Robinhood’s Vlad Tenev on AI, Prediction Markets, and the Future of Trading | Ep. 33

1. 0:00 – 0:27

   Intro

   1. VTVlad Tenev0:00

      We call it, uh, vibe trading. So you know how there's vibe coding? I think there will be vibe trading, which sounds a little flippant-

   2. JAJack Altman0:06

      Well, but, you know-

   3. VTVlad Tenev0:07

      I admit, but -

   4. JAJack Altman0:07

      The thing you said, that we're not a trading platform, it's like, you know, it's like a financial home. It's like vibe finances. It's like, you know, because you have all these other products, I assume it's gonna, you know, like, vibe set up my, you know, kids' Five Twenty Nine account, which is, you know, not-

   5. VTVlad Tenev0:19

      Totally. Here's the areas that I'm most interested in. [upbeat music]

   6. JAJack Altman0:23

      All right, Vlad, I'm super excited to be here. Thanks for doing this with me today.

   7. VTVlad Tenev0:26

      Well, glad

2. 0:27 – 4:15

   History of online brokers

   1. VTVlad Tenev0:27

      to have you.

   2. JAJack Altman0:27

      Okay, so I wanted to start by getting sort of your historical lay of the land of online brokerage, and maybe we don't have to go all the way back, but if you could sort of just go back to, you know, maybe, like, the early days of online stock trading into sort of like, you know, Vanguard and Schwab and Fidelity, and now you've got, like, online platforms for trading that are modern, like Robinhood. Just, like, what's sort of the history and sort of the narrative, uh, as you see it?

   3. VTVlad Tenev0:54

      There's a great book about this, A Piece of the Action by Nocera. It covers basically the modern-- the rise of the modern financial industry, uh, which is super interesting. I mean, it's basically a story of a big wave of democratization associated with lower costs. So, um, Charles Schwab, uh, began in the '70s. I think there's a lot of similarities if you look back between what Charles Schwab was to begin with and kind of what Robinhood is sometimes accused of being, right? Before Schwab, Merrill Lynch was, was the big broker, and really, they had brokers that would sell you trades and call you and convince you to buy stuff, and they would charge hundreds of dollars per trade. And then after that, there was, uh... The, the event that led to the creation of Charles Schwab was called Mayday. I forget the exact date, but it was in 1972, and up until that point, uh, commissions were regulated.

   4. JAJack Altman1:59

      Mm.

   5. VTVlad Tenev2:00

      So you could not charge under, uh, a certain amount per trade for commission. And Mayday led to deregula-re-- deregulation of trading commissions, which allowed Schwab to enter the business. And Schwab said, "You know what? We're gonna cut costs. We're gonna make it as efficient as possible. So we're not gonna have branch offices. You're gonna call us on the phone. We're not gonna try to sell you anything. We'll just process your ticket over the phone, make your trade, and we'll do it for..." I don't know what it was. Call it seventy-five dollars per trade. And so they, they were in the news in the early days for creating this, like, extremely sophisticated phone dialing system that could handle lots of simultaneous... Like, they innovated-

   6. JAJack Altman2:46

      Yeah

   7. VTVlad Tenev2:46

      ... using the tools they had at the time.

   8. JAJack Altman2:48

      Mm-hmm.

   9. VTVlad Tenev2:49

      And then, in the 1980s, the Apple II came out, right? And actually, in Palo Alto, not very far from here, two guys, Bill Porter and, um, I forget his partner's name, um, Randy or something, they met at a party, and Bill Porter had just bought an Apple II computer, and he had this idea of: What could I-- What if I use this, this machine to trade stocks from my home? Um, and, you know, the two of them got very excited about this idea, and they decided to make a business out of it, and E-Trade was born.

   10. JAJack Altman3:28

       Mm.

   11. VTVlad Tenev3:28

       And of course, that was sort of the, the origins of it. It went public ten years later during the, the dot-com boom, and it became one of the first profitable dot-coms, right? For, for a long time, they were accused... The, the whole internet thing was dismissed as a fad. Nobody thought that there would be a way for many of these companies to make money. But online brokerage was, I think, one of the first, if not the first, proven business model that could be profitable in the internet era.

   12. JAJack Altman4:00

       Mm.

   13. VTVlad Tenev4:01

       So that was E-Trade, and, and you probably remember, maybe, maybe when you were a kid, they were heavy on marketing. They had that baby.

   14. JAJack Altman4:08

       Yeah.

   15. VTVlad Tenev4:08

       It was kind of a cultural moment. The dot-com boom was when I started trading myself. I opened my first brokerage account.

3. 4:15 – 9:15

   The rise of Robinhood

   1. VTVlad Tenev4:15

      And then Robinhood started, let's say, what, what would have that been? 2015 was when we launched. Twenty thir- twenty twelve, twenty thirteen was when I got the idea, and our big innovation... I think, I think there were three innovations that led to Robinhood. First was obviously mobile. Everyone else had ignored mobile, and we made the bet that, you know, people were saying, "Mobile's a toy. Nobody would do serious financial transactions on their smartphone-"

   2. JAJack Altman4:45

      Mm-hmm

   3. VTVlad Tenev4:45

      ... "but that that would become primary." A- and so we, like, built for that when everyone else was ignoring it. The second bet we made was that high-frequency trading had completely changed institutional finance on an infrastructure level. So entire rooms that would have been full of trading desks, people picking up phones and, and making trades, were being disrupted by five to ten kids out of MIT creating HFT firms. A- and so we took the technology from a sophisticated high-frequency trading firm, and that became the backbone for our retail product, which allowed us to lower costs and offer commission-free trading. And at that time, commissions were still between seven to ten dollars, so that was a huge disruption. And the, the third thing, the company was sort of formed in the wake of the global financial crisis and the whole Occupy Wall Street movement. And if you think back on the global financial crisis, I had graduated Stanford in 2008 and gone to grad school. My first month in grad school, Lehman Brothers went under. It was kind of an interesting thing because a lot of my friends, the ones that were most secure in their financial careers, just all of a sudden, as quickly as they came into their jobs-- and, you know, they, they had their internship at Lehman Brothers. They got their return offer. They were very proud. They had, you know, three years of job security in front of them-

   4. JAJack Altman6:15

      Yeah

   5. VTVlad Tenev6:15

      ... and then they were gonna go get an MBA. There was this well-defined path-

   6. JAJack Altman6:18

      And then it evaporated.

   7. VTVlad Tenev6:19

      Evaporated, and you had the images of them with the-... packing up their cubicles-

   8. JAJack Altman6:24

      Yeah

   9. VTVlad Tenev6:24

      -with, with the boxes. There was just a lot of disillusionment, particularly among young people, among millennials, with the financial system, because some of this happened to them. They saw it happen to their parents. It felt like they were the victims, young people in particular, of forces beyond their understanding, that were just, like, packaging products and taking risk, making things complicated, and that there was no accountability. You know, no one went to jail as a result of crimes committed in the global financial crisis. Um, nobody big, anyway.

   10. JAJack Altman6:59

       Yeah.

   11. VTVlad Tenev6:59

       And I think this really, this led to the Occupy Wall Street movement, which was really a young person, a millennial thing. And, and I think it opened the door to a new brand in the space. Like, no love was lost between young people and the big financial companies. And, uh, Robinhood, along with Mobile, along with the great technology that enabled commission-free trading, I think hit a particular resonance-

   12. JAJack Altman7:26

       Mm.

   13. VTVlad Tenev7:27

       -because it was a very optimistic message in a way. It was kind of the anti-Occupy. Whereas Occupy said, "The system doesn't work, we just have to reset and, and start it all over," which I think was not really actionable, and that's why the whole movement ended up fizzling out without much impact. And we were saying, "Why don't we plug you into the system? If we get more and more people to become investors, to own the best companies, and, and we wanna make it easy and engaging and actually, like, enjoyable to do so, then we could solve a lot of these same problems." And, and I think at the time, there was a need for a new brand, and, and the story of Robinhood resonated just as much as the product and the technology.

   14. JAJack Altman8:13

       When I think about, like, Schwab, Fidelity, Vanguard, I for some reason, I feel like those brands were always, um, not deeply connecting with, like, the younger generation, or, like, they weren't, like, maybe going out of their way to be as loud of a brand as they could have been.

   15. VTVlad Tenev8:28

       Yeah.

   16. JAJack Altman8:28

       You know, when I think about, like, the big banks, there was definitely a lot of, like, animosity between just, like, the population and the big banks. I feel like that, for whatever reason, I feel like there was neither animosity nor love towards those brokerages. Did you experience it that way, or is that maybe just I wasn't paying attention?

   17. VTVlad Tenev8:44

       I think a lot of people lump the brokerages and the big banks into one thing.

   18. JAJack Altman8:49

       You think they get lumped into one?

   19. VTVlad Tenev8:51

       I think so. Yeah, I mean... And not even those guys, but you look at the market makers like Citadel.

   20. JAJack Altman8:57

       Yeah, for sure.

   21. VTVlad Tenev8:57

       You saw this during the GameStop era.

   22. JAJack Altman8:59

       Mm-hmm.

   23. VTVlad Tenev9:00

       I mean, there's just an association that they're sort of like these puppet masters that are-

   24. JAJack Altman9:06

       Yeah

   25. VTVlad Tenev9:06

       ... moving things around in the dark, and nobody understands. And, and I think trust in general tends to be quite low.

   26. JAJack Altman9:12

       Yeah.

   27. VTVlad Tenev9:13

       Um, now, now that was at the time.

4. 9:15 – 14:18

   Changing sentiment among generations

   1. VTVlad Tenev9:15

      Now, I think Gen Z and Gen Alpha, there's almost this opposite thing happening where the old, big, storied incumbents are kind of cool again.

   2. JAJack Altman9:27

      Interesting.

   3. VTVlad Tenev9:27

      And so we're trying to figure out how to navigate this scenario, right?

   4. JAJack Altman9:30

      What is that? I didn't know. Like, can you share more about that?

   5. VTVlad Tenev9:32

      I, I think there's a broader trend of things that are old and kind of, you know, maybe that your grandparents would use, uh, being cool again. So Gen Zs are really into buying vinyl, and cassette tapes are selling again.

   6. JAJack Altman9:47

      Oh, vinyl, yeah.

   7. VTVlad Tenev9:48

      Ten years ago, maybe it would've been very hard to get a cassette tape, but now-

   8. JAJack Altman9:51

      I didn't know that

   9. VTVlad Tenev9:51

      ... people are buying them. And so, you know, my daughter asked me if she could have a Walkman.

   10. JAJack Altman9:56

       Uh-huh.

   11. VTVlad Tenev9:57

       And I think in the same way, uh, financially, people are actually... Like, the, the younger generation is interested in retirement. You and I are probably close to the same age. Um, when I was graduating from college in 2008, I wasn't really thinking about retirement that much.

   12. JAJack Altman10:14

       Yeah, I was 2011, and same.

   13. VTVlad Tenev10:16

       Yeah.

   14. JAJack Altman10:16

       Yeah.

   15. VTVlad Tenev10:16

       Like, retirement seemed really, really far away. Now Gen Zs are opening retirement accounts at 19 years old.

   16. JAJack Altman10:24

       Mm.

   17. VTVlad Tenev10:24

       So they're like, they're thinking a little bit more conservatively, I think, than, uh, than prior generations. I'm not a, I'm not a cultural historian-

   18. JAJack Altman10:33

       No, but it's-

   19. VTVlad Tenev10:33

       -even though I try to be.

   20. JAJack Altman10:34

       It's important context, 'cause I, I assume that, um, for a business like yours, I would think that capturing the sort of like hearts and minds of people between, you know, 18 and 30 must be super important for the long term.

   21. VTVlad Tenev10:47

       Yeah, and there's a lot of counterintuitive things there. For example, uh, for, for older people, I think we've had a lot of success. You would think with, with older customers, we would emphasize how, you know, stable and how long we've been around, and-

   22. JAJack Altman11:03

       Yeah

   23. VTVlad Tenev11:03

       ... and all these things, but, but actually, that resonates very strongly with young people, and-

   24. JAJack Altman11:08

       And older people want to hear this-

   25. VTVlad Tenev11:09

       Older people wanna be that, you know-

   26. JAJack Altman11:10

       You could be, you could be plugged into the cool new thing.

   27. VTVlad Tenev11:12

       Yeah, it's innovative, y you know, easy to use. We have all these features.

   28. JAJack Altman11:16

       Is that new for you, or was it this way for you all along?

   29. VTVlad Tenev11:19

       I think it's relatively new for us. I mean-

   30. JAJack Altman11:21

       Like, you had to invert those seven years ago or something?
5. 14:18 – 18:47

   Incentive alignment with customers

   1. JAJack Altman14:18

      Do you think of your role as just give people the tools to do whatever they think is best, or do you think of your role as w- we're gonna help create certain sort of healthy patterns and pathways for people to do the right thing at the right time?

   2. VTVlad Tenev14:34

      Yeah. So at the top level, we are aligned. Like, we make money generally proportional to our total assets under custody.

   3. JAJack Altman14:43

      You want your customers to do well.

   4. VTVlad Tenev14:44

      We want our customers to do well. We don't want them to send their accounts to zero.

   5. JAJack Altman14:48

      [chuckles]

   6. VTVlad Tenev14:48

      The best behavior for us is if someone's account balance with us just monotonically and continuously grows over time.

   7. JAJack Altman14:55

      Mm-hmm.

   8. VTVlad Tenev14:55

      I think the best way to do that is to actually conform to how customers like to use financial products, and this has pushed us to... We don't really think of ourselves as a trading app anymore. The, the way to describe what we are and what we're increasingly becoming is a financial super app. Like, we wanna be your primary and your secondary financial account. So we have Robinhood Banking, which is rolling out right now. I think it's the best banking product on the market, and if we serve customers well there, their d- direct deposit comes into Robinhood.

   9. JAJack Altman15:32

      Mm.

   10. VTVlad Tenev15:33

       And then once we've got the direct deposit, it's sort of like our assets to lose, and we look at all the ways in which customers take money off the platform. We ask ourselves, "Is that something that should be happening on platform?" And I think that's what's pushed us into this multi-product line conglomerate. It's like a financial conglomerate. You know, a- across some of our businesses, we do have a fiduciary responsibility, where, you know, the leaders of those businesses, for example, Robinhood Strategies, they spend day and night thinking about how they can make as much money for you as possible. Other businesses are, are more about selection. Like, for example, prediction markets. What do customers want to trade? How can we make sure we have the highest market share-

   11. JAJack Altman16:15

       Yeah

   12. VTVlad Tenev16:15

       ... relative to our peers?

   13. JAJack Altman16:17

       Yeah, actually, this is a good moment to sort of transition to that. Um, Robinhood has, like, a crazy number of big businesses. I think the stat I heard was eleven businesses at over a hundred million of revenue. So could you just, like, talk about, just at a high level, like, what the portfolio of businesses are?

   14. VTVlad Tenev16:32

       Uh, we organize it into kind of three arcs. So one of those arcs is, we, we call it number one in active traders. So we want to be the place where if you're an active trader, you would feel like you're at a disadvantage using any other platform, and that's where you have our options business, our crypto trading businesses, Robinhood Legend, which is a new product that we have that's active traders on, on web. I was talking to you a little bit about how there needs to be a, like, a cursor for web, if, if that makes sense, like a AI-driven, active trading-

   15. JAJack Altman17:05

       Yeah

   16. VTVlad Tenev17:06

       ... home for, for the people that are extremely sophisticated. That's what Robinhood Legend is, and that's where, uh, our prediction markets business is as well. It's like, what are the things where we can track our market share? We're, for now, sticking to regulated financial products, so that's kind of the organizing principle. And we look at our market share, and we want it to, to grow over time. The second bucket is just, we call it number one in wallet share, all the things that lead to all of your finances being on Robinhood, the credit card, our Robinhood Gold program, which is kind of the subscription wrapper-

   17. JAJack Altman17:43

       Mm-hmm

   18. VTVlad Tenev17:44

       ... that gives you a better deal on everything. We have retirement, which is now twenty-five billion in assets. We've made some acquisitions there, too. TradePMR, which is, you can actually get a, a human advisor, which will eventually grow into, hopefully, your point person for your family office, for those that have one. But the, the end game there is: how can we get all of your money in Robinhood, and how can we get everyone to be a Gold subscriber so that you just get incredible value from everything?

   19. JAJack Altman18:12

       Yep.

   20. VTVlad Tenev18:12

       And then the third bucket is, we call it number one global financial ecosystem, which is us growing our business across two linearly independent vectors. One is from retail only to business and institutional. The other is from US only or US primary to fully global. And we think, you know, in ten years-... over half of our business can be ex-US, and cut another way, over half of our business can be non-retail. So I think there's multiple vectors by which we can grow at ten X, and we're trying to kind of go after all

6. 18:47 – 25:50

   The emergence of prediction markets

   1. VTVlad Tenev18:47

      of them.

   2. JAJack Altman18:47

      Can we talk about prediction markets a little bit? I feel like that's been, um, like a very interesting new category that has grown crazily.

   3. VTVlad Tenev18:55

      Yeah.

   4. JAJack Altman18:55

      And obviously, that's been like a big success for, for you all. Like, what has made prediction markets take off in the way that they have, do you think?

   5. VTVlad Tenev19:01

      This is a, a funny one because there's actually a very simple answer, and it's just one thing. Uh, the sort of like big bang of prediction markets was the presidential election last year. In my opinion, you know, I've, I've been kind of a student of prediction markets for many years.

   6. JAJack Altman19:19

      Mm.

   7. VTVlad Tenev19:19

      I've just loved them, and, uh, I remember in twenty sixteen, with the presidential election, I was like voraciously looking at the prediction markets, trying to figure out who was gonna win this thing, and at that point, there was nothing in the US. It was basically Betfair, which is a UK-based, uh, exchange that was, that was pricing the odds in real time. And, you know, you, you could tell you were watching the news. They didn't have an answer on that election for... until the next morning, when, when Clinton conceded that. Seven PM, seven thirty Pacific at night, Betfair showed, you know, Donald Trump had a ninety-five percent chance of winning. So that was, I think, the first instance where you could tell that this was a valuable new forecasting tool and source of information.

   8. JAJack Altman20:11

      Yeah.

   9. VTVlad Tenev20:11

      And then in twenty twenty, it was the same thing. PredictIt was probably the main platform, which was run as a research experiment. But I remember everyone- they had this nice electoral map. They had prediction markets, not just for the, the election as a whole, but for each state, and their website crashed from so much use on election night. And for the longest time, having prediction markets for the US elections were impermissible. Like, the CFTC said no, and then, uh, there was a Supreme Court case that got resolved literally a month before the election last year. That said, "Actually, it's okay. You can, you can roll out, uh, federally regulated CFTC presidential election markets." And that surprised everyone. Like, nobody thought that this result would shake out this way. So credit to Kalshi for actually taking on that fight and, and going to the Supreme Court and, and arguing for their business. When we saw that, we basically mobilized our entire company, and we're like: We have two weeks to get this ready. We've got to be ready for, for the presidential election. And that week, we, we were actually, uh... It, it was, it was very high degree of difficulty because we, we began integrating with Kalshi for that, and then Kalshi didn't get the approval to, uh, allow other brokers to connect. So we integrated with ForecastX, which is, which is an- another DCM. But our team sprinted towards this thing. Then we had to change vendors, so we had to sprint again, and we shipped it with about a week before- a week to go before the presidential election, and we still saw, uh, I think, over half a billion contracts traded-

   10. JAJack Altman21:57

       Wow

   11. VTVlad Tenev21:58

       ... which is a big business for us. And then, what happened was essentially the same argument that you could make for why, uh, the presidential election has a lot of economic value, um, could be adapted to the Super Bowl, like a, a big sporting event.

   12. JAJack Altman22:16

       Yeah.

   13. VTVlad Tenev22:17

       Clearly, a Super Bowl, huge event, lots of economic value. Uh, and then you, you could imagine, you know, if the Super Bowl has economic value, every football game has economic value as well because the Super Bowl is just a function of what happens the rest of the season, and it allows you to make those trades more granularly. And that has essentially unlocked the sports prediction markets industry, which has been a big thing.

   14. JAJack Altman22:43

       Which is enormous, right?

   15. VTVlad Tenev22:44

       Yeah, and if you look at it, it's a disruptive force to traditional sports betting because sports betting is state-by-state regulated. It's a patchwork. Taxes are quite high.

   16. JAJack Altman22:56

       Mm-hmm.

   17. VTVlad Tenev22:56

       You have this annoying effect where, you know, if you're using one of these sports betting apps in, in New York, you get shut out.

   18. JAJack Altman23:04

       Yeah.

   19. VTVlad Tenev23:04

       And then you have to drive across the bridge to New Jersey, and maybe there you have different products and services. Brick-and-mortar... Rules intended for brick-and-mortar casinos have been applied to digital platforms, which I think makes a little bit less sense in this case. Um, so it's been a disruptive force, and, and for Robinhood, if you look on a contracts traded basis, it's been doubling quarter after quarter.

   20. JAJack Altman23:34

       Wow.

   21. VTVlad Tenev23:35

       And in October, which is just one month, we did more than all of Q3 put together, and I think that's a function of more-

   22. JAJack Altman23:42

       Wow

   23. VTVlad Tenev23:42

       ... contracts, not just in sports, but diversity across the board. Like, we have really interesting AI contracts, too, where you can trade what's gonna be the best AI model at the end of the year, what's gonna be the AI coding model that wins? It's just more people finding out about it, figuring out what prediction markets are, so it's getting more adoption within our user base. We're also getting new customers coming in. But yeah, I think, uh, at least definitely on the retail side, we're kind of the only broker that offers prediction markets to a significant degree right now. One of the things I'm very proud of is how quickly we, like, jumped on it. I mean, there's... Some of our competitors have been integrating and trying to do this for years, and they still haven't shipped. I think it's not just a trading product. This is a unique one, where there's actually a huge use case, uh, almost as a-... a media forecasting tool. I did, like, a tweet storm about this a couple months ago. I said, "Prediction markets, a way to think about them is they're truth machines." Like, we're bombarded by all this information constantly.

   24. JAJack Altman24:45

       Right.

   25. VTVlad Tenev24:46

       Like, anyone can write anything on Twitter, it can go viral. Uh, how do you sift through what's real and what's not, and what's actually gonna happen? Well, now we've created a tool that lets you do that, and I think the benefit is not just for the folks that are trading.

   26. JAJack Altman25:01

       Mm-hmm.

   27. VTVlad Tenev25:01

       It's almost like the trading and speculating is doing the work-

   28. JAJack Altman25:04

       Yeah

   29. VTVlad Tenev25:05

       ... so that all of us have this reliable source of information.

   30. JAJack Altman25:08

       I should've looked this up before I came here, but I feel like I remember seeing that, like, if you ask a million people to guess the weight of a cow or something ridiculous like that-
7. 25:50 – 28:26

   Economic value vs entertainment

   1. JAJack Altman25:50

      what extent do you think of prediction markets as, like, economic value via this, like, truthy sort of outcome from the wisdom of crowds with skin in the game, versus just, like, a cool form of entertainment for people?

   2. VTVlad Tenev26:04

      Yeah, we, we get asked this all the time.

   3. JAJack Altman26:06

      And matter of fact, by the way, I love poker, for example.

   4. VTVlad Tenev26:08

      Yeah.

   5. JAJack Altman26:08

      I think it's-

   6. VTVlad Tenev26:08

      Isn't it just gambling? But the thing is, every tradable asset has had that criticism-

   7. JAJack Altman26:15

      Mm-hmm

   8. VTVlad Tenev26:16

      ... over time, right? Futures contracts, where people have been speculating over the price of oil or the price of gold. I mean, this was a huge fight back in the, I think, '60s, where a lot of people were on both sides saying, "You know, retail shouldn't have access to, to these products-

   9. JAJack Altman26:33

      Mm-hmm

   10. VTVlad Tenev26:33

       ... because it's just speculation." But, but I think, yeah, another word for gambling is speculation, right?

   11. JAJack Altman26:40

       Well, but also, I mean, there's nothing wrong with gambling, really. I mean, like-

   12. VTVlad Tenev26:43

       Pu- put aside that, and, and I agree. Um, without speculation, you can't have, uh, a functional financial market, so we need the speculators.

   13. JAJack Altman26:53

       Mm-hmm.

   14. VTVlad Tenev26:53

       Otherwise, things just don't work. You need people that have a view on what's gonna happen in the future to create the market. And, and I think most people would agree we need the market. But that said-

   15. JAJack Altman27:04

       Well-

   16. VTVlad Tenev27:04

       ... I don't think everyone should be speculating with-

   17. JAJack Altman27:06

       Yeah

   18. VTVlad Tenev27:06

       ... 100% of their money.

   19. JAJack Altman27:07

       I mean-

   20. VTVlad Tenev27:07

       That's an extreme case.

   21. JAJack Altman27:09

       I have no... I'm just thinking out loud here for fun, but, like, I suppose maybe the counter there would be, it's useful to get price discovery on, like, a, like, an equity asset or something like that.

   22. VTVlad Tenev27:19

       Yeah.

   23. JAJack Altman27:19

       But there's not particular value to getting price discovery on the outcome of the Ravens game or something. I, I, I imagine there'd be some counter like that.

   24. VTVlad Tenev27:27

       Yeah, and but, but it's, it's definitely the case that ha- that has value, because any forecast has value.

   25. JAJack Altman27:33

       And the politics is a good example, where there's obviously value to knowing the truth.

   26. VTVlad Tenev27:35

       Well, just think about how much money is there in informing people and, like, commenting on what's gonna happen to that Ravens game.

   27. JAJack Altman27:44

       Totally.

   28. VTVlad Tenev27:45

       People buy the newspaper to read the sports section and see the commentary. You're listening to Sports Center. And I think that's just gonna become a bigger and bigger part of the economy. Like, let's say we get to this future where AI is automating more and more jobs, right? One of the things that probably will be difficult to automate is entertainment and sports with real humans. So I, I would make a bet, actually, that this just continues to grow.

   29. JAJack Altman28:14

       Mm-hmm.

   30. VTVlad Tenev28:14

       And, you know, the, the lion's share of jobs and job families that we consider in the future probably look to us like some form of entertainment today.
8. 28:26 – 35:21

   Growing degree of risk taking

   1. JAJack Altman28:26

      One of the things that, um, I asked Dylan Field about on the podcast the other week, that I think maybe kind of relates to prediction markets, it kind of relates to some of the other things we've been talking about, is I have this sense that, um... I think to some degree with, you know, today's young people, but I think it's actually with all of us, there's, there is some growing degree of, like, a financial sort of, um, aggression, or like, you might- like, the negative way to say it might be gambling. As a positive way to say it might be risk taking.

   2. VTVlad Tenev28:56

      Yeah.

   3. JAJack Altman28:56

      I think it shows up in a lot of ways. Like, obviously, prediction markets are an easy thing to point to. I also gave the example, um, when I was talking to Dylan about, like, collectible cards, kind of, you know, that, and, like, NFTs, and you have these, like, you know, small things that, you know, people start speculating on like crazy. I think a lot of behaviors that people have just in general have gone sort of the way of, like, a lot more, like, risk, I would say. And I don't think that's a bad thing, but to me it seems like a thing. And I'm just curious if it's something that you've noticed, if it's something you've thought about at all, how you think Robinhood's, you know, suite of products can, you know, channel that in positive ways. I don't know, I'm just curious how you think about it.

   4. VTVlad Tenev29:35

      Yeah. I actually think that it's not a huge fundamental change in people's mindset, but more what they have access to. So, for example, uh, it used to be very difficult and cost-prohibitive to invest in individual stocks. I think there's a big reason why, why ETFs had s- extreme product market fit. Because before ETF came along, if you want to be invested in 500 companies, you're not gonna buy 500 individual stocks. You could get that diversification, uh, quite simply and easily. We're on a trajectory where people want more granular ways to express their opinion about things. So one example I can give you is, how many times have you seen a company just blow out their earnings estimates? Like, they, they blew out EPS, they blew out, uh, uh, revenue, but the stock goes down.

   5. JAJack Altman30:34

      Yeah.

   6. VTVlad Tenev30:35

      ... folks get frustrated because they're like, "I'm a student of this company. I figured out, you know, I have a pretty good model of how well they're gonna do," but the stock might not always be a perfect representation of that. So, you know, then you have prediction markets for EPS and revenue, where if you have a point of view of how something's gonna shake out, you can actually trade that more directly. Options trading, I think, i- is part of this trend, too, where maybe you do wanna hold a company for a very long time, but you have a view that it's gonna do well this quarter. So you can design a contract and trade it profitably based on that viewpoint. Then you have, you know, zero-day contracts, which take that to the extreme, which is, "I have a pretty good idea of how something's gonna do today," and maybe it's an earnings day, and you don't wanna take the time decay risk. So I think in general, even though to some degree these are called more complex products, there's a certain simplicity-

   7. JAJack Altman31:34

      There is, yeah

   8. VTVlad Tenev31:34

      ... in that so many things drive a, the value of a stock, but, like, these contracts let you express a more granular point of view. And, and I think the other thing is they just weren't available easily. You would have had to be very, very sophisticated to have unique access to have them in the past. Um, and now, you know, through tools like Robinhood, w- we make them available to traders with costs that are really low. And then I think the third thing is you hear a lot about it in the news, predominantly because it's more interesting than, like, buy and hold passive investing. Like, everyone wants to write about options trading and prediction markets and crypto-

   9. JAJack Altman32:12

      Right

   10. VTVlad Tenev32:12

       ... because it's speculative-

   11. JAJack Altman32:14

       Yeah

   12. VTVlad Tenev32:14

       ... and you have big swings. Nobody's interested in writing the story about how, you know, index funds are gaining AUM or money market funds are seeing huge inflows, even though that's also happening. So, so I think it's the combination of these three things that makes it seem like there's a huge-

   13. JAJack Altman32:31

       Yeah

   14. VTVlad Tenev32:31

       ... increase in, in speculation.

   15. JAJack Altman32:33

       Yeah.

   16. VTVlad Tenev32:33

       But I think on a relative basis, the story is much more tempered.

   17. JAJack Altman32:36

       I mean, it's probably also true what you're saying, where, like, if in the year 1950, you gave people, you know, a smartphone with an app that let them bet on the baseball game they were watching, a lot of people would have bet. And so I think-

   18. VTVlad Tenev32:46

       Hundred percent

   19. JAJack Altman32:46

       ... the tooling probably is just expressing, you know, like, human interest to do various things. I guess, you know, if-

   20. VTVlad Tenev32:52

       There was spec-- there has always been speculation.

   21. JAJack Altman32:55

       Yeah.

   22. VTVlad Tenev32:55

       When you look back, Isaac Newton-

   23. JAJack Altman32:56

       There's just been a lot of friction in the past, though-

   24. VTVlad Tenev32:58

       Yeah

   25. JAJack Altman32:59

       ... I guess. Like, now the abil-- like, the EPS example is really good. 'Cause I think a lot of times people are like, you work really hard to, you know, take a certain view on a company, and you have confidence in it, and then you bet on a proxy, which is, like, share price goes up.

   26. VTVlad Tenev33:12

       Yeah.

   27. JAJack Altman33:12

       It's a good, it's a good example.

   28. VTVlad Tenev33:13

       Totally.

   29. JAJack Altman33:14

       There was a trend over time that I do think is, like, harder for young people, is it does seem like it is, um... Like, compared to, and may- maybe this is sort of like a, a, a not truthful nostalgia, but I think, like, it probably seems to be the case that, like, our parents' generation had an easier time, like, buying a first home than today's, like, recent college grad or something like that. So I do wonder if there is, like, a long-term trend that does make it harder to, like, get on the financial ramp for people out of school, whether it's to do with, you know, home prices going up on a relative basis or something to do with, you know, inflation or, or, or I don't know what else. But it does seem like there is a long-term directional trend where it's harder for young people to, like, get into the place in their financial life that they want to get to at a young age.

   30. VTVlad Tenev34:02

       I think that's true. I think the social safety net has kind of frayed a little bit. I mean, you, you have the homeownership's becoming a little bit more difficult, a lot more difficult-
9. 35:21 – 39:33

   Tokenization and private markets

   1. JAJack Altman35:21

      Another thing along these lines I'm really interested in is, now as a, I suppose, as a venture capitalist, you know, a, a lot of value gets created in private markets.

   2. VTVlad Tenev35:29

      Yeah.

   3. JAJack Altman35:29

      And I think as companies, I mean, you're public, but a lot of, you know, peer companies that are of similar scale are private, and a lot of value compounds in private markets. And, um, I think that's becoming more true every year, and so maybe, you know, this touches on, like, the tokenization of everything type of idea, where, like, one way that you could help, you know, bridge some of these gaps would be to, like, give people access to some of these hard-to-access, you know, equities.

   4. VTVlad Tenev35:54

      Yeah. I mean, th- this is something that I'm personally very passionate about. I think that it's one of the biggest iniquities in capital markets. It wasn't too long ago, I mean, a few years before, uh, we were born, Microsoft and Apple went public at valuations in the hundreds of millions.

   5. JAJack Altman36:14

      Right.

   6. VTVlad Tenev36:14

      Right? Or maybe low single-digit billions.

   7. JAJack Altman36:16

      And then, like, ninety-nine point nine percent of their value, you know-

   8. VTVlad Tenev36:19

      Was created in the public markets, yeah. And, and you still see examples of that. Right now, you're seeing a lot of companies that are worth hundreds of billions-... like at the frontier of their industries. You know, not, not just open AI and Anthropic, but also SpaceX, which is leading the, the space revolution.

   9. JAJack Altman36:36

      Yeah.

   10. VTVlad Tenev36:36

       But before they're available to retail, it's, it's not hard to imagine that they're gonna be in the trillions, right? And then what kind of appreciation? To get a, a Microsoft IPO till now appreciation, they're gonna have to get to a quadrillion of value.

   11. JAJack Altman36:52

       It's tough.

   12. VTVlad Tenev36:53

       It's gonna be tough-

   13. JAJack Altman36:54

       It's a lot of billions

   14. VTVlad Tenev36:54

       ... I mean, without hyperinflation, right?

   15. JAJack Altman36:56

       Yeah. Yeah.

   16. VTVlad Tenev36:57

       Um, so yeah, I'm very motivated. I think ex US, we've- we're, we're pushing on tokenization, which I think is probably something like the end state. A lot of people have to get comfortable with the implications of it, and it's, it's really gonna be disruptive.

   17. JAJack Altman37:12

       Can you explain how it would work or works?

   18. VTVlad Tenev37:15

       At the fundamental level, it's, it's basically the same idea as what stable coins are. You have some traditional financial stuff that you put in a bucket, and, you know, in stable coins, it's US dollars and treasury notes, and, and bonds, and you mint and burn tokens against that. The traditional stuff stays in the bucket, and the tokens are freely tradable on blockchains. So you can imagine twenty-four seven liquid trading round the clock, just like a stock, and the only time tokens change hands with shares is in like a mint-and-burn scenario.

   19. JAJack Altman37:53

       Mm.

   20. VTVlad Tenev37:54

       So another analog is, you imagine, uh, it, it's kind of like an ETF or an ADR. You have a bunch of stuff here, like S&P 500 ETF warehouses, the underlying stocks. The ETF is traded freely, and then at some point, very rarely, you have a mechanism that exchanges the underlying for, for the ETF, which is mo- more of an institutional product. But yeah, you can extend this concept with blockchain technology to anything.

   21. JAJack Altman38:23

       Mm.

   22. VTVlad Tenev38:23

       So you can put private stocks or SPV, LP interests in the bucket.

   23. JAJack Altman38:28

       Do you think that's where things go in the US over time?

   24. VTVlad Tenev38:31

       I think so. Yeah. I think that it's, it's really hard to imagine, uh, a cleaner solution. I think a lot of people talk about on-chain issuance. I don't think the end user gives a shit about on-chain issuance or really any of this. The end user just wants economic exposure to things in a way that works. Um, a- and I think some mechanism of this... And there's a lot of questions to be answered, right? So currently in Europe, this, the structure is a, a derivative, but this is more of like, um, paperwork thing, right?

   25. JAJack Altman39:06

       Mm-hmm.

   26. VTVlad Tenev39:06

       The underlying mechanism could stay the same, and the regulatory description of it, and what it is, and whether you get ownership or voting rights, that could all change. So I, I think there's gonna be questions of: Is it a derivative? Is it a tokenized stock? Is it a new thing? Uh, do you get to vote your shares? But we'll, we'll be able to make it at least as good as, fro- from an experience standpoint, as the existing things that are out there.

10. 39:33 – 43:35

    The impact of AI on Robinhood

    1. JAJack Altman39:33

       Obviously, everybody talks about, like, AI. Now, I'm, I'm curious how much of a, an impact it has been for you to date and where you think it's gonna be the most impact in the future.

    2. VTVlad Tenev39:43

       A lot of people speak about this in generalities, don't they? I think that-

    3. JAJack Altman39:47

       Well, if you just speak in generalities, then everybody just, you know, make, you know-

    4. VTVlad Tenev39:50

       Yeah, yeah.

    5. JAJack Altman39:50

       Value goes up, so you just say AI, and it's good.

    6. VTVlad Tenev39:52

       Yeah, I, I like to measure things. I think we're very, um... Yeah, we, we, we pick the areas kind of internally that we thought AI would make the biggest difference for us, and then we spent a lot of time trying to- we continually spend time thinking about how to measure it and how the progress should go.

    7. JAJack Altman40:11

       Did you have any guesses that you thought would matter, and it didn't, and then were there any where, you know, you were surprised in the other direction?

    8. VTVlad Tenev40:17

       The two areas where we really invested big time in were customer support and engineering-

    9. JAJack Altman40:24

       Right

    10. VTVlad Tenev40:24

        ... which I think were the two most, i- if you had to think about-

    11. JAJack Altman40:27

        Yes

    12. VTVlad Tenev40:27

        ... where human capital really matters, writing code determines how fast we ship products-

    13. JAJack Altman40:32

        Yeah

    14. VTVlad Tenev40:32

        ... and fix bugs, and improve infrastructure. Customer support's, like, the frontline interface-

    15. JAJack Altman40:37

        Yeah

    16. VTVlad Tenev40:37

        ... with our system.

    17. JAJack Altman40:38

        Yeah, and I think outside of chat, those are probably, like, the biggest two AI markets so far, so that makes sense.

    18. VTVlad Tenev40:42

        Yeah, and so customer support, we measure AI deflection rate.

    19. JAJack Altman40:45

        And it's worked super well.

    20. VTVlad Tenev40:46

        Worked super well. And with deflection rate, which, um, y- you probably can, can, uh, uh, understand, but I don't know if most viewers w- would, you kind of look at, uh... It's a measurement of what ticket would've gone to a human, but instead has been fully solved by, by AI.

    21. JAJack Altman41:06

        What'd you get to?

    22. VTVlad Tenev41:06

        Um, I don't know if we've announced that publicly. Um-

    23. JAJack Altman41:10

        But something good.

    24. VTVlad Tenev41:11

        It's, it's relatively- it's very high. I think it's the best in the industry-

    25. JAJack Altman41:15

        Mm

    26. VTVlad Tenev41:15

        ... actually, and we, we do all this work in-house. We don't use vendors.

    27. JAJack Altman41:18

        Have you measured if it doesn't just, you know, save costs by, you know, not touching a human, but have you measured if there's also higher satisfaction on the way the ticket was handled? Like, is it both a better experience and cheaper?

    28. VTVlad Tenev41:29

        We do measure that, and I think the story is complex. Um, and the reason is, there's some percentage of people, call it ten to 15%, that just don't like talking to an AI agent. They have, you know, predisposition to, to not like that. We actually track that number, and that's going down over time, too-

    29. JAJack Altman41:47

        Yeah

    30. VTVlad Tenev41:47

        ... which is very good.
11. 43:35 – 46:59

    What excites Vlad about AI

    1. VTVlad Tenev43:35

       in a big way.

    2. JAJack Altman43:35

       I feel like the, um, the cursor idea you mentioned should be very interesting. If at some point you can get to a place where you, like, sort of trust Robinhood enough to just sort of tell it, "Here's what I'm looking for, both in the short term and the long term. Here's my risk appetite, here's the products I want. Just, like, go make it all happen," it's like-

    3. VTVlad Tenev43:51

       We call it, uh, vibe trading. So, you know how there's vibe coding? I think there will be vibe trading, which sounds a little flippant.

    4. JAJack Altman43:57

       Well, but, you know-

    5. VTVlad Tenev43:58

       I admit, but-

    6. JAJack Altman43:58

       ... the thing you said, that we're not a trading platform, it's like, you know, it's like a financial home. It's like vibe finances. It's like, you know, because you have all these other products, I assume it's gonna, you know... Like, vibe set up my, you know, kids' 529 account, which is, you know, not-

    7. VTVlad Tenev44:10

       Totally.

    8. JAJack Altman44:11

       Yeah.

    9. VTVlad Tenev44:11

       Here's the areas that I'm most interested in. So I think vibe trading and going down that path of helping first active traders, but eventually seeping into more general use cases with indicator analysis. Right now, these guys are writing code in languages that you and I have never heard of, to write these custom indicators and, and different scanners. So we can turn that to English, and we announced that through our Robinhood Cortex for Legend product-

    10. JAJack Altman44:41

        Mm

    11. VTVlad Tenev44:41

        ... at our, uh, active trader event a few, a few weeks ago. We have stock digest and crypto digest in-app, which actually are really cool, like, incredible feedback from users so far. Basically, the way it works is, you get a notification saying some stock or crypto is up 5%. You immediately want to find out what's going on, and so we actually give you a digest and a product that explains, and it, it's up- it's accurate up to seconds or, or low single-digit minutes, and that's been really good. So, so you could imagine AI unobtrusively being this, like, assistant, and some- in some cases, autonomous financial agent for many of these things. I also think that there's just some really, really boring stuff that's very hard right now, that we're gonna push to fully automate. So, moving your bank account. I don't know if you've ever moved a bank account, but it's a pain in the butt.

    12. JAJack Altman45:41

        Yeah.

    13. VTVlad Tenev45:41

        You have all sorts of bills that are hooked into it, all sorts of subscriptions.

    14. JAJack Altman45:46

        Totally.

    15. VTVlad Tenev45:46

        And I think at some point, you'll just press a button, and that bank account will move. And the first companies that figure out how to do this are gonna have a pretty big advantage, because, like, it's considered a very sticky thing precisely for this reason. Nobody wants to go to the effort of, you know, changing their credit card number or their, you know, ACH information for 20 to 30 different things.

    16. JAJack Altman46:09

        Yeah, you don't even know what you forgot.

    17. VTVlad Tenev46:10

        Yeah, you don't wanna even think about it. And yeah, that's just, that's why it doesn't happen. I think if we can... If, if, if it becomes a button, and I think it's headed there, right? Then, you know, it's gonna be very disruptive to a lot of incumbent firms. Moving brokerage accounts, same idea. Very complicated. They don't wanna make it easy either. Like, your counterparties are not interested in having, like, a streamlined integration.

    18. JAJack Altman46:36

        Totally, but, uh, I guess an agent that read all of your documents from the old brokerage could figure out everything that you needed to know, I suppose.

    19. VTVlad Tenev46:43

        Yeah.

    20. JAJack Altman46:44

        Yeah.

    21. VTVlad Tenev46:44

        Yeah, it could be like, you know, when- if you have a person doing this on your behalf, and-

    22. JAJack Altman46:49

        Yeah

    23. VTVlad Tenev46:49

        ... they make the calls, they talk to customer support, they have access to your emails-

    24. JAJack Altman46:54

        Yeah

    25. VTVlad Tenev46:54

        ... uh, there's no reason why an AI agent won't be able to do all of that work for you.

12. 46:59 – 50:11

    Reflections on being a founder

    1. JAJack Altman46:59

       Yeah. Maybe just to, um, finish up, um, I guess you've been doing this for over 10 years now, and, um, obviously, you know, over $100 billion public company, but you still have, um, I know, like, an intensity, a drive, like, to keep going. So I, um, I guess one thing I'm curious about is, where have you found the sort of drive to stay hardcore detail focused, like-

    2. VTVlad Tenev47:21

       Yeah

    3. JAJack Altman47:22

       ... you know, founder through, like, you know, both a lot of years, but also it's like you've gotten to, like, a level of success where it would be easy to not fight so hard, but obviously you're pushing the boundary on so many things at once.

    4. VTVlad Tenev47:33

       I think that the one amazing thing that you have as a founder of a company, that I don't think is as easy if you're an employee or even a senior executive, is ultimately you have a lot of control, right? So if there's something about your company that doesn't work well, um, or that you don't like, or you find yourself having to say things to the employees that you don't agree with, I think that's a, a, a good opportunity to reset and, and to change something. You either have to change something about yourself or about your policies or what you're saying. I think I learned this during COVID, which was a, a hard time for us for, for many reasons, but also for me personally, um, was some of the folks in the company, uh, maybe also, like, the press and what you're hearing from the internet, pushed me into the directions where I was just, like, saying things that I didn't really believe in. Like, "Oh, we really care about having the best health and wellness benefits so that our employees can feel good and, you know, you can bring your whole self to work." And I noticed that I was saying things that I didn't really believe in, and I think that's the source of ultimately a lot of unhappiness. And at the end of the day, as a founder, I think the company values have to be your values. The way you run the company has to be the way you run your life, to some degree. And I became unhappy when there was a disconnect, and then I, I figured out, "Ok- okay, actually, this is why I'm unhappy. I have to fix it."

    5. JAJack Altman49:06

       Yeah.

    6. VTVlad Tenev49:06

       And the, the good thing was, you have the power to fix it, because you're- if you're lucky enough to still be running your company as the founder, then it- the buck stops with you, for, for better and for worse.

    7. JAJack Altman49:17

       And I'm sure you've just gotten much more confident to, like, call- like, you see it and make changes as time's gone on, and you have more years doing it and everything, too.

    8. VTVlad Tenev49:24

       Yeah, for sure. And I think I have to... O- obviously, we're doing very well right now. Uh, there were times where we were doing quite poorly in the eyes of other people, and I've been through maybe, like, two or three of these cycles.

    9. JAJack Altman49:37

       Yeah.

    10. VTVlad Tenev49:37

        So I know there's probably gonna be some time in the future where-

    11. JAJack Altman49:40

        Is there any-

    12. VTVlad Tenev49:40

        we're shitheads again, and-

    13. JAJack Altman49:41

        Do you do anything in the good times to, like, bank any of the, like, good vibes or any of the just, like, sentiment? Like, can you bank any of it for the hard times, or is all you can do just know it's gonna not always be good?

    14. VTVlad Tenev49:52

        Good question. Um, I try to go on more podcasts. [chuckles]

    15. JAJack Altman49:56

        Yeah.

    16. VTVlad Tenev49:56

        Yeah, maybe, uh-

    17. JAJack Altman49:57

        You gotta-

    18. VTVlad Tenev49:58

        ... most people don't wanna talk to me, right, when, uh, when we're, when we've done something bad. [chuckles]

    19. JAJack Altman50:01

        I'll go on with you in the next podcast.

    20. VTVlad Tenev50:02

        [chuckles]

    21. JAJack Altman50:03

        We can run it back. Well, Vlad, this was super fun. Thanks a bunch for doing this with me. I really enjoyed it.

    22. VTVlad Tenev50:07

        Yeah, likewise. [upbeat music]

Episode duration: 50:11