The New American Dream: Democratising Investing

Speaker A: In really Robinhood, the idea was a very powerful idea because what it stands for is ownership. A future owned by the few is a very fragile future. We want to make everyone an owner and we believe that, um, ownership, broad ownership, is essential to a free, stable and prosperous society. I think that message really resonated and made us at the time the, certainly the fastest growing brokerage, I think, unlike 2020 and 2021. So you had retailers like, ah, Gamestop, you know, movie chains, um, the airlines, you know, rental car companies, which is very different from today where our customers are by and large investing in these disruptor companies that are at the frontiers of their industries. And you know, we. I, uh, think you can debate the price to earnings and all of those indicators, but, but I don't think you can debate that, you know, they're changing the world. I think there will always be humans making trades. I mean, if every retail trader used the same AI agent, then, then I think the opportunity and the incremental value of using that AI agent would probably decrease.

Speaker B: Yeah.

Speaker A: Which I think then would open up an opportunity to be a human trader.

Speaker C: Welcome to the Master Investor Podcast with me, Wilfred Frost, where we celebrate and learn from the success of the greatest investors, business leaders and politicians in the

Speaker B: world, giving you, our listeners, an edge.

Speaker C: The Master Investor Podcast is sponsored by LSEG Interactive Brokers, the World Gold Council and BNY Investments. Please do remember the views expressed in this podcast are for general information purposes only. Nothing in the podcast constitutes a financial promotion, investment advice or a personal recommendation. More on that in the show notes.

Speaker B: My guest today is the co founder, chairman and CEO of Robinhood, the financial trading app that really popularized commission free trading, amongst many other things. Robinhood was founded in 2013. It IPO'd in July 2021 with, uh,

Speaker C: a market cap of $32 billion.

Speaker B: Nearly a year later, uh, during the 2022 market pullback, the share price had fallen 80%, the market cap down to 6 billion. Well, today the market cap is close to $100 billion, just over $90 billion. And the company has $380 billion of platform assets.

Speaker C: They are back.

Speaker B: They're bigger than ever. And I'm delighted to welcome their CEO, uh, uh, Vlad Tenev.

Speaker C: Vlad, welcome to the Master Investor Podcast.

Speaker A: I love that trip down memory lane.

Speaker B: Yeah. Which part of it did you enjoy more than the other part?

Speaker A: The rise rather than probably right now. Right now is the most fun.

Speaker B: Um, let's jump into before, uh, the pullback, before the ipo, because I think it's a really interesting bit to get into. Not so much on Robinhood's history, but the market history. So 2022, you have such a great insight into what all traders are doing, but particularly retail traders are doing, obviously. Did you see bubble behavior in what your clients were doing before we saw that market pullback that you guys, your own share price got caught up in?

Speaker A: Uh, yeah, during COVID um, I personally did have a suspicion about um, I wouldn't say bubble behavior, but if you remember, in 2020, the government, the US government started printing a lot of money. I mean we were sending checks to people, uh, to people's homes directly. And um, of course at that point, if you looked at um, various instruments that would predict the rate of inflation, uh, nobody thought inflation would increase. The estimates on the 10 year treasury, um, were still roughly around 2%. And I was thinking to myself, like, how could this be? Keep printing money but inflation doesn't go up. The government hasn't created some kind of perpetual motion machine. They can't uh, violate the law of physics here. So at some point some assumption has to break. Uh, so it wasn't a surprise to me personally, even though I think to the, to the market writ large. Um, when, when we got into late 2021, inflation ticked up and eventually got to the highest level in decades, in over 30 years. And, and I think then once you start seeing the trajectory, you know, it going from M0 to 9%, 10%, uh, there's a policy response increasing, rates, tightening that I think was very inevitable and predictable.

Speaker B: Is it as simple as it being that inflation and the rate increases that we saw that followed, or is there an additional point that there were signs even before that of excess valuation in the marketplace? Um, I think, you know, the meme stock aspect in particular, I guess is what I'm getting. Could we have all stepping back with hindsight and observed, yeah, these stocks aren't making money and they're doubling in short space of time.

Speaker A: I think these things are related at the end of the day, I mean if you think about the timing of uh, the most famous of the many sort of meme stock rallies, which was January of 2021, it was um, a couple of weeks after, ah, a large stimulus. So um, and then we would see this in our data, right? Uh, the stimulus would come and you know, within days or weeks you would see that capital deployed in the market. So if you look at Robinhood's business and the amazing tailwinds we received during, during COVID um, there were a few things, I mean Loss of lack of places to spend your money. Mhm. Right. Everything was, was shut down. People were cooped up in home. So all sorts of digital activities including investing in the markets, um, remained open. Uh, people had more time. Right. So, so they could actually learn things about Investing. Follow the YouTubers and different influencers. Rates were zero. So if you remember 2019, uh, the Fed was hiking rates and we got to ballpark of to over 2% federal funds rate in 2019. But uh, in 2020 we took them right back down to zero. Ah at the beginning of the COVID crisis. And on top of zero interest rates we had the, the stimulus packages. So all of this was sort of geared towards stimulating the equities market. Right. All of these uh, all of these effects. Um, in March the equities market effectively crashed. It was a very short lived, there was a V shaped recovery. But um, were it not for the immediate stimulative response and the loosening of monetary policy, it might have ended up quite differently.

Speaker B: It's interesting those snapshots because again obviously I was doing CNBC at the time and our ratings spiked during that moment because as you said people didn't have much else to do. So I think it was linked uh, in to as you saying, the attention turning towards, towards the markets.

Speaker A: Everything was closed but the markets.

Speaker B: Yeah, right, exactly. Um, I think why I wanted to start here, and we'll come to it in a moment, is whether you see the same similarities today, but it's why it's so interesting. You kind of point to the stimulus checks and then the rates going up because that doesn't perhaps apply today. Before getting to that though, I mean, uh, the other thing, I think it's fair to say, and I've seen you talk about this, that your clients perhaps more than any others, partly because of your skew to retail clients. So many of our guests have talked about this in recent weeks that this smart money versus dumb money. I think a lot of people now see the retail clients as the smart money.

Speaker A: That's right, yeah, I've always felt that.

Speaker B: And they have bought the dips successfully. Whether it was October 2022, whether it was April 25, March 2026. Is that still a trend that you see? Do your clients still seemingly know more than the rest of us and buy when things are cheap?

Speaker A: Yeah, I mean a lot of times the um, so called smart money I think can be a little bit too smart, um, in a negative way. It's like investing, institutional investing has gotten very indirect and abstracted in A way. Right, because you have these portfolio managers, they're looking at the macro. They end up rebalancing their portfolios, looking at these high level indicators. And a lot of times they'll sell out of a stock, uh, for reasons completely unrelated to the underlying business because of tariffs. Tariffs force them to, you know, move more capital around and, and then they end up, you know, selling a company counterintuitively, like Palantir, that maybe is unaffected by tariffs or maybe maybe affected positively even. Whereas a retail investor thinks about it a little bit more simply like they make, they make companies, they're investing, they're buying and selling companies because they think that individual company is going to do well. And so you end up in these situations where they're maybe a little bit more resilient through macro events like, like tariffs and rates. They're just looking at, okay, is this company uh, doing well? Do I like the products? Are the revenues increasing? Are they, are they increasing their profit margins? What's the rule of 40 looking like, I mean, I mean still sophisticated analysis, but it's not this sort of like Russia, Ukraine is happening. So I'm just going to dump equities and reallocate towards fixed income. Uh, like you see the institutions.

Speaker B: Um, I wanted to then touch specifically on your company during that period of time. As I said, you IPO'd July 2021. Um, clearly then the market had a really tough period shortly after that. I mean, do you think you kind of got it away just in time because capital markets then were not particularly supportive of your type of transaction for a couple of years after that?

Speaker A: Yeah, I think the IPO window, uh, basically shut for several years. Um, and we have additional visibility into this because we have our IPO access product. The IPO window shut and there was a crack a couple of years later actually with the arm and Instacart IPOs. So two got in. Um, I uh, want to say 20, 23. Um, and then there was another, you know, that was maybe a precursor to what, what, what was to come later. And really last year it kind of reopened in full force.

Speaker B: So what I wanted to then come to in a sort of roundabout way for this opening section is, is whether you feel a little sense of deja vu with SpaceX now listing that sense that you got yours away. If it had been a bit later, you might not have done. Markets had a tough year or two after that. Could there be a bit of a deja vu with SpaceX getting away and now people wondering, can all of these companies follow OpenAI have now said they're probably not going to try and get theirs away. What do you think about the market dynamics today compared to then?

Speaker A: Um, yeah, I guess there's this talk about whether we're in an AI bubble. And I think the difference that complicates the analysis is uh, you have a lot of companies that are spending a lot of money on AI and there's a business model, uh, in the AI industry around these model companies where companies and individual customers are paying for tokens. OpenAI has a subscription product that's that, that's got quite a bit of scale as well. So unlike previous bubbles where the business model was less clear, you have a business model, you have revenue increasing. So then the question is, okay, what are the dynamics? Is it possible that the companies that are paying for all of this AI start, you know, going from a mode where they're just willing to learn and aren't looking at costs very closely to now looking at roi? And if they start looking at roi, will that revenue per company actually go down versus go up? And is the rate of adoption by new companies? Because there's a very, very long tail of companies who haven't touched it yet. Even consumers as well have that long tail. You look at Claude code and it's I think on the order of low tens of millions of users. It's not hundreds of millions or billions. So there is that Runway, that Runway aspect of it where it still feels like we're early with existing revenue. So yeah, I think it's a different analysis as to timing of the IPOs of these companies. One thing I realized is it feels the time that we're in now has always felt consequential. It always feels like we're in a moment right now for which there isn't a precedent and we're kind of on the precipice of something. But, but if you look back, these cycles have been getting quicker. We're talking about the IPO window closing end of 2021 and starting to reopen in 2023. So if you take a slightly longer term perspective, what you're really talking about is timing, a function that is essentially sinusoidal. And you can assume that none of these things are final. And if the window shuts for a little bit, it probably won't take 10 years for it to reopen.

Speaker B: But I guess the underlying market dynamics, to go back to where we started from, that you observed in your clients behavior, um, before the big market pullback of 2022, you're not seeing that today. You're not seeing the kind of SpaceX is not a meme stock. Clearly it's worth trillions of dollars. But there's similar comparisons of it's being driven up with a lack of earnings to crazy levels, falls back down again. I'm not comparing it to GameStop, but do you know what I mean? Are you seeing in your clients behavior anything that makes you think back to 2020, 2021 before the pullback in 2022?

Speaker A: Well, the companies that our clients are investing in, I think by and large are large companies that have uh, earnings power and are at the frontier of their industries. So you mentioned SpaceX. You also have companies like Nvidia, Tesla, uh, the other chip makers. The chip makers have been doing, uh, have been doing well as of late and our customers have been interested in those. Um, so I think unlike 2020 and 2021, where there was this dynamic of, I'd call it nostalgia, a lot of investors, a lot of our customers are millennials. They were investing in companies that were in their eyes unfairly punished by Covid era policies. So you had retailers like uh, GameStop, movie chains, um, the airlines, rental car companies. You wouldn't say that these companies, uh, even optimistically I think are at the frontiers of innovation. They're actually, you know, due to the market environment and Covid and to some degree, uh, everything going online and streaming, uh, or getting disrupted in some sense, which is very different from today where our customers are by and large investing in these disruptor companies that are at the frontiers of their industries. And you know, I think you can debate the price to earnings and all of those indicators, but I don't think you can debate that they're changing the world.

Speaker B: Yeah, unquestionably. Huge leading companies, huge revenues, growing revenues. I agree. Uh, even if the PE multiples can be steep.

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Speaker B: let's talk about Robinhood more broadly and before getting to where you are today and the next steps. When you look back, what is the fundamental thing that helped you to gain traction early Days Commission free trading was the big first step.

Speaker A: I think that it was a combination of three things that led the product to really resonate. Number one, you mentioned it, commission free trading. I mean when everyone else is charging 7 to $10 per transaction and we're 0, we were both able to unlock a new market of uh, primarily young people who didn't have the thousand dollars or $2,000 you needed to get started. But, but later we were able to get active traders on the platform as well. If you're an active trader and you're trading 100 or a thousand times a month, you'd put up with a lack of functionality or features relative to other platforms because the value proposition economically is so strong. So the economics certainly one, number two was, uh, in addition to pioneering commission free trading and um, creating the gold standard business model of our industry, now we also pioneered mobile trading. So we were the ones that kind of led the platform shift to mobile. Before Robinhood, you had some brokers that had had launched mobile apps, but it was very much an afterthought. But we made a bet that mobile was going to be big and in fact it's going to be the primary way people engage with their finances because there's actual practical advantages to having it beyond mobile. So we designed for that. I think Robinhood really uh, created the mobile brokerage industry and the market, which has become increasingly the default market, um, and uh, has been a leader there. And then the third thing which I think is important is what the company stands for. So you look back at the global financial crisis in 2008 and a lot of our customers were kind of coming of age at that time. I graduated college in 2008. I went to grad school my first month in grad school. But my co founder Baiju's first month at his job, Lehman Brothers went under. So you had the start of the global financial crisis. And the way that uh, our generation perceived the global financial crisis was that it was a problem imposed on them by the financial industry and the financial industry made poor decisions. Uh, the cost of it was kind of socialized to some degree. Uh, nobody was punished and the ensuing recovery went to the financial industry or people that were already invested in kind of insiders to some degree the top 1%. This led to the Occupy Wall street movement and this generational malaise in the early 2010s. And so I think people were in need of a solution. And I think what Robinhood offered was a solution that said, hey, rather than abandoning the system because we have A really strong uh, system in the US Here, uh, compared to I grew up in Eastern Europe, Very, very different. We're talking about 10% inflation. Like a disaster. Uh, Bulgaria in 1997 had over 2000% inflation. My last year in the country there was a little pre shock, uh, 150 to 200% inflation. So just staggering numbers. Um, and in really Robinhood, the idea was a very powerful idea because what it stands for is ownership. I think a world where a future owned by the few is a very fragile future. We want to make everyone an owner and we believe that um, ownership, broad ownership is essential to a free, stable and prosperous society. I think that message really resonated and I think the three things together made us at the time the certainly the fastest growing brokerage.

Speaker B: Oh absolutely. I remember covering it all. And by the way, all three things together I think were brilliantly summed up by the name Robinhood. And I want to come back to the name in a second. Um, but I personally remember, I think it really resonated and caught my attention when we were covering it on cnbc, partly because of the name, summing all of that up. Um, come back to that in a second. Just you sum those things together. Clearly you've taken market share and attracted some customers as you said, that were trading elsewhere. But, but I think as you're alluding to, you brought in a new set of customers that might not have been in the market at uh, all in the first place. Where do you see penetration now in the US for not just Robinhood but for your broader sector? Are there more people other than obviously generational effects? Are there more people still potentially to come into the markets that haven't? Or is the last decade shift of that kind of given most of the

Speaker A: low hanging fruit already, I think uh, there's much more opportunity now. The US is at uh, roughly 2/35% equity participation. And uh, if you look back, uh, the guys at acquired podcast, uh, did an episode on Vanguard.

Speaker B: It's a fantastic podcast.

Speaker A: Yeah, so they plotted this and there were a couple of inflection points. You know, there was the rise uh, of the employer sponsored 401k, uh, which took equity participation from 20% to something like 50 where it actually plateaued for a bit right after the global financial crisis. And then on the chart you see the launch of Robinhood, which took it from the 50s to the 60s and has still been increasing. And now the question is, can we get from the 60s to the 90s, uh, maybe uh, getting to literally 100 might um, be challenging. There's going to be a long tail there. But I think the 90s is doable and what that requires is many people aren't eligible for an employer sponsored 401k. So can we get them brokerage accounts? Can we get them invested? Can we do it from an early age? And that's why we're so excited about being the sole initial broker and trustee with, with BNY Mellon, uh, powering the Trump Accounts program, which is a US program that gives every newborn child a brokerage account invested in a diversified ah, uh, uh, diversified group of companies from age 0. So I think um, you know, that's the beginning of something that could take us to 90 uh, plus percent equity participation in the US over time, quite literally completing uh, well, never complete, but at least accelerating our mission and making everyone uh, an owner in the US at least.

Speaker C: Hi guys, it's Wilf. I hope you're enjoying this episode. Just a quick reminder to please hit follow or subscribe on your podcast or

Speaker B: video app so that you never miss an episode.

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Speaker B: So then, snapshot for me where you think penetration is or the opportunity to grow in a market like the uk?

Speaker A: Well I think the UK is a little bit further behind. Uh, yeah, I think that uh, one in six uh, people have exposure to equities and, but you know, I see no reason. And if you look at the industry, uh, you know you have the big brokers here that haven't gone commission free yet. The full service brokers, unlike in the U.S. uh, have not, you know, adopted the business model which I think is an inevitability actually. I think over time they'll have to adopt it. And, and the UK just hasn't had its uh, its, its industry shift yet. But, but if I, if we look at the UK market, one of the reasons we get so excited about it, it's sophisticated market. People understand financial services. Um, there are similarities to the US in terms of uh, you know, the, the level of understanding and how people think about their money. Um, there are some differences as well, but we believe that by bringing good product into the market there's huge opportunity here and we're seeing that with our UK launch. That's why we're continuing to invest. We're rolling out more. We're now at the stage where were actually building UK specific products like our ISIS launch with the 2% match. Um, yeah. And, uh, you know, occasionally I'll say this, um, and the IR team doesn't love it.

Speaker B: And to some degree, I'm looking forward to this.

Speaker A: Yeah, to some degree it's, uh, uh, aspirational. But, uh, I do aspire to be one of the largest employers in the uk. I think it's very fitting that Robinhood should be a UK company in kind of the same way, uh, it started as a US company. I mean, the legend of Robinhood originated here.

Speaker B: So this is why I feel a

Speaker A: calling to come here and serve this market.

Speaker B: This is why I didn't want you to pick up on the name until we got to the UK section, which is obviously, as you say, it's a figure from medieval England. And look, I do think the name in the rise in the late 2000 and tens, early 2000 and twenties, was a huge factor in the U.S. it

Speaker C: will resonate here even more.

Speaker B: I think people still feel, by the way, um, the sentiment you were saying that Occupy Wall street embodied for three or four or five years in the U.S. i think people still feel that there. So I think there's something to tap into there. I'm obviously a believer with this podcast of, um, the need for growing equity ownership here. There's another statistic I'll throw out there, which is that the gambling commission here, it was actually a 2024. I keep saying last year, two years ago, their 2024 report, over 50% of the population placed the bet in a single year. There is that underlying desire to take risk, but it's channeled into the wrong industry in my eyes at the moment, rather than the. Than, uh, investing. So I think there's huge potential upside. But at the moment, the message has not quite cracked through.

Speaker A: Um, well, we'll keep working on it.

Speaker B: Yeah, great. No, I think, um, the country needs to save more for the long term.

Speaker C: Let's, um, talk about crypto.

Speaker B: Cause you mentioned commitment here you've got the big announcement, um, which crypto's a part of. You're launching the public mainnet of Robinhood chain. For the uninitiated, what does that mean exactly?

Speaker A: So it's a blockchain, uh, a layer two, uh, built on top of Ethereum with Arbitrum technology. And the intent is for this to be the best chain for real world assets. And what I mean by that is, uh, for the longest time, and I think it's still very much the case, when people say crypto, they mean Bitcoin and Meme Coins and these assets that actually don't represent anything in the physical world. And Robinhood, uh, for, for over a year now our crypto strategy has been can we, can we actually take crypto technology and turn it into useful infrastructure for real world assets, assets that have fundamental utility and in doing so make it easier for people to own those assets worldwide. So um, along with the Robinhood chain we uh, are progressing in our tokenization initiatives. And last year we did an event in Cannes in the south of France where we unveiled our long term tokenization roadmap. We said, okay, what's the value of tokenization? The value is in the same way that stablecoin has spread access to US Dollars to hundreds of countries worldwide where it would have been very, very difficult for people to get their hands on dollars otherwise. And now they have a solution. With stablecoin, tokenization, uh, will spread the value of US equities, uh, and make it easier to own US equities, uh, for people in the long tail of countries that don't have even as sophisticated financial systems as we have here in the uk um, so on the Robinhood chain we will have uh, stock tokens. Those stock tokens will be live in over 120 countries. So you'll be able to use a non custodial wallet or the Robinhood wallet. We provide one for which there will be a really, really nice experience uh, for trading and swapping stock tokens and get access to the entire universe of, get exposure to the entire universe of US listed equities. Right now we have 2000 with our first phase of stock tokens, um, and they'll be tradable 24, 7. They'll also be portable so you'll be less reliant on any individual broker counterparty. Uh, as long as the blockchain continues to operate, uh, your tokens will be transferable and swappable.

Speaker C: This episode is sponsored by BNY Investments. BMY Investments is part of bmy, a uh, global financial services company supporting investors and institutions around the world. This sponsorship does not constitute investment advice. This episode is sponsored by the World Gold Council, the global experts on gold. They champion gold as a trusted strategic asset, providing market leading research to help investors understand gold's role and modernize how gold is owned, traded and used. Developing industry standards and market infrastructure. Learn more@goldhub.com and let's move from that

Speaker B: to tokenization more broadly, including of private assets, of non listed assets. I mean I guess it's quite easy for you to do it for us equities you kind of obviously have a lot of stock in that and um, it's easy for you to own it and underwrite it. When you do any other tokenization, is it synthetic or is it always real? Do you always own the underlying asset as well?

Speaker A: It's always real.

Speaker B: And so does that then mean you have to have the permission?

Speaker A: And actually I should clarify this, uh, because there's been industry chatter. Some of our competitors also chatter about why our tokens are uh, not the best tokens and how their future tokens will solve some of our shortcomings. Um, they are backed one to one and customers should feel uh, secure in the fact that if something happens to Robinhood, their exposure is safe. So we've also clarified the structure with this relaunch of the tokens product and

Speaker B: if it is of a private, non listed company. I listened to your episode, uh, with um, the Collisons on Cheeky Pint. Obviously Stripe, uh, they haven't listed uh,

Speaker A: yet, um, but there is uh, Robin Hood Ventures Fund one, uh, has a piece of it has uh, invested in Stripe. So I did, um.

Speaker B: I bet that's done.

Speaker A: Well, I'll declare some uh, victory there for getting them over the line because you know, they were generally skeptical of this whole providing access to retail. They'd always tell me, look, we're a small family owned Irish business.

Speaker B: Uh, not that small anymore.

Speaker A: No, not that it was tongue in cheek. Uh, but yeah, no, we were happy to have them join the portfolio and kind of embrace retail pre ipo.

Speaker B: I guess my question on it, given its underlying one to one, can a company always block it? Or if you acquired privately for Robinhood's balance sheet, a chunk of Stripe? I guess they could in their founding documents, if you took it off an employee, they could have made it impossible going forward for that to happen in the terms of their shareholding. Or are you quite up for the fight if sometimes, if you get your hands on the shares?

Speaker A: Yeah, yeah. Um, and we've had our fights in the past, uh, yeah, not so much with Stripe, but um, uh, there's two things that we do and have done. One is the tokenized privates that we announced last year again at our can event in the EU where we had stock tokens for SpaceX and OpenAI. Uh, and that was really, it was in the form of a gift.

Speaker B: So.

Speaker A: So we never actually made them 24. Seven tradable between customers. Um, partly because it's so new. And um, there's certain things that we have to clear up both on a Regulatory side. So uh, the tokenized offering uh, was limited to a gift the eu. Um, we're still trying to figure out the best way but we haven't yet scaled that. And now Robinhood Ventures which is the US solution uh, and it's done quite well. Um, and the mission of that is how can we actually using Tradfi, give exposure to these private companies. And we came up with a structure via closed end fund. So this is a publicly traded vehicle. You can kind of think of it as a publicly traded venture capital firm so invests in a portfolio of private assets. Uh, and it invested in companies like Stripe OpenAI, uh, SpaceX at the IPO, Revolut UK, uh, company here and uh, yeah, a collection of others. And one of our principles is um, that we respect the issuer. Right. Uh, we of course prioritize the shareholder. We believe retail should have ownership of these private companies. Very, very important. But we also respect our issuers and we believe long term we're going to end up in a place where issuers. This is going to be a common thing. Uh, we have come to the conclusion, we made a bet that that um, you know having the issuers buy in is, is, is critical and it's critical for acceptance of this product. It's also going to be where things end up over the long run. And every investment in Robinhood Ventures, the company is actually you know, excited to, to participate, has been excited to participate thus far. They're filming videos. Uh, they see the benefit of having, of having retail early. And I think that's going to be a ubiquitous thing where we'd like to take it as actually earlier stage because Robin Hood Ventures fund one generally late stage pre IPO companies, they've already been um, I mean on a relative, relatively speaking, uh, they're less risky than earlier stage. But, but I um, think in seed and series A, the first rounds of capital that a company raises when it's just an idea that should be safely made available to retail investors as well. So that, that's uh, I think that's kind of the end state. Retail is a part of all stages of capital formation even, even the very beginning.

Speaker B: I think that's really interesting. I mean let's see it in early stage would uh, definitely be a sea change moment to get retail involved. And I also do wonder whether companies will continue to go to IPOs as late as they have been. And if, which is an. If private capital, private credit and equity have some kind of reset, then maybe the private capital that they've all had access to might be not as readily available. We'll see in the years ahead. Let's talk about um, A.I. and uh, you've talked in lots of podcasts about tangible examples improving your customer interface that it gives you, you want to build it yourself. Um, so that gives you that edge. Do you think this will be. We talked about what led to your rise from commission free trading to being mobile first. The company in your space that harnesses AI in the right way will take what extra scale of market share do you think in the next five years?

Speaker A: Well so here's the way I think about it. Um, I think there will always be humans making trades. Um, I started my career in high frequency trading which was one of the first use cases of, of AI or you know back then it was called machine learning. Uh, high frequency traders were buying GPUs. Uh, and the first version of like Cuda powered non graphics card accelerators. Nvidia rolled Those out in 2010. The Nvidia Teslas they call them. And uh, I think uh, I had one of the first ones off the shelf right back in my high frequency trading days. Um, we were using them uh, to price different securities and to build algos. And so markets have been electronic for a long time. Uh, you've had quants, writing, sophisticated strategies, deploying them. Before Robinhood came in it looked like you know, high frequency trading, uh, as a percentage of the market was going to eat the entire thing. Right. And now Robinhood, you know, has, has led to a big resurgence in retail. Retail has come back. Humans are making trades. There's always a balance between the two. Um, but uh, what I think is the interesting opportunity is can you take the strategies and can you take some of the tools that ah, an extremely sophisticated hedge fund or a high frequency trading firm can deploy and they look very different than typical retail strategies. And can we make it easier for people to do that without a computer science degree? So I think that's the promise. I think this looks much more like democratizing software engineering than democratizing retail trading.

Speaker B: Does it ultimately end up with making markets perfectly efficient?

Speaker A: I don't think so. And you can imagine, um, there's already algos, uh, trading but human decisions.

Speaker B: But if every retail trader had access to that and said turn it on, yeah, then would they be perfectly efficient?

Speaker A: Well, I mean if every retail trader used the same AI agent then I think the opportunity and the incremental value of using that AI agent would probably decrease. Uh, which I think then would open up an opportunity to be a Human trader.

Speaker B: Yeah.

Speaker A: So um, this is, these are very complex dynamic systems. They're, they're, they're chaotic right, in every sense. Um, but I don't think, I think there's going to be some balance. Um, and what I have high confidence in is agentic trading which, which we rolled out ah a couple of weeks ago along with a gentic credit card, um will start to take share from uh, that software engineering prosumer and maybe eventually the institutional trading bucket over time.

Speaker B: Obviously AI is incredibly expensive. We've seen how much money is being invested in it. A lot of people Mason Moffitt Value act on talking about BlackRock and why he started a position there. And a lot of people say you need massive scale to make the necessary investment. JP Morgan invests more money than most people's market cap in tech every year. You've got the scale to compete.

Speaker A: Well, uh, it's a uh, yes, um, but also I guess I reject the premise that you need massive scale to um, to compete in AI. I uh, think that there's a lot of small startups that are building really amazing things and you also saw the whole deep seek moment last year where and of course I don't have the underlying training data and there are some rumors that maybe this was overstated. But if they trained a frontier quality model for $6 million then you extrapolate the curves of you know, price to performance. New chips coming out, new training algorithms. I um, think at the same time companies are investing more and more but, but also it's possible to get to frontier quality with lower and lower investment over time. And you know it's not even clear that Robinhood has to do our own pre training. Pre training is the part that's very expensive rl relatively cheaper to some degree. Um, doing post training, doing reinforcement learning, uh, in house, um, uh, yeah, I think cuts down quite a bit of the cost and can lead to performance. Uh, but do we have the resources to build awesome things? Absolutely. And I mean you're already seeing them come to market.

Speaker B: It's interesting. This perfectly leads me to my next question. Last couple of questions as we m run out of time. But you're 39 years old and you manage $100 billion market cap company. Do you think you gain more from being young and dynamic and energetic and totally across these areas that we just talked about than you lose from not having the years on this planet? The experience that most people who are CEOs of companies of that size are by just being 60 or older.

Speaker A: I mean I Think I'm kind of in the Goldilocks period to some degree because I'm no longer the 25 year old I was when, uh, I started Robin Hood. You know, you can see a couple of the gray hairs forming on my chin.

Speaker B: Still got a pretty good head of hair. You're not going bald yet, that's for sure.

Speaker A: Yeah, uh, I think I can put on a suit and uh, hang with extremely serious people, maybe in a way that, well, when I was 25, I would bask, uh, in their credibility and really, really, uh, looked, uh, a little bit less comfortable. But also. So I have, what is it, 15 years of experience, um, in the industry, but also I'm young enough to not be completely a fish out of water with these new technologies. So, um, yeah, I think there's definitely a balance there. Financial services industry has historically been an industry that prioritizes, um, safety and stability, and we care about that very, very much. Um, but also innovation is incredibly important and I think we've been a disruptor and I think, um, the balance that Robinhood has to get right is this balance between how can we be extremely safe and stable, but also how can we lead? And leading requires innovating, innovating requires risk taking. And can we balance those two things? And um, I think for the company to be able to balance them, um, the founder and the CEO has to balance them as well. Because companies reflect the founders and over time I think they converge. If done well, uh, if I can balance those things, I think it's much more likely that the company will do a nice job of it.

Speaker B: Well, as someone that's, um, a year older than you and at 40, if you're framing your position as in the Goldilocks position, I'm happy to conclude that you're right.

Speaker A: You feel pretty good, right too.

Speaker B: America, 250, uh, obviously, ah, well, days away. This drops on Monday 6th July, so, uh, two days earlier, uh, from when it drops. Um, you arrived in America in 1992, uh, from Bulgaria. You referenced this a little bit earlier. Um, you're obviously, as we just referenced now, the founder, CEO of $100 billion company. Do you think you embody the American dream?

Speaker A: Yeah, I think so. I mean, for a long time, if I had to, um, if I had to describe the American dream, it was really about home ownership. Right. Uh, it was a big element of it. You know, how can you get to the point where you can buy a house and have the, the white picket fence and uh, you know, you get the 30 year fixed mortgage. But that was kind of the funnel we were putting people into. Uh, I think Robin Hood feels very strongly that everyone should be an owner. Uh, we think ownership is important. Juxtaposing my time in America with Bulgaria, where when I was born, it was kind of the uh, swan song of the communist era and nobody owned anything. Everyone lived in these large Soviet era apartment buildings that all looked the same and nobody cared, so they were all covered in graffiti. And I was just back in Bulgaria a couple of weeks ago and things hadn't, hadn't changed very much, um, since my previous visit, which was more than 10 years ago. And so I saw what a society without ownership looks like. And um, it's a very fragile society. So I think we have something very, very valuable here in the US that we can nurture. And I think we have to evolve this idea of, uh, ownership from, from just real estate, which I look at as, okay, real estate is great as a part of a portfolio, but if that's, if that's the only thing, it's an illiquid asset with enormous transaction fees that you're kind of suggesting to people that they should take on a ton of leverage to, to purchase. Um, so I mean, we want to broaden that. Uh, Robinhood, of course, believes very strongly in, uh, ownership of stocks and different assets, but we've extended that to privates with the Trump Accounts initiative. We're extending it to age zero. Um, and I think a future that has broad based ownership, uh, is essential in order for us to have a free, stable and prosperous society.

Speaker B: Well, it's a great answer, Vlad. And we're uh, pretty much out of time, so I'll end, uh, as I always do. But what is your overriding piece of investment advice for our listeners?

Speaker A: Uh, I gotta be careful with that question. Um, yeah, I think the reason that I've been pushing very hard on private markets is a lot of these companies that we talked about in this conversation. SpaceX, OpenAI, Anthropic, um, these are companies that either have gone public in trillion dollar valuations or will likely go public in multi trillion dollar valuations. So we're in a very fragile moment right now where a lot of this value creation is accruing to a smaller and smaller group of wealthy insiders that just keeps getting wealthier. And the days of, you know, you investing in a company like Microsoft or Amazon, evaluations of hundreds of millions and seeing a, uh, thousand x or ten thousand x return in the public markets as a retail investor seeming harder to come by. Um, and so we want to make it easier for companies to go public. And we have efforts there, um, but there's a chance those don't work and we could fail. I mean, those efforts could be successful and companies could just still be going public at trillion dollar valuations because raising capital privately will continue to be easy, um, and get easier over time. Um, so we have to unlock these private market opportunities. And that's why I'm so passionate about Robinhood Ventures. I really think this is our next crusade in our mission. Um, can we democratize private markets? Can we make it so that a retail investor has the ability to take ownership, uh, with appropriate safety and guardrails at the earliest possible stages where the risk is highest, but also the opportunity is greatest?

Speaker B: Vlad, it's a great place to leave it. It's been a real pleasure having you on the Master Investor Podcast. Thanks so much for joining me.

Speaker A: Likewise. Thank you for having me.

Speaker B: Next, uh, week on the Master Investor Podcast, we'll be joined by Kara Swisher.

Speaker C: Uh, please hit five, follow or subscribe

Speaker B: on your podcast app if you haven't done so, uh, already. Thanks again for tuning in. And thanks again to Vlad Tenev.

Speaker C: The Master Investor Podcast is sponsored by Elseg Interactive Brokers, the World Gold Council, and BMY Investments. Please do remember the views expressed in this podcast are for general information purposes only. Nothing in the podcast constitutes a financial promotion, investment advice, or a personal recommendation. More on that in the show Notes. This podcast is produced by Paradine Productions and Master Investor limited In association with Birdline Media. If you've enjoyed the show, please do subscribe on YouTube or click follow on your podcast platform and you'll be automatically notified each time a new episode drops.