Robinhood: Mobile First, Margins Later - [Business Breakdowns, EP.233]

25:37It's a good question. And it gets to a point Vlad has talked about that basically 2022, he considers it the refounding of Robinhood. The background is January 2021, you had the crescendo of the meme stock hysteria. Robinhood was forced by the central clearinghouse to effectively pull the buy button on those stocks because of a egregious capital call that was given in the middle of the night, basically demanding$3.5 billion. That was 10x any capital call Robinhood had received up until that point. They'd only raised$700 billion since inception. And that's a whole story that's just fascinating. But basically, they get through that moment in time.

26:19They raise some capital in case that happens again. They get through, but they're just dragged through the mud. And the media is the only issue that could unify AOC and 10 crews is just excoriating Robinhood and these abuses and collusion. Long story short, all of that was proven not to be true. It was just complying with the regulators, the reason they had to pull the buy button. You then fast forward to 2022, and you're coming right off of that controversy into inflation ripping, interest rates going up, gross stocks melting down, investors pulling money out of those stocks, putting them into yield assets.

26:57Robinhood's volume has declined by 40, almost 50%. And it was another existential moment of the business would have gone bankrupt, but are we topping out? Can we continue to grow through this? And Vlad, his insight was that the business that he founded catered to the first-time investor. And that was a very powerful, unlocked, democratizing finance. But the next unlock and what would make their business much more resilient through cycle was focusing on the active trader. And these are more sophisticated traders, people that are using option strategies, multi-leg option strategies that can benefit in a bull market.

27:35They can also make money in a bear market. They can also make money in a sideways market. And also their transaction density is higher. But that was his insight. And he realized, okay, basically we built the product for effectively newbies. And we've by accident acquired some active traders just because our fee structure is so much better and the product is a little bit better. But we're really not doing a good job serving these customers. So this is what kicked off a two-year of intense product development. It kind of looks like Robinhood is working because meme stocks are working or the market is ripping, but really understanding what happened, all of the seeds were sowed two years ago.

28:12The key focus points were, one, recognizing the limits of being a mobile-only experience. So realizing if we want true traders, just sophisticated investors, we need to have a desktop-based platform that has rich charting. That's called Robinhood Legend that launched last year, but had been in the work since 2022. Number two, we need to improve the latency and speed across a lot of the products. We need to improve the option experience. We need to expand into other asset classes that sophisticated traders care about. So futures, tax benefits, also index options. So what you've seen is really this massive increase in product velocity.

28:50If you go back from 2015 to 2021, Robinhood was putting up one big new product a year. Over the last three years, they've been putting out five big new products a year. And a lot of iterative improvements on existing ones like that actually undersells that there've been more improvements than that. Reputation and brand follows product. So Robinhood's product has improved massively. You would not be wrong, I think, in 2021 to just say, hey, Robinhood, I might want to use it, but there's a whole list of things they just don't do that I need to have my brokerage do. And they have been chipping away at that list.

29:27They're almost a complete product parity with a Fidelity, with a Schwab, and in a lot of ways, pulling ahead. So I think it's the improvement with product. And we're seeing that in the reputation increasing, and particularly in NPS. They were scoring really badly with their active traders. Active traders now rate them higher than any other cohort within the company. NPS has improved 40 points since 2022. And overall customer NPS has improved 30 points as well. The business really has changed. The last part of this that I would point to is that the business mix has broadened quite a bit. So if you go back to 2021, transaction revenue was almost 80 % of revenue.

30:09I think it was around 75%. If you look at that today, it's about 55%. What has grown in its place, obviously transactions continue to grow, but the growth of cash weeps, so earning interest on your client's unused cash, which is just going to continue to grow as Robinhood grows its account balances from 10 ,000 to 100 ,000 to 200 ,000. also spinning up the margin lending business, getting that bigger, getting more competitive on margin rates. I think it was in 2021, they had three businesses that were doing nine figures. So$100 million revenue businesses. Today, that's nine. The business has diversified over time, so should be more resilient regardless of market cycle and then also interest rate dynamic today versus 2021.

30:54The last point I would just make is that Vlad is, I think, a fantastic CEO and is the heart and soul of that organization. He's the one that's driven the vision. He's also really smart in terms of bringing in industry talent. That was one legitimate shot you could take at Robinhood pre-2022 was, it's a light offering. They're moving really fast, but you're in a regulated financial industry. You're going to make mistakes. That's going to be costly. He recognized that and brought in a whole host of financial services, industry veterans. I would call out just one quickly, a guy named Steve Quirk.

31:29He's a big personality. He's featured in a lot of the events. He's just a really cool guy. He architected TD Ameritrade's expansion into Active Trader and architected their acquisition of Thinkorswim. So it brought him in and said, hey, you know the playbook, let's execute it here. And that was in 2022 as well. So the product's gotten better, the leadership team has gotten better, and the business is more diversified than it was in 2021. Best way to go after a strategy is to hire somebody that's already done it and executed on it before. I can certainly admire that. If I take what you just mentioned there, I think there's a lot of public scrutiny or questioning over some of the product rollouts, whether it's options or anything that would typically have risk associated with it to the average retail client.

32:18It sounds like this is very much for the active trader base, which in theory understands the risks and dynamics of these, understands the hedging mechanisms rather than being long all these naked exposures. And that itself is offsetting potential risk associated with those going into it that aren't as aware. I think that's fair. You look at the customer outcome. So we talked about account balances, roughly 5X-ing over the last three years. Let's make it a hard comp. Let's look at the peak in 2021. We're still 2X that level. And if you decompose the growth, it's really, really healthy. Half net new deposits, and then it's half organic appreciation of the assets in the account.

33:06And what that shows you is that investors are making good decisions. Again, And these are not day traders that are blowing themselves up. If they were, you just wouldn't be able to get a kind of asset growth that they're showing. And then on the other side, the really healthy net new deposits shows that Robinhood is becoming a higher mindshare. It's a platform that they want to add assets to, that they want to make a bigger part of their financial life. The proof is in the pudding in terms of their customers doing well. There's a great book, Charles Schwab wrote an autobiography called Invested.

33:38It came out in 2019. And it was fascinating to me. He disrupted the industry. In 1975, they deregulated commissions, and it birthed this whole industry of discount brokerage, and Schwab was the most successful. And to see the smear job and the tax that the legacy guys aimed at Schwab, it's very similar to the narratives that have been promulgated around Robinhood of a couple of years ago. It was about gamification, and you need to take this almost paternalistic view of the customer can't be trusted to have choice. We need to make that choice for them. A lot of those same arguments were put against Schwab, and he talks about it a lot.

34:16And I think a lot of cases that's covering up for either the legacy guys want to protect rent-seeking monopoly in one way or another, or it's just a lack or an inability of innovating. A lot of these legacy guys, when we just know this, are on ancient tech stacks and have grown through acquisition. So you've just got this nightmare to try to integrate on the back end. One great example is crypto. Robinhood introduced crypto actually being able to buy a token itself in 2018. Fidelity was obviously slower, but in 2022, I think they launched for institutional clients and then 2023 for individual clients.

34:53Schwab still hasn't. It's coming in 2026. And you could say, well, maybe that is a paternalistic view. I also think there's probably something technologically on the back end that's an issue. The success points for the customer speak for themselves. In general, it is better to empower customers with choice and variety and let them make decisions. It's always difficult to take a legacy incumbent's arguments against a new entrant, an outsider saying it would have validation. You always have to think with a bit of skepticism towards that, and we see it across industries. There's a perception that Robinhood is always pushing the envelope in terms of the riskiest things.

35:34It's actually not the case. And you look at crypto. So they were early to offer crypto. They only offer the 10 most liquid biggest names. If you look at a Coinbase, they're offering 250. Now, obviously that is their business, but Robinhood could have done the same, but purposely held back because of regulatory uncertainty. I think that's one of the risks here is making sure that you don't put irresponsible products in front of your customers. Prediction markets is really the only one where I have even a tiny bit of a question. I think there might be a little bit of risk. How so? I'm very curious.

36:09It's more reputational. Prediction markets are super interesting. The idea of being able to express a view about a real world event. And then always even more interesting is the idea of being able to harvest that data. I think this market's got to get way bigger. The thing I didn't see coming and that I don't maybe love is that sports betting has become this lightning bottle use case. And Robinhood obviously makes that available on the app. I don't see anything wrong with that. The way I think about it is it's got to be a very small percentage of revenue. Even if it's very successful, we're talking about definitely sub 5%.

36:41But where I think is valuable is, again, providing choice to customers and each of those different assets become a different auto ramp. And it really is a customer acquisition tool. One of the interesting things that I didn't even realize was the whole meme stock hysteria was motivated by, I don't think, great investing decisions. Buying GameStop or whatever the crazy valuation was was not a good choice in the long run, but customers came to Robinhood to do that. And 80 % of the customers that came on during that year are still with the company. And by all indications have become real investors.

37:16So investing, as we know, is very much a process of learning, of experimenting and playing. You kind of have to have some of that. The key is to keep them in the platform and get them focused on equities and auctions, which are the real wealth builders. It's definitely going to remain a topic of interest. You could slice it in so many different ways, but it's interesting to hear some of the details in terms of what they've rolled out, how they've rolled out, your perception of where there is risk, where there is a very reasonable approach as it relates to sports betting. I have always been a free markets person.

37:51There is some lack of friction associated with that, which makes me a little bit uneasy. But nonetheless, not for me to decide. If we're to go back to now what the business looks like from revenue streams, I think you mentioned you have the payment for order flow. You have the interest income sweep. Are there any other big buckets today or potential big buckets in the future that can materially change the profile of the business and really the size of the business via material earnings driver? We expect both of the sides of transaction and net interest income to scale with account growth. Robinhood is doing so many things at once that you have to pick what matters most.

38:33But we have followed the fintech world for quite some time. And we think, so Robinhood is rolling out a banking offering at the end of this year. It's going to really ramp up next year. We think that is going to be very successful, specifically a banking high yield savings equivalent, and then also a link credit card. We think that has the potential for customers that attach to basically double ARPU. So ARPU today is about$150. If you look at some comps, I think SoFi is a good comp in terms of even the strategy and the way they've executed. Robinhood is going to look like that, but they have even better cards.

39:07But you can back into$125,$150 ARPU from that banking and credit card business. The reason that we feel that they are advantaged is primarily around the engagement data. There's a war for eyeballs. We all know that. There's a consolidation of attention around a couple apps. Realistically, particularly with younger generations, if multiple financial services can be accomplished in one app, I think that's where the world is going to move to, assuming product parity and assuming a strong brand. Again, we think Robin Hood is the beneficiary there. But if you look amongst users, Robin Hood customers spend about two hours in the app per month.

39:45That's about twice as much time as Schwab customers, about four times as much time as Fidelity customers. But what's really interesting is it's like five to 10x as much time as other financial services apps. The legacy banking apps, also the peer-to-peer payment players, Venmo, Cash App, also the buy now, pay later players, and then also these neobanks like a chime. And we think that is very powerful. Banking is something that every consumer fintech at some point says, we want to go after that. We want to try to get deposits. So we usually have our kind of on-ramp initial product, the ones I just laid out, P2P money transfer, buy now, pay later, some other form of lending.

40:25And then some that are just trying to come straight out of the box as a neobank. And then you have brokerage. We believe brokerage is very advantaged here. One, because of that engagement point. The second is its core business. So brokerage is very profitable,$150 ARPU. If you look at somebody like Cash App, which we've invested in Block in the past, it really came out of the gate very strong. One of the core problems was that peer-to-peer money transfer is a loss leader. You don't actually make money on it, you actually lose money on it. So you're fighting, the more your customer uses your product, the deeper your hole is.

41:01Brokerage doesn't have that issue. One of the really important things is setting up incentives, having a war chest to fund incentives to get customers to make the right choices. The big holy grail is getting direct deposit to have customers deposit their checks on a monthly recurring basis into your account. SoFi has actually been pretty successful. They didn't have great cards. And it's a real credit to Anthony Noto and that team for executing as well as they have. We see Robinhood in a position to be very generous with incentives. They've already done this on their IRA product, which has been growing like a weed.

41:36And they are giving a 3 % match on your annual contribution. Way better than anybody else in the industry. And actually going back to kind of our original frame of Robinhood disrupting based on economics and then on product. That's the economics piece in terms of being very generous on the IRA match. But then also, I think they're the only retirement account that has ever received a design award. They did receive that award. We see the same framework coming in, making them successful in banking. It brings us to this question too of the gold subscription, which is another thing that smooths out the revenue profile of the business.

42:11Gold subscribers in the most recent quarter grew about 75 % year over year compared to total accounts growing 10%. It's very powerful. And we see the Amazon Prime model of packing a ton of value behind a very cheap, a very affordable subscription as a means of consolidating, in Amazon's case, spend, in Robinhood's case, consolidating your financial life, more assets on platform to take advantage of the benefits of gold, it's$5 a month. So we're talking about the price of a cup of coffee. You could industry leading yield on your bank balances. So think about it like a high yield savings account, industry leading cash back on the credit cards of 3%, cross the board rewards, free market data, better margin rates.

42:58They just continue to add value here. And that's where I think the banking offerings are going to slot behind gold. Today, 13 % of users are gold customers. Spotify, I think around 40 % of their users are the paid tier. Our view is that gold gets to 50 % penetration over time. And think about that as kind of a proxy for the savings and the banking stamp. Again, this is over a decade long time horizon, but these products work better together. When you've got your savings right next to your brokerage, you've also spending out of the same account, you can track your expenses. And then particularly if you let your mind run a little bit into a couple of years, they're already demoing this, the AI functionality of having a co-pilot for your money, the insights that you get out of that scale exponentially, the more assets and the more activity you're doing on platform.

43:46So we think all of that augurs very well for Robinhood. If you think about those revenue streams, we're talking about primarily net interest income on cash balances, so pseudo-recurring, not transactional, and then also interchange on the card, which again is pseudo-recurring. So both of those things smooth move out on the margin, remit profile the business. I didn't fully appreciate the gold subscription being that one-stop shop aspiration, particularly with the banking side of things. And it all gets back to your point earlier on having that mindshare and then share of financial transactions, which as you evolve a business to get away from the cyclicality of that trading business or investment business, it makes a lot of logical sense.

44:30And it's nice that you have a high margin trading business to fund that as an alternative to some of the others that you mentioned there. On the cost side of the equation, I can come up with an idea of this being software-esque just in the sense that you're going to have the fixed cost, but the incremental margins in theory should be impressive. But how would you capture the cost structure and anything unique about that profile? You're 100 % right. This is one of the great attributes of brokerage, certainly for the scaled incumbents, which Robinhood isn't an incumbent, but they're certainly scaled, is that it's a very high fixed cost, very low variable cost.

45:08So Robinhood has disclosed that their cost structure is 85 % fixed, 15 % variable. The industry is actually very consolidated. Three players control 80 % of the market based on accounts. So you've got Fidelity, Schwab, and Robinhood. And if you looked at the assets, not accounts, but assets, even more concentrated. So it's an industry that wins itself to scale and scale advantages. And a lot of that is exactly this cost structure that we're talking about in that it costs a lot to be regulatorily compliant in KYC, to do all of these things that you need to do. But the cost to facilitate 1 million accounts is not that much different from 10 million.

45:46To your point in terms of what's different, it's not being suppressed today. But I think the long-term steady state margins for Robinhood are significantly higher than first Schwab. Robinhood really was born in the cloud on AWS. And that has two principal benefits. Their competitors, mainframe based, and then have been very, very acquisitive. And there's a lot of tech debt associated with that. And even with all that tech debt, maintaining all those disparate databases, they've still got 50 % margins. So we expect steady state Robinhood margins to look more like interactive brokers. So interactive brokers is around 70 and their model is different.

46:24So we kind of get there for different reasons, but a lot of it is efficiency on the cost side. Vlad has talked about a movement to real-time settlement on blockchain rails via tokenization. Those transactions being one-tenth the cost of traditional transactions for Robinhood. So we'll see how that pans out from a regulatory perspective. But if that's true, that probably gets us even over 70%. But this is a business that scales really attractively. Today, the principal benefit, they're on AWS, so it's cheaper. They also can spin up products much faster. And what we're seeing is them reinvest that structural cost advantage into top-line growth objectives today.

47:03But at some point in the future, that will become less important. We'll see market scale. Now, just for context for our listeners, today EBITDA margins are low 50s and incremental EBITDA margin over the last four quarters has been, I think, 81%. So it's really impressive. An impressive incremental relative to the industrials that I used to cover. Exactly. And remember, we're talking about$10 ,000 account balances. When you think about just how much bigger from an asset perspective this business gets, it's really impressive. Obviously, revenue doesn't scale like one to one with assets. You do see a deterioration in the ROCA return on client assets.

47:40So we model that moderating over time, but it's still really, really impressive revenue growth coming in at very, very high incremental margins. If you did your best isolation of the most important things you track from a growth perspective, what stands out? Principally, we are looking at account growth over time. So we're looking at net deposits are very important. We are also looking at a non-financial metric product velocity and uptake of those incremental products. The one risk that we see, or just generic risks that you see with a company like Robinhood that is this dynamic and this ambitious is a loss of focus.

48:19The way to frame this in my mind is the upside is kind of on rails. And I know that maybe that sounds crazy, but if you really look at how much customers love this company, look at how they're improving the product, it's just so clear in a year or two, they're going to be so far out in front of their competitors. One thing we haven't talked about, and again, it's in the early phase, but the idea of AI being a platform shift in this industry. And this is again, where being born in the cloud is going to be a huge advantage. You've got a sound data strategy, you can access that data. And we believe that in the next year or two, Robinhood is going to start spinning up this financial co-pilot that a Schwab or Fidelity is just not going to be able to offer.

48:59So I would say looking for those kinds of products, continued progress there, particularly on the AI cortex side. They demoed at the last product day, an AI scripting and screening tools, which we think are going to be very impactful for the active investor. In general, we're looking for account growth. And then we're also looking for product velocity and a retaining of key focus. The latter are being oftentimes more difficult to track, but equally important because it's a symbolic measurement of the go forward. On the account side of the equation, I actually don't know if Robinhood is a global user base or if it's mostly domestic US and what that represents for them as a business.

49:45Is that a material opportunity just from a growth perspective? It's a great point. And I probably should have mentioned, that's one area that I think we are extremely conservative in modeling. So basically model effectively no contribution. So to answer your question, yes, it's all US. They technically have operations in the UK, but it's very, very small at this point. Historically, the history of brokerage would tell you that it's pretty hard to break into other countries. One, because the cost of dealing with all the local regulatory regimes. Two, by definition, all these countries are going to have fewer inhabitants than the US are smaller markets.

50:18And then three, you just see the percentage of those smaller populations that invest in stocks is way smaller. So it becomes smaller TAM, potentially higher cost. I think that's why Vlad is so focused on using tokenization in these markets as a way to bring down the cost and therefore making expansion into these countries much more efficient than past brokerages that failed in that attempt. In our modeling, we're probably conservative on the account growth, but we have accounts going from 26 million to 40 million. So you're talking about an addition of only about one and a half million accounts per year, about half of that coming from share take, half of that coming from net deal to the industry.

50:55And that's a four or 5 % CAGR. So pretty slow. The majority of our growth is driven by asset growth, existing accounts, and then monetization of these peripheral financial services. But I encourage any of our listeners that want to dig into the international opportunity, please do. And This is a perfect example. Robinhood is doing so many things. You almost have to pick your bets in terms of what you think matters flat. If you hear him talk, he thinks international is a huge opportunity. So I'm probably wrong on this, but it's just even more upside. I don't think you need to believe he did much contribution, if anything, for this to be a blackout.

51:29It's difficult with this type of velocity, as you mentioned. One point you just made on that 1.5 million half coming from taking share half coming from net new accounts, has the Has share taking or share grab been a piece of the story in recent years? Do they report that? Is there any way to measure whether that is actually something that you're seeing happening? When we think about share take, it really matters what age demographic we're looking at, and it's good to decompose. So if you look at Robinhood's share in baby boomers and certainly the silent generation, we're talking about 1 % share.

52:09when you get to Gen X, share increases to about 20%. Millennials, over 50 % market share. And then with Gen Z, over 65%. If you look at Robinhood, 75 % of their customers are under 45. And that ratio is flipped for all of these legacy guys. What's really interesting too, is we've got the largest intergenerational wealth transfer on record that's going to be playing out over the next 15 years, where basically$80 trillion is going to be passing from baby boomers to their children. The Beatty Boomers are a majority on the legacy brokerages and all of their children who are receiving those funds are on Robinhood.

52:47It got 20 % share of accounts. Robinhood under earns today, so only 2 % of assets. But we expect of that transfer, that 80 trillion. And again, if you really cut it down, 40 trillion is investable assets. I mean, you can haircut that again of self-directed versus assisted. But we assume Robinhood gets 40 % incremental share, And that alone gets you Robinhood today at about$300 billion in assets to$4 trillion over the next decade. So just massive growth. That 20 % versus 2 % is a meaningful opportunity. To start to close things down on the risk side of the equation, I think there's some fairly obvious ones.

53:27But the one that I wanted to focus on was the regulatory dynamics. Vlad has spent plenty of time with the regulators from everything in the GameStop moment, but also in terms of rolling new things out. Where would you say they stand just in terms of regulatory reputation, that relationship? It feels very important to me, particularly as the velocity of what they're rolling out is so high and they're doing so many different things. Do you have any sense of that? Their regulatory team is very strong. So Dan Gallagher runs their compliance and regulatory affairs. He was a former SEC chair and has become very much a thought leader.

54:08Vlad is even becoming a thought leader, particularly the area of tokenization. The Trump administration writ large is very supportive of tokenization of crypto. Surprisingly, the EU has been as well. Again, this is all very early days, but actually trialing tokenization of equities is starting for Robinhood in the UK and in the EU as opposed to the US. It's certainly something to track, and Robinhood is going to continue to be at the forefront. Their reputation with regulators is good. Dan actually came on, I believe, in 2020 or 2021. He wasn't in that 2022 hiring phase, but I think his influence has grown.

54:46Robinhood has grown up as a company. Vlad has grown up as a company. I think the regulators recognize that as well. That's quite a time to join and see all of the action. He's lived through some wars, to say the least. Is there anything else that stands out to you as a major risk or thing that you would most focus on in terms of risk to the business or the stock? Generically, with the company, this ambitious, trying to do this many things, focus. If you want to be a financial analyst, you could say capital allocation. Robinhood and Vlad have earned a ton of credit, or they've proven themselves in this regard.

55:22so it's not something that keeps me up at night. Those are the problems you want. Amazon, you're going to have a Fire Phone every now and then. You want a company that's pushing the envelope, trying new things. And it's just such a stark contrast. If you compare what Robinhood's doing to anybody else in the brokerage space, there's really no comparison. I'm a fan of Coinbase in general, but if you compare Robinhood as the only founder-led brokerage left, Schwab, Fidelity, we're talking about three to four generations, they're kind of managers at this point. But Brian Armstrong is a founder. And if you look at the product velocity out of Coinbase, it just doesn't compare to Robinhood.

55:57It does hammer home, yes, this is founder-led, but even amongst founders, I think Vlad is very, very impressive, has a mathematical mind, also a genius of branding, a renaissance man, if you will. I expect him to continue to deliver as he's built out that bench of talent around him. It would feel like a logical acquisition target for some incumbents across the financial services space, not just brokerages, which from a valuation perspective, it would be challenging. But where does that stand just in terms of your perspective on their willingness to ever entertain an acquisition offer or something along those lines?

56:36I don't think there's any desire. I don't know why they would. But I've never seen a company that has this an expansive view of itself and in the best possible way. It's not delusion. They're executing it again. So they've earned the right. I would encourage any of our listeners that are interested to watch the investor day from late 2024, last year. And they outlined these three growth arcs of win the active trader over the next one to two years, use that to fund winning wallet share with the millennial and Gen Z. This goes to our banking discussion and the growth of gold. looking out past that, they are for sure going to disrupt the low end of the wealth management industry.

57:15There's just no question about it. My conviction in that has grown a lot just in the last couple of weeks as I've done more work there. That's another revenue stream that's going to come down the pike that using AI and then they made an acquisition of a company called Trade PMR that does custody for RIAs. I think it's actually going to look very much like TurboTax and TurboTax Live, that evolution of going from DIY tax and Robinhood is basically DIY investing to a hybrid model where you still are doing most of it yourself, but you have one AI helping guide you. But then also the option of if you've got a top question or you want some real advice, here's a little button up top, or we're going to connect you to an actual RIA.

57:52With all of those aspirations in front of them, I don't see any chance of taking an acquisition offer. Something told me that was the answer based on the ambitions worth mentioning. One other risk, the reality is the stock is up 7x over the last year. Stocks can get ahead of businesses. I don't want to make a call on valuation or what makes sense. And every investor has a different time horizon. But I would just note that stocks can get ahead of businesses in the short run. It's always good to have that disclaimer in there. This has been fascinating. I've learned a lot more about Robinhood. Despite there being so much out there about them, It's deepened my appreciation and understanding of exactly what they're doing.

58:33We close out the conversation with just the lessons that you might be able to take away and apply elsewhere. Is there anything that stands out as a lesson or lessons from Robinhood that you could apply as an investor elsewhere? The big lesson for me is that product wins. This was an industry that was basically being very comfortable and very profitable. All the VCs said, Robinhood, you're going to fail. Everybody that came before them that attempted something like this did fail. What they didn't factor in is Robinhood's attention to detail and focus on product. Customers ultimately recognize that.

59:11At our firm, we break up the investable universe into generational winners, which is what Robinhood would be. You've got stalwarts, which are these stable, steady-eddy companies, and then you've got opportunistic situations where maybe it's a turnaround. That is the risk of the stalwart bucket of saying this is a really profitable monopoly and they're crushing it, which is what I'm sure people were saying about Schwab and Fidelity at one point. And you have a Robinhood that just comes up and steals the entire next generation out from under you. I think that is something that investors need to be aware of, not to write off a small competitor if the product is very strong.

59:45One thing that impressed me as I've really gone deep on Robinhood is the extreme attention to detail within that company. You pick up the app. And for those that haven't used it, this sounds like a squishy competitive advantage of it just feels good. Very much akin to Apple. And if you talk to people that have worked there, it's a known thing in terms of you'll have PMs and engineers that come from other fintech companies. And it's literally like a six month adjustment period where they have to level up their game and realize that it's not just about pushing out a product that works. The product has to be beautiful.

1:00:18It has to feel great. A big part of that is a large contingent of Robinhood customers are also users and are power users. Pretty much any product that they launch first gets baited within the firm for a couple of weeks, and they really rip it to shreds. It is that sanding down. It is that nitty-gritty detail and the push for polish that ultimately, kind of to your very original point of it's not just the economic model. It's really the product and being mobile first. That is true, and it's as true today as it was then. And that attention to detail and that total empathy with the customer is really what has made Robinhood successful and will continue to make them successful in the future.

1:00:56Having an eye for that in a management team and a culture is super powerful. It's an incredible disruption story and one that we will continue to watch with the ambitions still being quite large. So thank you, Art. This has been a pleasure. Thank you. To find more episodes of Breakdowns ranging from Costco to Visa to Moderna, or to sign up for our weekly summary, check out joincolossus.com. That's J-O-I-N-C-O-L-O-S-S-U-S dot com.