattered, he sort of proved that he had our back, my back personally, and sort of like the, the best interest of the company. So Micky has this very unique thing, and, and I think at first, uh, when you meet him, he's probably, I mean, he's a, he's a particular person, probably not everyone's cup of tea. He's not someone that you, like, immediately like necessarily. Uh, he's kind of got a tough exterior. He's a giant man, you know.

David Senra 3:55 [laughs]

Vlad Tenev 3:56 Uh, probably puts up quite a bit of weight in the weight room. He's got like a aggressive temperament.

David Senra 4:02 These are my favorite kind of people, by the way. [laughs]

Vlad Tenev 4:03 Yeah. Yeah.

David Senra 4:03 So me and him clicked from the very first time. [laughs]

Vlad Tenev 4:06 The way he kinda challenges me and the company, he does it directly. It's clear. I never worry about whether he has the best interest of me or, or the company. So I think our trust has just grown over time, and multiple times, he's kind of been there to help the company in our most important moments. He was a board observer in Robinhood before we went public. You probably know this, but typically, when you go public, all the observers go away. And in fact, most of the board members who are venture capitalists end up rolling off the public boards because that's not the business they're in. So Micky was actually the only one. He got promoted on our board. So he rolled off when we went public, and then I came back to him six months later, and I'm like, "Hey, we, we'd like for you to join this company as a public company, as a full board member."

David Senra 4:58 Why'd you do that?

Vlad Tenev 4:59 Because I just valued his counsel so much. When you're a public company, you get to pick your board members, by and large. And you know, when you're private, it's the investors, and it's sort of, uh, you pick them, but it's a negotiated deal that the investor owns the board seat. So sometimes you have situations where maybe you get along with a certain board member, and then they leave the firm, but it's the firm's board seat, so they get to decide what happens with it. Public company, you pick your board members. And so, um, I have the luxury of being able to select the, the people on

Vlad Tenev 5:35 the board now.

David Senra 5:35 You referenced, uh, at the beginning of our conversation that he dumped half a billion dollars into Robinhood in, like, thirty to forty-five minutes. Can you tell the story?

Vlad Tenev 5:43 The story actually goes back to March of 2020. So when he actually dumped that money was January of 2021. But eight months earlier, March of 2020 was a big inflection point in Robinhood's history. So it was the beginning of COVID. And I'll, uh, set out the scene for you.

David Senra 6:05 Mm-hmm.

Vlad Tenev 6:05 We were in this office, um, or the one across the street, and, uh, w-we basically occupy the Sunset Magazine headquarters right now. And Sunset Magazine, as you maybe don't know, but, uh, has two large buildings. There's, like, the one we're in and the big one across the street with a giant garden. Uh, anyway, there was a running joke because we, we first moved into the smaller one, then we got the big one. You know, our, our CFO would constantly have to answer when we're moving into that building because the date kept getting moved back and back, and it's an old building. They had to do a lot of retrofitting. Uh, anyway, March of 2020 was our move-in date, so we mark it with a big hackathon. So over the weekend, we have a hackathon, and remember, it was kind of a sad hackathon, kind of poorly attended 'cause it-

David Senra 7:01 Because of COVID or they're not, not related?

Vlad Tenev 7:03 I don't know. I think j-just, like, there was a little bit of a malaise. I don't know if it was COVID related or we just, uh, were kinda going through the motions and we, w-we didn't really hype it up enough, but, uh, not very many people hacked. And then the following day, Monday, March 2nd, 2020, we had a massive day-long trading outage, and this day was, like, a huge upswing in the market. So there, there was some up and downs. COVID had started. The market had gone down, and in that Monday it went up. Our infrastructure basically failed, and we had a day-long trading outage, which was very nerve-wracking 'cause you're a financial firm. You know, people, customers depend on, on you to, uh, to trade. And for me personally, as a engineer, I take any infrastructure engineering issue very, very personally. I feel like I'm failing at my core competency, right? So that happened. We got through it, and a week later everyone went home because you had, uh, the start of lockdown. And I remember it was a very confusing time because all the companies that were sort of in our peer group at that time were taking precautions. They were planning on cutting headcount. A lot of them were doing layoffs.

David Senra 8:34 What did you consider your peer group back then?

Vlad Tenev 8:36 You know, like, um, Airbnb, DoorDash, those types of companies.

David Senra 8:41 Okay.

Vlad Tenev 8:42 But I think it was-

David Senra 8:42 So just tech startups, nothing to do with fintech.

Vlad Tenev 8:43 Yeah, yeah, tech startups.

David Senra 8:44 Okay.

Vlad Tenev 8:45 But, but it was beyond that. I mean, there was just pessimism, and, you know, the market had, had crashed, and people just assumed that we were gonna be in dark times for-

David Senra 8:57 Mm

Vlad Tenev 8:57 ... for the next couple of years. We didn't really know which way it was gonna go because when you looked at our numbers, we were just seeing crazy numbers. Uh, user base was growing, revenue was growing, volumes were growing. So COVID at first seemed like it would be, like, a, a headwind, a risk that we would have to manage, and then it became pretty clear that it was just a huge accelerant to

Vlad Tenev 9:22 the business. But as part of our business accelerating quite dramatically, we encountered the capital requirements for the first time. And, and the way that basically that works is, since we're a regulated broker, depending on how much activity there is on our platform, we have to set aside corporate cash-

David Senra 9:45 Mm

Vlad Tenev 9:45 ... business cash to, like, support that activity. And we started noticing during March that, you know, the volumes across equities and options were, uh, going parabolic, and our capital requirements were increasing as well. And so I call up Micky, and I'm like, "Hey, things are really good right now. Revenue's growing, business growing. Not sure how sustainable it is, if I'm being honest, because it's like we're doing three times the volume that we did a month ago. But there is a chance that I'm gonna need hundreds of millions of dollars really quickly because, you know, what if one day our volume 10 X's and, you know, uh, there's these capital requirements?" And, um, and he's like, "Okay. Well, let's work out a deal. Let's have a term sheet in place so that if that does happen, and, you know, you need it, we, we can just, like, set it up, sign the docs, and the money is wired in your account same day."

David Senra 10:50 Smart.

Vlad Tenev 10:51 And nobody else was willing to do that kind of... That's like a improvised deal, right?

David Senra 10:57 Mm-hmm.

Vlad Tenev 10:57 And, and remember at the time, venture capitalists weren't really investing. Everyone had kinda battened down the hatches to see what was, what was happening with COVID. And a couple of months later, it became clear that some businesses were actually doing well, and, you know, then, then the floodgates opened again, and it became one of the biggest bull markets ever-

David Senra 11:16 Yeah

Vlad Tenev 11:16 ... and kind of a speculative, uh, extravaganza from, I'd say, second half 2020 to second half of 2021.

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Vlad Tenev 13:24 March of 2020, we work out this deal, and we feel really good, and then we ended up raising capital from Sequoia and then D1, so we never really had to take that term sheet, uh, off the shelf because we felt really good and, and things had kinda stabilized and went to a more normal period of growth. Then, uh, January of 2021 happened, and it was, like, a huge inflection point in speculative trading activity.

David Senra 13:57 Why? I don't remember.

Vlad Tenev 13:58 I think part of it was the new year. Every time you cross from, like, uh, end of December to early January, w- we kind of see, uh, an inflection point in, in, in activity, like a step change in activity. I think it's behavioral. People are home. You know, the end of the year is kind of a, a closing of the chapter, opening the new one, and, and, and people start thinking about their finances more, so they open, you know, Robinhood accounts and, and start buying stocks. Uh, so there, there was that. Uh, there was also stimulus checks-

David Senra 14:37 Oh

Vlad Tenev 14:37 ... which dropped in people's accounts. There was lack of other things to do to spend your money. I mean, a lot of restaurants and sporting events were closed, so, uh, in the zero interest rate environment. Yeah, what we saw was just a insane amount of interest in crypto and stocks at the same time.

Vlad Tenev 15:00 In our crypto business, which we launched in January of 2018, and for a while it was generating n- next to nothing in revenue for many years, like-

David Senra 15:14 Why?

Vlad Tenev 15:14 ... close to zero because January of 2018 was the start of a prolonged crypto winter.

David Senra 15:21 Okay.

Vlad Tenev 15:22 And, and we had just gotten started, so we didn't have a established base of activity. So pe- people were buying, and there were some moments where, you know, we had more activity, but call it close to zero until 2020. Then Q3 of 2020, it just went up by 10X. So we, we started seeing, you know, tens of millions of quarterly revenue. Q4 it was, it was hundreds, and by Q2 of 2021, I think we had something like 500, 600 million of crypto revenue. So it went from nothing to, uh, our largest or second-largest revenue stream, and this was happening alongside all of the meme stock stuff. So yeah, we, we had to contend with, with both of these things, and remember, by that point, my mind was on the full day trading outage of March of 2020. That was, like, the last big crisis we had, so I was like, "I'm an engineer. Keep the systems up. Make sure that, uh, you know, we, we can serve our customers," 'cause, you know, that was the devil I knew.

Vlad Tenev 16:27 So yeah, we were just kinda blindsided by the capital requirements issue springing up overnight again. Our capital requirements-

David Senra 16:35 Was it really overnight?

Vlad Tenev 16:37 It was basically overnight, and day of, this got kind of confusing because the numbers kept changing, but the first number that came through the automated files was something like three billion.

David Senra 16:49 [laughs]

Vlad Tenev 16:50 So it was, like, three billion, then 1.8 billion, then we had a file that was, uh, 700 million

David Senra 16:55 When did you saw the three billion number?

Vlad Tenev 16:57 Well, so by the time I woke up, uh, which was 5:00, 5:00 AM Pacific, uh, this was, like, a very unique moment in my life. First off, at that time, I was sleeping with my phone downstairs because I felt like I was in a bad head space just, like, on my phone the entire time. Like, I think C- COVID at the beginning was very euphoric for me because I was like, "Oh, I can be so efficient. I can do all this work, and then my family's right here, and I can just be plugged in while also being present with my family." But couple months go by, and I realize it's not very good for me. I was just, like, uh, distracted all the time, always on my phone, always working, so I was trying this thing where I would sleep with my phone in a different room.

David Senra 17:45 But specifically, describe your... You, you said it was a bad head space.

Vlad Tenev 17:49 Yeah.

David Senra 17:50 Anxious? Depression?

Vlad Tenev 17:52 Uh-

David Senra 17:53 What is it?

Vlad Tenev 17:54 Definitely anxious. Probably not depression yet, but the best way I can describe it is no matter how good of a meeting I have, if it's on Zoom, I want the meeting to end, and I wanna kinda go outside, right? It's, it's very different than having a meeting in, in real life for me where I can kinda vibe with the people. So I realized that about myself during COVID, that I'm not a remote work person. Yeah, it just, it just doesn't make me happy. No matter how good of a meeting I have, how energizing, I just kind of don't wanna be staring at people on a computer screen.

David Senra 18:35 So you're sleeping downstairs with your phone?

Vlad Tenev 18:37 Yeah. And so my wife wakes me up, 'cause, like, folks from work call her, and-

David Senra 18:42 Oh. [laughs]

Vlad Tenev 18:43 And-

David Senra 18:43 That's not good

Vlad Tenev 18:44 ... and she doesn't really get a call from work that often.

David Senra 18:46 [laughs]

Vlad Tenev 18:47 So she knows it's bad. She's like, "Oh my God. Oh my God. Vlad, you have to call work right away." So I go downstairs, and I pick up my phone, and my phone is unusable. It's literally, like, vibrating constantly. Just I pick it up, and it's bzzt, bzzt, bzzt, bzzt, text messages coming in, calls going to voicemail. It's like, uh, I, I think I saw this on Instagram one time when, uh, Kim Kardashian turns off her, uh, do not disturb, and then you just see that, you know, the phone just starts glitching because people are just commenting on her Instagram posts. Anyway, that's probably the closest I've gotten to that. Um...

David Senra 19:25 [laughs]

Vlad Tenev 19:27 And, um, yeah, it was kind of like hate tweets and voicemails, like, you know, "How could you do it?"

David Senra 19:36 But wait, wait. What, what-

Vlad Tenev 19:36 "Turn it back on."

David Senra 19:37 But what's going on? I thought you had to turn off trading because you didn't have the, the money to put up. What is exactly the place of the day?

Vlad Tenev 19:43 Yeah. So I don't know what's going on yet.

David Senra 19:44 Okay.

Vlad Tenev 19:45 And I'm expecting a call from Gretchen, who is our COO. And, you know, I pick up my phone, and in between the calls and text messages, I figure out that I can go into settings and block unknown numbers. And then, uh, Gretchen gets through, and, uh, then she's, you know, explaining, explaining things to me. The upshot of it is we had to, uh, PCO GME. So we had to mark GME, which is GameStop stock, position closing only, which since we didn't allow shorting, meant people could only sell it. If you... You couldn't buy more GME. If you didn't own it, you couldn't buy it, and if you owned it, you could only sell it. She was kind of explaining why. It was like, well, first they asked for three billion, then it was 1.8. We didn't have that much money. Maybe it was a little bit more than that, but definitely not three billion. 1.8 would've been tough. And so, okay, what do we do? I don't know, let's get on a call. We got the leadership team on a, on a Zoom call, you know, and everyone was kind of in different places, which made this, this type of fire very difficult to fight because first thing you do now is pull everyone in a room together. Well, there was no room. It was a Zoom call. We kind of decide that we're gonna split off into a couple of work streams. One work stream is to figure out how to communicate to customers because they were obviously very, very angry at that time. And so, you know, the marketing and comms folks, uh, started working on that. Then there was the engineering, just keep the systems up, which, knock on wood, that was actually my biggest fear.

David Senra 21:22 I know. [laughs]

Vlad Tenev 21:22 But the systems were actually, like, holding up throughout this crazy activity. And then the third work stream is-

David Senra 21:28 Find the money

Vlad Tenev 21:28 ... get the money. We didn't know how much we needed, but it was just get as much as possible.

David Senra 21:34 So when you know that you need to find the money, who's the first person you call?

Vlad Tenev 21:37 I called Micky.

David Senra 21:37 That was the first call?

Vlad Tenev 21:39 Yeah. Yeah.

David Senra 21:40 [laughs] Shit.

Vlad Tenev 21:41 Yeah, and, and he committed, uh, on the spot. He's like, "How much, how much do you need?" I said, "I don't know, 250 million, 500 million. I'm not sure." He's like, "I've got it."

David Senra 21:52 He didn't have it yet, though.

Vlad Tenev 21:53 Well, so I learned later-

David Senra 21:54 [laughs]

Vlad Tenev 21:54 ... in a odd twist of fate, that he called up, uh, the CEO of SVB.

David Senra 22:00 I was gonna say, Silicon Valley Bank. I've heard this story before. [laughs]

Vlad Tenev 22:02 Yeah. Yeah, 'cause I, I, uh, I had a coffee with, gosh, what was his name, the CEO of, of SVB. Great guy. Um, he went through his own issue, um, that unfortunately didn't end-

David Senra 22:15 Yeah

Vlad Tenev 22:15 ... as positively. Um, but yeah, he was on the golf course in, uh, in, in Hawaii, and he's like, and Micky calls him. He's like, uh, "I'm gonna have to pull down that line of credit that I set up with you guys."

David Senra 22:29 [laughs]

Vlad Tenev 22:30 So he didn't have the money, but he had a line of credit.

David Senra 22:33 Yeah.

Vlad Tenev 22:34 Uh, and anyway, that ended up being a consequential first call because these times are times of high uncertainty, as you can imagine. You know, nobody wants to give money to a business that's about to collapse, and, and I think legitimately there were people that were, that were afraid of this. It's like when in financial services, if there's a solvency issue, you know, you don't wanna be... Y- you have to get your money out first. You certainly, it's, it takes a lot to actually move money in, to inject money at that time, as, as we found in many failures since then. You know, and I notice when I tell this story, depending on where we are in the world, uh, people are much more sympathetic to what we went through. Like, after the FTX collapse, people were like, "Okay, I get it." After the SVB banking crises, I think people got it more too.

David Senra 23:28 You know, it's funny that you bring up FTX and SVB. I'm thinking of, like, Jay Gould. I'm thinking of, like, the stuff that happened way before the invention of even the SEC. Like, there was all... I mean, this was something that throughout especially American financial history-

Vlad Tenev 23:40 Yeah

David Senra 23:40 ... I've read tons of biographies. It's like they did this on purpose. They did it for fun. Cornelius Vanderbilt, Daniel Drew, like, there's all these people that would essentially, like, cause bear runs to happen and then would profit, and then obviously there's a lot of financial regulations that came out of this.

Vlad Tenev 23:53 Totally. And actually, if, if you look at the history of the specific capital requirements that had exploded for us, a, a lot of that came up as a result of Dodd-Frank.

David Senra 24:07 Yeah.

Vlad Tenev 24:07 Uh, as, as a result of the global financial crisis in 2008. They said, "Okay, we wanna make sure everyone is, like, super capitalized to handle the trading activity that they could handle." So we have these, like, onerous capital requirements. Of course, they never anticipated that people would be It would be, you know, retail traders trading-

David Senra 24:27 Yes

Vlad Tenev 24:27 ... meme stocks.

David Senra 24:28 At, at home with s- stimulus checks and everything they got.

Vlad Tenev 24:30 With no commissions.

David Senra 24:31 Why did you say it's a consequential first call, though?

Vlad Tenev 24:33 I think it could have gone another way where the first call wasn't as strong of a reception. They said, "You know, we'll think about it. I've gotta talk to my team. I gotta talk to my CFO" and-

David Senra 24:44 Mm.

Vlad Tenev 24:44 Uh, and then maybe the second call also said something like that, and then the third call asked me, "Well, is anyone else doing it?" And I have to tell him, "No, you're my first call." You know, and time kills all deals, so having Micky actually answer the phone and commit on the spot got things started for us.

David Senra 25:05 Did it give you confidence? Like, what-

Vlad Tenev 25:07 For me personally?

David Senra 25:08 Yeah, what that did for you.

Vlad Tenev 25:09 So this was a really interesting time because juxtapose this, like, big, we're trying to raise a lot of money, this big f- like, financial need that we had, which typically companies that are in that state are not doing well. It's a, kind of a bad situation, but the reason we were in that situation was because we were growing too quickly.

David Senra 25:29 Yeah, yeah.

Vlad Tenev 25:29 It was a consequence of too much success-

David Senra 25:31 [laughs]

Vlad Tenev 25:32 ... which is quite rare.

Vlad Tenev 25:33 So at that time, Robinhood was the number one app in the App Store, not just in finance, which was, you know, kind of a... Still good, but we were ahead of Instagram, we were ahead of TikTok. Number one overall.

David Senra 25:47 That's insane.

Vlad Tenev 25:47 Extremely rare for, for a finance app.

David Senra 25:49 That's insane. [laughs]

Vlad Tenev 25:49 We'd never seen anything like that. So we were in this position where we needed capital, but also we were growing tremendously quickly, which was hard to keep in your head at the same time because as a leader, obviously I'm excited about the growth, the success, the revenue. I mean, the, uh, January 2028, we hit, uh, 1.8 billion run rate, something of that nature. Like, we had crossed... The company I think made 200 million in revenue in 2029- in 2019. Then we went to close to a billion, and then we ended up doing-

David Senra 26:27 So wait, 5X'd in 12 months?

Vlad Tenev 26:29 Yeah.

David Senra 26:29 Okay.

Vlad Tenev 26:30 4X, yeah.

David Senra 26:31 Sure.

Vlad Tenev 26:31 And then in 2021 we got to 1.8 billion. So obviously that growth was exciting to me and I was cheering it on, but also along with that rapid growth came just a increase in risk.

David Senra 26:45 But go back to the, the consequential nature of the call and the fact that Micky just, he's like, "Yeah, you got the money, you're done"

Vlad Tenev 26:51 The fact that he committed on the spot and said, "I'm in"-

David Senra 26:55 Okay

Vlad Tenev 26:55 ... made everyone else, every conversation after him much easier.

Vlad Tenev 27:01 Um-

David Senra 27:01 How did those conversations go? So the second call you say, "Hey, I, Micky Malka's giving me half a billion dollars"?

Vlad Tenev 27:08 Second call's, "Mick- Micky Malka's in? Okay, I'm in too."

David Senra 27:11 Bet.

Vlad Tenev 27:11 And then eventually, um, we started getting the calls, right? It's like, "How much is left?" And then we were like, "Wait, wait, wait a minute."

David Senra 27:18 [laughs]

Vlad Tenev 27:19 Um, these warrants-

David Senra 27:22 Yeah

Vlad Tenev 27:22 ... we have to change the deal because we probably had, you know, $10 billion-

David Senra 27:27 Like, the, the-

Vlad Tenev 27:28 ... of demand at the first term.

David Senra 27:29 I love the story you just told 'cause you're like, yeah, this happened in, we're saying what, we're, we're January 2021. What, we're-

Vlad Tenev 27:35 Yeah

David Senra 27:35 ... okay. But-

Vlad Tenev 27:36 January 2020-

David Senra 27:36 But you're like, it actually didn't happen then. It happened March 2020 when you guys did this term sheet, didn't sign it and just put it in a fucking drawer, but you knew it was gonna happen.

Vlad Tenev 27:45 Yep.

David Senra 27:45 That's incredible, dude.

Vlad Tenev 27:47 Yeah, pretty much. I would bet we would've gotten it done either way, but it certainly helped that we had gone through that exercise of thinking about this stuff.

David Senra 27:58 Have you heard of anything else like that? I can't think of another example.

Vlad Tenev 28:01 Of just-

David Senra 28:02 Of-

Vlad Tenev 28:02 ... prescient business planning-

David Senra 28:03 Yeah [laughs]

Vlad Tenev 28:03 ... to that degree? I don't wanna give myself too much credit, you know? Um-

David Senra 28:08 I might give it to Micky. I'm gonna [laughs] have to give, have to give the credit to Micky. That's incredible.

Vlad Tenev 28:12 And during that time, a lot of our counterparties, 'cause we, we have lots of counterparties for running the business, too. Securities lending, for instance, which are big banks, and they have credit risk departments. So I had to do a roadshow throughout all this where I talked to all of our banks and I assured them that our financial condition remained strong because, you know, if they pull their lines of credit, it, it could also create a cascading failure. So, you know, what we pulled off, I've been told, was a miracle, right? There's many ways that the firm-

David Senra 28:47 Yeah

Vlad Tenev 28:47 ... could have actually gone bankrupt and, uh, and gone insolvent, but I think we-

David Senra 28:53 Oof

Vlad Tenev 28:53 ... just navigated it.

David Senra 28:54 Let me close the loop on Micky, though. I have a question. How does he end his phone calls with you? What does he say? What's the last thing he says to you?

Vlad Tenev 29:00 I think they just kinda peter out.

David Senra 29:02 I gotta ask him why-

Vlad Tenev 29:03 [laughs]

David Senra 29:04 ... what he knows about me, but every time, I think it's the last three times we've hung up the phone, he says, "Behave."

Vlad Tenev 29:09 Oh, yeah. [laughs]

David Senra 29:10 [laughs] He doesn't say bye. He's like, "Make sure you behave." Or no, he just says, "Behave." [laughs] And then the call ends. So like, what does he think I'm gonna do?

Vlad Tenev 29:15 Are you sure that's not just him saying something in Spanish?

David Senra 29:18 No. [laughs] No, 'cause I would know it. My dad is Cuban.

Vlad Tenev 29:21 Yeah.

David Senra 29:21 So, uh, no, I'm just like, all right, I gotta ask him why, what does he think I'm gonna do over here? So-

Vlad Tenev 29:25 He never tells me to behave.

David Senra 29:26 [laughs] I know, exactly, so I was like, all right, th- this is-

Vlad Tenev 29:28 Maybe he thinks I'm more well-behaved than you.

David Senra 29:30 Uh, apparently. Uh, okay, so wait.

David Senra 29:33 I wanna, this is very curious. Like, were you, when you were younger, when you were a kid, were you always interested in financial markets? Is this, this, this interest come later in life?

Vlad Tenev 29:42 I was always interested in financial markets.

David Senra 29:45 How and why?

Vlad Tenev 29:47 Um-

David Senra 29:47 Like, he told, Micky told that crazy story on my podcast where I think he, like, borrows-

Vlad Tenev 29:51 He-

David Senra 29:51 ... money from his grandfather to buy an is- uh, and his grandfather charged him interest to buy one share of Berkshire Hathaway, and I think he's like 13 years old or something.

Vlad Tenev 29:59 Yeah.

David Senra 29:59 Like, was it like this with you?

Vlad Tenev 30:01 I immigrated from Bulgaria to the US in 1992, and, um, the year before I left, 1991, Bulgaria went, started going through significant inflation. I think the inflation rate in 1991 was, like, 170%.

David Senra 30:21 Very similar to what you-

Vlad Tenev 30:22 Yeah

David Senra 30:22 ... Micky experienced in Venezuela.

Vlad Tenev 30:24 In 1997, a couple years after we'd just escaped or immigrated-

David Senra 30:29 Yeah

Vlad Tenev 30:29 ... or what have you, Bulgaria had the unfortunate distinction of the highest inflation rate in the world.

David Senra 30:35 Really?

Vlad Tenev 30:36 1700% ... percent

David Senra 30:38 Over what time period?

Vlad Tenev 30:39 One year.

David Senra 30:40 Oh.

Vlad Tenev 30:40 Yeah. So, you know, they were adding zeros to the currency. It went from like, uh, two leva to a dollar to two thousand. And, you know, I, I saw what it did to my grandparents. So it went from kind of being a keen observer to what the communist system, how that affected my family, because my family would always tell this story. On my mom's side, collectivization came in, I wanna say the, the 1960s, really got intense. And so I grew up and, and we lived in this apartment building. Well, they, they show me pictures on that territory where there was now this like kind of brutalist, Soviet era, kind of hideous apartment building, uh, that I grew up in. There was this nice yard and house that my great-grandfather used to own, and, uh, they came in and kinda confiscated-

David Senra 31:39 And built a big ugly structure

Vlad Tenev 31:40 ... built a big ugly structure, but of course they gave him, uh, one of the apartments in there. And then on my dad's side, he always tells a story about how his great-great-grandfather lost his land. They had like 100 acres or something, and, you know, him and his, his buddies from the village took the, the long, arduous trip to the capital to argue in front of the courts that they should have their land back, but they were kinda laughed out and, and sent back to the village. So anyway, everyone was kinda lamenting the loss of their property. And then, uh, hyperinflation came, and e- every, the financial system collapsed. And I think my grandparents were very lucky because they had just retired, and my, my parents, who were just be- beginning to get established in the US, had to support them effectively. So all of our big arguments were, were about money as a family, which side was getting more, you know?

David Senra 32:41 How old were you when this is happening?

Vlad Tenev 32:43 I was five when I-

David Senra 32:44 Okay

Vlad Tenev 32:44 ... when I moved, and by the financial currency crisis, I was probably 10, 1997. I was born in '87. And then also my grandfather, uh, one of my earliest memories was opening up this closet in, uh, in their apartment, and it was just copper cookware falling out. That was their, uh, their investments.

David Senra 33:06 That was their store of wealth.

Vlad Tenev 33:07 They would ho- they would hoard copper cookware.

David Senra 33:09 Because the inflation was so bad. They couldn't-

Vlad Tenev 33:10 The inflation was gruesome, and I also remember the Cuban bananas were very delicious. When I came to America, one of the things that shocked me was you go into the grocery store, there's bananas everywhere.

David Senra 33:22 Yeah.

Vlad Tenev 33:22 Of course, I couldn't touch the organic ones. My mom would slap my hand if I got near those. But in Bulgaria, Cuban bananas were like a once-a-year thing where my grandfather would kinda have his hookup over at the, over at the shipyards, right? So it was very, very different.

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Vlad Tenev 34:42 Yeah.

David Senra 34:43 Okay. So when do you have this interest in... You, you're hearing these crazy stories from your, your, obviously your parents and your grandparents. Do your grandparents make it to America as well?

Vlad Tenev 34:51 No, no, they don't.

David Senra 34:52 Okay. So they stay there the whole time?

Vlad Tenev 34:53 They stay in Bulgaria, yeah.

David Senra 34:54 Okay.

Vlad Tenev 34:55 Yeah. The, the first time my grandparents came to America, it's a crazy story, was on September 11th, 2001. They, uh, they're scheduled to have their first trip to the US to visit us for the first time. September 11, 2001, they depart Bulgaria on way, on the way to the US. Of course, their plane gets-

David Senra 35:18 They close the airspace

Vlad Tenev 35:19 ... the plane gets immediately rerouted-

David Senra 35:21 Yeah

Vlad Tenev 35:21 ... to Frankfurt, Germany, and they spend two weeks, uh, in the basement of the Frankfurt airport.

David Senra 35:27 Oh, wow.

Vlad Tenev 35:28 Yeah. Just they had like rows of beds, uh, pending the, the next flight.

David Senra 35:34 Okay. So you're, let's say, 10 years old. When do you start paying attention to financial markets, money? When do you get an interest in this?

Vlad Tenev 35:42 When we land in America, there was just this huge sea change immediately. Like the vibe was completely different, and I noticed it as a, as a five-year-old. Because in Bulgaria, you walk around, it's, the society's collapsing, all the old ladies are like looking down, and everyone's moving kinda slowly. My first arrival in America, still remember it, I land in JFK, and my parents lived in Delaware 'cause my dad was a grad student at University of Delaware. So on the drive from JFK Airport, uh, to Delaware, we drove through Manhattan. And to a Bulgarian kid who just got on the plane ride-

David Senra 36:27 It's gotta be like another planet

Vlad Tenev 36:28 ... Manhattan just seemed like science fiction.

David Senra 36:30 Yeah.

Vlad Tenev 36:30 I was like, "Is the, is the whole country like this?"

David Senra 36:33 Yeah.

Vlad Tenev 36:34 Like the buildings are so hu- every single building would be the tallest building in Bulgaria. It's like the buildings are competing with each other, right?

David Senra 36:41 Mm-hmm.

Vlad Tenev 36:42 There was no competition in Bulgaria. People weren't competitive. People were just moving quickly. I was like, "Is everyone just... Why is everyone in a hurry?" And so- And I think the other thing that happened was I was the only child, and my parents were kind of just getting started, and they were always figuring out how to move ahead in their careers. And I kinda felt like a equal partner in that almost. So my parents would sit me down, they'd say, "Look, Vladimir, you know, our status as visa holders in this country is very, uh, fragile. We get deported at any moment. By the way, your dad isn't making any money, so you're gonna have to get a scholarship if you wanna get to college. You know, can't, can't count on us, basically." And so from, from pretty early on, I was like, "Oh, okay. You know, money's pretty tight here." You know, I was, I was just thinking about all that stuff.

David Senra 37:37 You're an only child. They never had another kid after you?

Vlad Tenev 37:40 No.

David Senra 37:40 But they're talking to you as almost like-

Vlad Tenev 37:41 Because of our financial situation.

David Senra 37:43 Yeah, which is devastating.

Vlad Tenev 37:44 Yeah.

David Senra 37:45 I'm sure it's probably their biggest regret. Are your parents still alive?

Vlad Tenev 37:47 Yeah.

David Senra 37:48 God bless that they've seen your success. That's gotta be awesome for them. Um, I bet you if you, you talk to them, their biggest regret is probably not being able to have more children, I would guess.

Vlad Tenev 37:56 100%, yeah.

David Senra 37:57 But they're talking to you like an adult, which I think is very smart, and not, like, hiding things. You know, saying, "Hey, we're in dire situation." Like, if-

Vlad Tenev 38:04 Yeah

David Senra 38:05 ... you, you obviously want a better life. You're in this country. You see the difference between Bulgaria and America. This basically lights a fuel, like, inside of you.

Vlad Tenev 38:14 Yeah. And I was a latchkey child, too. M- my parents couldn't afford a babysitter.

David Senra 38:18 Yeah, it was-

Vlad Tenev 38:19 And they both had to work

David Senra 38:19 ... we were around the same age. I, like, the idea, like, we just ran the streets whenever you wanted to.

Vlad Tenev 38:22 Ran the streets.

David Senra 38:23 Yeah, yeah.

Vlad Tenev 38:23 I would walk home from the bus stop a mile to the apartment building. At first, they were like, "Knock on the neighbor's door," who was this, uh, Indonesian family, "and you know, she'll let you in. She'll give you the key." Then they realized, "Well, our son's [laughs] going through this kinda complicated chain of events to get home. Why don't we just-

David Senra 38:40 Yeah

Vlad Tenev 38:40 ... we can trust him with the key." So, um, yeah.

David Senra 38:43 And so then you find computers, and you get interested in computers. So how old are you then?

Vlad Tenev 38:47 I was probably five or six.

David Senra 38:49 Really?

Vlad Tenev 38:50 So what happened was, in lieu of a babysitter, my dad would sometimes take me to grad school with him. He was a grad student at the University of Maryland.

David Senra 38:59 What was he studying?

Vlad Tenev 39:01 Economics.

David Senra 39:01 Okay.

Vlad Tenev 39:02 So I would hang out in the computer lab and, you know, he would be going to class or, or whatever. So my first experience with computers was just hanging out there, right?

David Senra 39:15 But you had free rein to do whatever you want while he's at school?

Vlad Tenev 39:17 Free rein.

David Senra 39:18 Okay.

Vlad Tenev 39:18 Totally. Yeah, and I- he didn't know how to use computers. I didn't know either. He's like, "Play, play around. Figure it out for yourself." And I kind of got into it pretty quickly. Of course, I started gaming, you know?

David Senra 39:32 [laughs]

Vlad Tenev 39:32 Figure out-

David Senra 39:33 Yeah

Vlad Tenev 39:33 ... figure out how to install games, 'cause there were other grad students there, and they showed me, and be like, "Hey, can I take the floppy disk?"

David Senra 39:41 [laughs]

Vlad Tenev 39:42 And then somehow, we didn't have any money, but they decided it would be a good idea to buy a computer ourselves. So we, we got a computer maybe when I was seven years old. I got really into this thing. Didn't have internet, of course, so I was like, uh, you know, learning to use the terminal-

David Senra 40:01 Wow

Vlad Tenev 40:01 ... doing all of that. I was a pretty good student. Another thing that my parents, I think, uh, at, at the time, I was kind of annoyed at them for this because all of my friends were always in activities, right? They were, like, doing baseball or T-ball or basketball or soccer. My parents were basically like, "First off, we can't afford any of this stuff. Second of all, I don't know who's gonna drive you, you know? We have one car, and we're both working, so you have to, like, figure that out for yourself, you know? You wanna call your friends, get a carpool." I was, like, six years old, so it just never happened, and so I was just kind of, uh, at home a lot on the computer. And, uh, when, when we ended up getting internet eventually, uh, I opened up Yahoo Finance and, like, uh, created a portfolio.

David Senra 40:53 Why?

Vlad Tenev 40:54 I don't even know how I got into it, but, uh, but, but I did, and I just, yeah, got into it. Uh-

David Senra 41:04 And so was stocks your first fascination?

Vlad Tenev 41:07 Yeah. Stocks, computers, and computer games.

David Senra 41:10 And at this point, were you already, you already had an interest in math or no?

Vlad Tenev 41:15 Yeah. I think pretty early on I realized that I was good at math. You know, and then, and this was kinda interesting for me too because I was dropped into school in America, kindergarten-

David Senra 41:27 Mm-hmm

Vlad Tenev 41:27 ... not knowing a word of English. So my first experience was kind of disheartening in a way. It's like, you're going into this place, don't even speak the language. I can't even tell the teacher that I want that toy, right? So a couple months ago, I was reading, uh, my old report cards. I found my report cards from when I was in kindergarten, and, you know, the, the teachers were, were writing about me. I read this one that was like, "You know, Vladimir, he's adjusting well to kindergarten. He's not talking to the other children yet." It kinda made me sad, so I'm like, man, I, I wasn't talking to the... This was six months in, probably 'cause I didn't know English, and I was just shy and quiet. By, I guess, the end of first grade, uh, I was in advanced English and advanced math. So this was back when they would kind of still sort kids.

David Senra 42:23 Yeah.

Vlad Tenev 42:23 You would have talented and gifted.

David Senra 42:24 They put you in gifted.

Vlad Tenev 42:25 Yeah.

David Senra 42:25 Yeah, yeah.

Vlad Tenev 42:26 So by the end of, yeah, I guess in, in one year, I had gone from not knowing anything, not talking to anyone, to kinda being in the, the most advanced, uh, math and English, and, you know, the, the teachers were like, "Okay, well, maybe, maybe he should skip a grade." So I got to feel that trajectory, and then I think at that point I realized, okay, I'm probably... I guess I'm good at math and school-

David Senra 42:52 But-

Vlad Tenev 42:52 ... and learning

David Senra 42:53 ... but if you go back to, like, you're a kid sitting alone in a apartment- On your computer building a portfolio on Yahoo Finance. Was it just because you're like, "Hey, I'm sick of fucking being poor? I don't wanna reenact what I saw in Bulgaria, and I'm in..." Like, do you think you even understood why you were interested in finance? Did you see it as a path to, like, become wealthy one day and essentially have more control? 'Cause what you're describing right now, it's like you, essentially your family, I mean, a lot of families that, you know, when you go back to Micky Malka's family having to come from Venezuela, I think he was, like, in his 30s. My father, obviously, was born in Cuba, came here. Like, you have a lack of autonomy, a lack of control.

Vlad Tenev 43:27 Yeah.

David Senra 43:27 And some people are just like, they just, like, break under that pressure, and other people, which is the, the read I'm getting on you, is just like, "I need to find a way out and a path out where I actually have control and actually can build wealth and, and, and have control of a, a future and build a future-

Vlad Tenev 43:41 Yeah

David Senra 43:41 ... vastly different than the ones that your grandparents experienced, for example."

Vlad Tenev 43:45 Yeah, I think at that point I was terrified of the downside case, which was, shoot, what if, what if, uh, you know, we're homeless, or I'm homeless, or I can't just figure out all of this stuff? Like, I thought that the prospect of getting a job that paid me a lot of money, 'cause I didn't know anything about entrepreneurship at that point. It was just not even in my vocabulary, um-

David Senra 44:11 'Cause you don't have any entrepreneurs in your family, right?

Vlad Tenev 44:14 Yeah. Well, actually, my dad had an entrepreneurial venture in Bulgaria, which I was too small to kind of-

David Senra 44:22 Mm-hmm

Vlad Tenev 44:22 ... realize it at that time, but he, he started a tourism business.

David Senra 44:27 Is there a lot of tourism [laughs] when the society's collapsing?

Vlad Tenev 44:30 Well, as soon as, uh, as soon as the Berlin Wall fell, there was this influx of tourists that came. They couldn't come from Western Europe before. And my dad spoke French, so they, they started this business called Contour, kind of a cool name, where they would basically take the French tourists around, uh, the Bulgarian sites, which-

David Senra 44:52 Mm

Vlad Tenev 44:53 ... there were lots of amazing historical sites. Tourism is still the largest industry in Bulgaria. I think, I think it was probably still doing well during the, the collapse, 'cause it relied on foreign money in. Yeah, small scale and not a technology business. They would, like, buy buses and take people around. But-

David Senra 45:11 But did you think you were gonna get... When you said, "Okay, I didn't even think," didn't even know, really know entrepreneurship was a path that was-

Vlad Tenev 45:17 Yeah

David Senra 45:17 ... available to me at that time," did you think you were gonna get a, a job in finance? Like, what did you think... If you could go back and talk to that version of Vlad, what did he think he was gonna do?

Vlad Tenev 45:26 I think my mom's ideal picture of what I would end up doing would be get- getting a job as, like, a analyst at JPMorgan or something, or God forbid, B- Goldman Sachs. That would've just blown my mom's mind.

David Senra 45:41 [laughs]

Vlad Tenev 45:42 Or, you know, consulting, McKinsey. Yeah, because both of my parents started working at the World Bank. My dad actually began working at the World Bank while he was a full-time grad student at University of Maryland, so he had two full-time jobs. He was a full-time grad student, full-time at the World Bank, and he paid for... We got enough money from my mom to get an MBA at Georgetown to also join the World Bank, and they, they were there for their entire professional careers, so 25 years each. Yeah, it's kind of interesting. My parents took this, like, one massive risk of just uprooting the entire family, moving to this new country. I think when they got here, they were just very focused on stability. It was almost like, "We're done."

David Senra 46:29 Yeah.

Vlad Tenev 46:29 Like, that was just such a crazy experience that let's just make sure now that we're here we can stay here and, you know, we can provide a good foundation for, for our son. Yeah, I, I think for me, the interest in investing at first was curiosity. Like, I'd, I'd heard about investing. I was on all the message boards. I saw people talking about it. We were in the midst of the dotcom boom.

David Senra 46:53 Mm-hmm.

Vlad Tenev 46:53 So it was just there. Of course, I saw, you know, reports that some people were making a lot of money. That, that was attractive, but-

David Senra 47:02 Yeah, but at that time you were probably, what, 13 in 2000, something like that? You were born in '87.

Vlad Tenev 47:05 Yeah. Exactly.

David Senra 47:06 So, yeah.

Vlad Tenev 47:06 I was learning, right? Yeah, I had a, a simulated portfolio that did quite well during that time period, pro- probably 'cause everything was doing

Vlad Tenev 47:15 well. But then, um, my dad gave me a challenge. He was like, uh... I was, I was, uh, studying for this test because, um, I was in this program called CTY. I don't know if you're familiar with it. Basically, you take the SAT. Depending on how you do, they put you into this program where you get to do a year's worth of math in two weeks. I was doing this thing, and I, I think I was in seventh grade at the time, and I had skipped a grade, so I was 12 years old. And he said, "All right. If you get above 1,300 on the SAT, I will give you your score in dollars to invest with." And this was very motivating to me. I think he, he did a very smart thing, because I just got after it, and I end up, I ended up getting a 1,370 on the SAT, so he gave me some, some money to invest with. So then that became my real portfolio.

David Senra 48:12 So now you don't have a simulated portfolio, you have a real one. [laughs]

Vlad Tenev 48:14 Now I don't have a simulated portfolio. Now I de- now I deploy real capital.

David Senra 48:17 [laughs]

Vlad Tenev 48:19 Uh, and of course a couple of months later, the market crashed, but not before I, I, uh, I made a smart move. So I bought this company, 3Com, which made the PalmPilot, which was, like, the first, uh, PDA, personal digital assistant. And so I, I put a lot of money in 3Com, and it spun off Palm. So I went from having one stock to having two stocks. And then I, I remember, you know, getting the big packet of shareholder information in the mail and leafing through it, and it gave me this feeling like I actually owned something, right? And there was just, uh, even though it wasn't a ton of money, there was, like- Some pride in that. Like, not only did I buy this thing, but I'm, I'm an owner of this company. They, they want me to vote. They care. I got to learn what a corporate reorganization and spinoff is, tracking this portfolio. I learned a lot and-

David Senra 49:16 Excellent real-life education for a kid.

Vlad Tenev 49:18 Yeah.

David Senra 49:18 All from this idea that your dad had.

Vlad Tenev 49:20 I got super passionate about it. Yeah, and, you know, I started trading quite a bit. I had, uh, Nvidia pretty early. One of my regrets with-

David Senra 49:29 And you held all the way through, right?

Vlad Tenev 49:30 No.

David Senra 49:30 [laughs]

Vlad Tenev 49:31 Sold, sold at twenty-five. Um-

David Senra 49:33 [laughs]

Vlad Tenev 49:34 'Cause they made great graphics cards.

David Senra 49:36 Yeah.

Vlad Tenev 49:36 I loved, uh-

David Senra 49:37 And you're a gamer

Vlad Tenev 49:37 ... I loved gaming.

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Vlad Tenev 50:53 So yeah.

David Senra 50:53 So let me ask you a question. I've heard you say before that you find entrepreneurship intoxicating.

Vlad Tenev 50:58 Yeah.

David Senra 50:58 Now, I can't get a read on you whether you're more into finance because you've built a business that facilitates people to, to trade, or you're more into your entrepreneurship. Like, which one is more dominant in your brain, entrepreneurship or investing?

Vlad Tenev 51:14 I think that's an interesting question.

David Senra 51:16 Those are the only kind I have.

Vlad Tenev 51:18 Yeah, it's always hard to, to figure out the contrapositive of what would have happened if Baiju, who's my Robinhood co-founder, hadn't called me and convinced me to start our first company together. There were a lot of competing forces. So before I became an entrepreneur, I was a math grad student. And I think my, uh, my relationship with math was a long and somewhat tortured one. So from when I was in kindergarten, it became really clear that I was good at math. I was, like, the top math student in my class, and I started getting all this positive reinforcement. "Well, do more math. Do it in the summer. Do a year's worth of math in two weeks." And it kind of became this self-referential loop where I would just try to climb the ladder, right? All the way through to becoming a math PhD student at UCLA, um, studying under this, this guy Terence Tao, which many consider to be the greatest living mathematician. So kind of pretty high in the hierarchy. I mean, I wasn't a postdoc or a professor, but I was, I was definitely probably in the top zero point zero zero one percent of how much math a, a person realistically would try to learn. So I was in math grad school. Uh, my first month in grad school, you have the start of the global financial crisis. And even though I had been at Stanford, I wasn't really in the entrepreneurial circles. And, and also back then, Stanford was not quite as entrepreneurially focused as it is today. Like, the number one major wasn't computer science. A lot of people wanted to go into finance, but, like, you know, Goldman, JPMorgan. I wasn't really in those circles. I was more in the math and physics kind of research circles. And my math and physics friends weren't very employable. This was, like, pre-data science, pre-AI. Everyone was hiring computer science people. So I was also in a weird position of not having a ton of attractive work options. Like, I didn't get a ton of job interviews. I kind of went to UCLA because it was the best option, the def-default option. Continue doing math. I have, uh... I was getting paid eighteen thousand dollars to be a grad student. Get to hang out in LA, which we both know is very nice, although not a very nice place if you're super poor, uh, to be clear. I was kind of drifting at that time. And, and then I get into grad school, and I see all of these immigrants, and they were people who I imagine, kind of like my dad, had fled their countries, and this was kind of their moment. So they were doing math all the time. You know, they, they wouldn't go out. They would just be sleeping, eating, going to class, doing math. And then I remember thinking to myself, "Man, if I'm not like that, what am I even doing? Like, there's no way I'm gonna, you know, out-compete these people, uh, for the ever-winnowing number of postdoc positions." And I kind of asked a lot of questions of myself like, "Do I even want that? Is that the life that, that, that I want?" Well, you know, Terence Tao, the greatest mathematician in the world, maybe there's, like, twenty people in the world that can understand a Terence Tao paper. So it wasn't like what you learn in, in class. You know, Gauss, Riemann, all these great mathematicians that every child learns their work. You know, it had gotten so specialized that, you know, very, very few people read this stuff now. So at that point, I started asking myself, "Is this, like, ladder of math leading me to a good place?" And I realized, no, the romantic idea of like learning for learning's sake and progressing and making discoveries kind of collided with the practical reality of this being just like one of the worst careers and jobs. And I'm not even talking about dealing with like the administration of the university and all that bureaucracy. So, uh, I wasn't very happy with what I was doing. And, uh, at that time, Lehman Brothers went under, and you had the start of the global financial crisis. And my co-founder, Baiju, who was also a math and physics guy, so we bonded over, over that, he got a job at a hedge fund up in Marin County kind of on a whim, and he calls me up and, uh, convinces me to start a company with him.

David Senra 55:58 And what is that company gonna do?

Vlad Tenev 56:00 Basically, he was hired in this, uh, hedge fund that was doing proprietary trading. So it wasn't really a hedge fund, it was a proprietary trading firm. They were trading the owner's capital and deploying it with computerized algorithmic trading strategies. Essentially, they had a couple of trades that were making money. One of them was, uh, what's called inter-listed arb. And this is the simplest strategy ever. Basically, the way it works is you have a stock that's trading in Canada-

David Senra 56:29 Mm-hmm

Vlad Tenev 56:29 ... Intel, say, and then it's also trading in New York.

David Senra 56:34 Yeah.

Vlad Tenev 56:34 And you have a fast line in between them, so you just buy it where it's cheaper and sell it where it's more expensive, and you try to, you know, minimize the latency between the two so that you have less slippage. Well, this company had a pretty fast line between Toronto and, and New York, so they were able to, um, make a lot of money using, using this trade. And then there were a couple of other ones, like there was this market on close trade, which literally just traded, uh, it w- it would buy the imbalance heading into the close, so it would trade five minutes at the end of the day, and it's, again, just a total speed game. So he calls me up and he says, "Look, I was hired here to be the first quant. I get to see all the traders, I get to see all the engineers. They're running on Windows machines. They've got Java. A trade hops through like 30 machines before it gets sent to the exchange." So the original idea that we got started with is can we just like compress that? Can we make it one machine? Can we run Linux? Can we have it on C rather than Java? And maybe we take that 30 millisecond latency down to 10 milliseconds, and if it's a speed game, you know, that, that should win.

David Senra 57:46 But wait a minute, before we get there, like idea aside, think about like the jump from, I would say, conservative family upbringing in the sense that like your parents took a huge risk by coming to America, but once they got here they're like, "We're essentially-"

Vlad Tenev 57:59 Yeah

David Senra 57:59 "... gonna stick to one career." Almost, I don't know if they count students like, you know, "Just, just get a normal job." You just said your mom's goal would be like, "Just, just go work at Goldman Sachs or JP Morgan. It's awesome." Like-

Vlad Tenev 58:08 Yeah

David Senra 58:09 ... you, just middle class life, maybe upper middle class. Maybe you save a lot of money, you're a single digit millionaire in a few years, whatever the case is. But you're going from, that's a hell of a jump from math grad student to entrepreneur when you've never run a company before.

Vlad Tenev 58:23 Totally.

David Senra 58:23 And you did it. So explain like how you made that decision.

Vlad Tenev 58:26 And it was a hard decision, to be clear. Uh, I wrestled with it a little bit. I was like, "Do I really wanna do this?"

David Senra 58:32 For how long?

Vlad Tenev 58:33 Well, I was in a fortunate position. I passed my quals my first year. So then, you know, the summer after your freshman year, uh, or your first year, typically you're kind of studying for your quals. So the math department kind of paid you to, uh, study for your quals, get ready for, for the exams and whatnot. But I passed them the end of my first year, so essentially I was being paid to do nothing. And so that was an opportunity to get together and hack on stuff, right? And we rented a little place in the South Mission, me, uh, Baiju, and this other kid, Andrew Yarmola, who was also from the Stanford math department with us. And, uh, we got this place in the South Mission. Not a great neighborhood, but kind of fun. And we were just like, uh, building the trading system. That was kind of the goal for the summer. And then m- my plan was always to kind of take stock of where things were at the end of the summer, see how much progress we made and, and essentially we'd made very little progress. But we were having a lot of fun, and I kind of wanted to see it through. So the idea was we were, we were gonna build the stuff, then we were gonna go to New York and kind of figure out how to deploy it and trade it.

David Senra 59:47 Yeah. If you were, you just said, "I wasn't happy with what I was doing," and now you're having fun not making much money, or-

Vlad Tenev 59:52 Zero money

David Senra 59:53 ... this is your money. Yeah.

Vlad Tenev 59:53 Yeah.

David Senra 59:54 It's just like-

Vlad Tenev 59:54 Grad student's stipend

David Senra 59:55 ... but that's good enough. Like-

Vlad Tenev 59:57 So it didn't seem like-

David Senra 59:57 ... the fact that I was having more fun-

Vlad Tenev 59:58 It didn't-

David Senra 59:59 ... is a good enough reason

Vlad Tenev 59:59 ... it didn't seem like I was taking a huge risk-

David Senra 1:00:02 Yeah

Vlad Tenev 1:00:02 ... to be honest with you, because the, um, alternative, it, it's not like I was like killing it, making a killing working at a cushy job at Google that was paying me millions of dollars a year. I was-

David Senra 1:00:15 You were making 18,000 a year.

Vlad Tenev 1:00:16 I was making eight- 18,000 a year.

David Senra 1:00:18 Turns out if this doesn't work, I can probably find another job that'll make $18,000

David Senra 1:00:22 a year [laughs] .

Vlad Tenev 1:00:22 Well, and I was concerned about that actually. So I went to the, the vice chair of the department to ask for a leave of absence.

David Senra 1:00:30 Mm-hmm.

Vlad Tenev 1:00:30 And I was like, "All right. I do want a safety net. I'm not gonna be stupid here. I'm gonna go to the vice chair and request a leave of absence for a year." And I was like biting my fingernails off for this conversation, and I still remember it vividly because I planned out my decision tree and I was like, "If he tells me he won't approve it, I'll probably stay back and-"

David Senra 1:00:59 Wow

Vlad Tenev 1:01:00 ... "and keep doing grad school." And it was this Russian guy, Dima Shlotenko. And actually a couple years ago I was invited to give the commencement at UCLA math, and Dima Shlotenko was the department chair at that time. So we had this dinner- And, and I was like-

David Senra 1:01:16 Did you tell him-

Vlad Tenev 1:01:16 "Do you remember that conversation?"

David Senra 1:01:17 "That changed the trajectory of my life?" [laughs]

Vlad Tenev 1:01:19 "That changed the trajectory of my life?" And he's like, he's a, he's like, "That conversation changed the... It was very memorable. I'm very proud of you." And so he, I, I go into the, his office, and he's like, "So you want to be businessman, huh?"

David Senra 1:01:33 [laughs]

Vlad Tenev 1:01:35 "When I was your age, I also wanted business. I wish you good luck. You do it, and we will have spot for you if it doesn't work out."

David Senra 1:01:44 Oh, that's awesome.

Vlad Tenev 1:01:45 So I was like, man, this guy just, yeah, just, uh, you know, gave me a, yeah, safety net.

David Senra 1:01:52 He-

Vlad Tenev 1:01:52 So I felt good. And I-

David Senra 1:01:53 Have you read any of the, uh, biographies on Elon?

Vlad Tenev 1:01:56 Uh, some of them, yeah.

David Senra 1:01:57 Yeah. He, he has a story that he tells in one of them, I think in all of the ones I've read about him, where I think he was in grad school. I forgot what... He was in some kind of school, and he said, "I'm gonna take a leave of absence," and the guy said to him, "You're never gonna be back." And he goes, "Turns out he was right." [laughs]

Vlad Tenev 1:02:09 Yeah.

David Senra 1:02:10 Then I think he left to go do Zip2, if I remember correctly.

Vlad Tenev 1:02:14 I took a leave of absence. Um, we put all of our servers and all of our stuff in the back of my, uh, 1998 Infiniti Q45 boat of a car, drive across the country from LA to New York City. For the first year, we were kinda derping around, honestly. Try some things. They didn't really work out. And then the year came. And then I remember having this conversation with my mom. I was living in Brooklyn at the time in this, like, terrible apartment that we were subletting. The bathroom was in the kitchen sorta thing.

David Senra 1:02:50 Very sanitary.

Vlad Tenev 1:02:51 Yeah, yeah. And my mom would visit me, and, and, and she cried. She's like, "Man, my son-"

David Senra 1:02:57 [laughs] The math genius

Vlad Tenev 1:02:59 ... "my son went to Stanford."

David Senra 1:03:00 [laughs]

Vlad Tenev 1:03:02 First of all, he went to Stanford, and then with great shame, I had to tell people he then went to UCLA.

David Senra 1:03:08 [laughs]

Vlad Tenev 1:03:09 'Cause, you know, Stanford, everyone knows.

David Senra 1:03:12 Yeah.

Vlad Tenev 1:03:13 And you have to explain the nuance of actually UCLA having a very, very strong pure maths department to people, but, you know, at a surface level, it kind of felt like a downgrade, at least to my parents. And now he's borderline homeless-

David Senra 1:03:25 [laughs]

Vlad Tenev 1:03:27 ... living in Bushwick, uh, in this apartment that the bathroom's in the kitchen.

David Senra 1:03:33 [laughs]

Vlad Tenev 1:03:34 They're like, "Are you gonna go back to UCLA?" They knew about, you know, my one year. I am like, uh, "No. I'm having way too much fun. This is awesome."

David Senra 1:03:45 Is, is this-

Vlad Tenev 1:03:46 "Who cares that we're not successful?"

David Senra 1:03:48 Say more about that. "Who cares that we're not successful?" Is this, is this when you, you said-

Vlad Tenev 1:03:52 I guess I-

David Senra 1:03:52 ... you started, you found entrepreneurship intoxicating even before you had success?

Vlad Tenev 1:03:56 Yeah, so I think the first, the first experience that I had with entrepreneurship was almost the best parts of doing math but without any of the bullshit. So the best parts of doing math are that it's just you, your mind, maybe a chalkboard. Now it's a computer, but back then, it was just you, your mind, a couch, and you could just make progress, and you actually didn't have to depend on any other people. And of course, when you turn math into a career, it stops being that because you have to go to classes, you have to teach, TA, deal with the department administration, all of that shit. But yeah, this was kinda similar in a way. It's just you, computer. You're writing code. Maybe you have a business. That business generates revenue. People want the code you write, but it, it's, like, all under your control. And no boss, you know? No one, no one, uh, no one that you have to deal with. So that was the first time I'd kind of experienced that, and I found that part intoxicating. And now eventually, I think it became important for us to earn a living. So entrepreneurship for entrepreneurship's sake, um, lasted. That carried me on so far, and then it became about, you know, can we actually create a business that generates revenue that we could support ourselves? And we weren't quite there at the time I had to make the decision, but I did feel optimistic that we were gonna get there. And so six months later, we had a business-generating revenue. Uh, and it wasn't the original business we thought of. You know, we weren't trading. But we were selling low-latency trading software to other companies. So we had kind of improvised our way to a business. Yeah, it got to maybe 2 million in revenue. We, we hired a small team. We were profitable, growing. We had a path to, uh, 10 million or so in revenue. And then I kind of went into

Vlad Tenev 1:05:56 my second evolution as an entrepreneur. The first one was from just enjoying entrepreneurship for entrepreneurship's sake to having a sustainable business that could feed, feed me and, you know, my co-founder and our, our employees. Then the second gate was, well, I could grow this business from 1 million to 10 million, maybe, maybe get to 100 million, but if I had to look back on my life in 50 years, would I be proud of what I was doing? Would I feel like I contributed positively to the world and, and to society and made an impact? And we were selling software to hedge funds who were already rich and making them, you know, trade a little bit faster and more efficiently. My co-founder and I both kinda realized that, you know, if, if anything, this was a means to an end. Like, we, we didn't see ourselves just really doing this business for, for the long term.

David Senra 1:06:57 I love the idea that you imagine yourself as an older person looking back on your life.

Vlad Tenev 1:07:01 Yeah.

David Senra 1:07:02 Uh, I think you, I've heard you say this is, like, a legacy test. It's like, "Do I really wanna spend the next 30 to 40 years of my life doing this?" Like, you'd get to the end and be like, "I kinda wasted my life."

Vlad Tenev 1:07:10 Yeah.

David Senra 1:07:10 It reminds me of, um, that famous, uh, conversation that Steve Jobs had when he was recruiting John Sculley from Pepsi. He's like, "You wanna continue to sell sugar water, or you wanna come with me and change the world?" Like-

Vlad Tenev 1:07:20 Yeah

David Senra 1:07:20 ... it's very fascinating, but I, I think this idea that I love, and maybe I'm wrong, but, like- Looking at the career choice that you're making, the business that you can build because you're an entrepreneur, you can build whatever business you want. Like looking at is like, will I spend the next thirty to forty years of my life doing this? And if the answer is no, you should, should stop.

Vlad Tenev 1:07:38 I think another reason why I liked mathematics as a thing to do was this idea of like making a fundamental discovery. And maybe if you make a fundamental discovery that's really big, eventually every child will, will learn about it, right? It'll be in the... not, not just in the history books, but you know, ev-every child will like learn about the techniques in school. That got me really excited because you, you have both the act of creation, of bringing something new into the world, which, which I find just, uh, inherently interesting, but also that there's an impact and, you know, it could affect millions of people. And I think that's what got me really excited about the idea that beha-became Robinhood. It's both like a act of creation, something new, fundamentally different, and something that could have like mass scale that could change the lives of hundreds of millions of people.

David Senra 1:08:43 So it goes back to where this, this, this like tree of our discussion started, where you think much more of yourself as like an entrepreneur. You get a lot more satisfac-satisfaction out of the success you have as an entrepreneur compared to the success you had as an investor.

Vlad Tenev 1:08:56 As a, um, a investor, or you mean a founder of a financial company?

David Senra 1:09:02 No, yeah, I mean, you invest as well.

Vlad Tenev 1:09:03 Yeah.

David Senra 1:09:03 But like, yeah, clearly from the discussion we've had, and especially where you just wrapped it up beautifully, it's like you think of yourself much more as an entrepreneur. You ever read Michael Bloomberg's autobiography?

Vlad Tenev 1:09:13 I haven't, no.

David Senra 1:09:13 Okay. So he was in finance, and when he got fired, I think from Salomon Brothers, I think it was in like 1980, something like that, he had like a fifteen million dollar, uh, golden parachute, which is a ton of money at the time. And everybody, since he was in finance, they thought, "Okay, you're just gonna take that money and live as an investor." And he's just like, "No, I wanna build something. I wanna build a business that actually makes other people's lives better." Talks about it over and over again in his autobiography. It's exactly the story you just told us.

Vlad Tenev 1:09:36 Yeah, I mean, I think the financial aspect is really integrated into my upbringing and identity as well, which is a reason why I, I care about it and I care about our, our customers. Things are changing very rapidly in this world. I mean, you have AI, and it's really changing things for the positive, also making people very nervous. But one thing that's not changing, I'm pretty confident, is the importance of, of having money, investing, generating passive income. I think that's never been more important than it is right now.

David Senra 1:10:12 Vlad, you took this discussion in areas I had no, uh, possible indication that we were gonna go. I didn't even get to half the stuff I want to talk to you about, so I'm gonna come back in a few months, and then we're actually gonna do the How Vlad Works episode, but this was awesome, dude. Thanks for the time.

Vlad Tenev 1:10:23 Let's do it.

David Senra 1:10:25 I hope you enjoyed this episode. Please remember to subscribe wherever you're listening and leave a review, and make sure you listen to my other podcast, Founders. For almost a decade, I've obsessively read over four hundred biographies of history's greatest entrepreneurs, searching for ideas that you can use in your work. Most of the guests you hear on this show first found me through Founders. [upbeat music]