Robinhood CEO Vlad Tenev on Tokenization and Prediction Markets for Everything

13:25Tracy Alloway:They've been gifted. But those are back.

13:27Vlad Tenev:But the token holder doesn't have the equity. It's in the special purpose vehicle, I assume.

13:31Joe Weisenthal:So, yeah, technically the way this works is it's kind of similar to a stable coin. Yeah. So you have your bag of traditional assets that are governed by traditional rules and legal covenants and whatnot here. And then you mint and burn tokens against that. But yeah, as of now in Europe, it's a derivative product. And that's also subject to change. You can think of this as kind of the paperwork around the technology. The technology is the same, but we have been hearing from customers that, hey, they're a little bit concerned with traditional stocks in the event of bankruptcy of Robinhood or something.

14:09Joe Weisenthal:It's very clear what happens. And so in V1, I think a lot of those questions were ambiguous. But since then, we've continued working and we're going to have a V2 and eventually a phase three of this offering where we believe we'll have a path to actually addressing all those concerns. So now you're at the point where if you buy something that's tokenized, maybe it's a little clunky and it is slightly worse as a product than if you have the traditional equity, right? If you have access to that, some people don't have access to it. So it's actually much better for them. But I think you're going to get to the point within the next year where it's superior in all practical ways.

14:51Joe Weisenthal:And I think that's where things really start to get interesting.

14:55Vlad Tenev:And just on the Ventures Fund, I know you said it was a closed-end fund, but is that like a 40-act thing? It's a 40-act thing. 40-act, okay. Yeah.

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16:31Tracy Alloway:Edition. It's your daily 15-minute podcast on the latest in global news, politics, and international relations.

16:38Vlad Tenev:Listen to the Bloomberg Daybreak U.S. edition podcast each morning for the stories that matter with the context you need.

16:45Tracy Alloway:Find us on Apple, Spotify or anywhere you listen.

16:50Vlad Tenev:I find financial engineering interesting and it certainly gives us a lot to talk about. But on the other hand, it seems like so much work. Would it not just be simpler to try to lobby for the accredited investor rules to actually be changed? Like, how are you making the decisions to we're going to create all these new products, which I assume are a lot of work for you guys, take a lot of discussion with the regulators versus just lobbying for these old rules to actually get overhauled?

17:17Joe Weisenthal:Yeah, I think we're doing that as well. I think the accredited investor rule needs to go. Frankly, it doesn't make any sense. But I don't think that answers all of the problems that people have with private market investing. The other problem is just liquidity. Like I don't even myself, right, who has access to these things. I don't want to have my capital locked up for 10 years, possibly more for these companies to go public. And some of them might never go public. Right. So there's liquidity. There's also just access. And I mean, Robinhood, part of what we're doing here is we're out there hustling, getting into these deals because I'm in Silicon Valley.

17:57Joe Weisenthal:Our team is there, unlike most of these financial companies that are here in New York. So we happen to kind of be in the epicenter where the deals are getting done, where the companies are based. The no carry, obviously, and the accreditation, you know, if we could solve that through other ways, that will become interesting. But Chairman Atkins of the SEC actually specifically called out closed-ed funds as the preferred vehicle for having access to privates. So, you know, we're doing our part working with the regulators to try to open this up. I think they agree that it's a problem. And, you know, I don't think that it's going to be the end state necessarily.

18:35Joe Weisenthal:I think this thing will evolve, but we want to serve customers and work with regulators at all stages of it. So, and, you know, you do this once. The fact that it's hard is also kind of attractive because it makes it so that we're unique. Like we figure it out. We have qualities that we can bring to bear that not all of our competitors can. For example, you really need to have both sides. You need retail to actually be on the platform and to be serving customers who are interested in these products. You also need to get to the supply. And I think Robinhood is somewhat unique in being able to actually do both of these things simultaneously.

19:17Joe Weisenthal:And then we figure it out once and then we turn the crank. So, you know, you notice we named it RVI, Robinhood Fund One. We do anticipate there will be other funds. We already have lots of ideas of unique products we can offer. So it's really just the first step.

19:31Vlad Tenev:So you mentioned being in Silicon Valley and being able to source these deals. And this is the other thing I wanted to ask you, because getting into a hot private tech company at the moment seems incredibly competitive. And Joe and I, we go out and we talk to a lot of venture capital funds and they always give us the same pitch, which is, well, we're different. We build long term relationships with our investments. How is Robinhood actually competing in that space? And what, I guess, differentiates you from a sort of classic VC? you?

20:00Joe Weisenthal:Yeah. I mean, a big one is we can say that there's no carry on these funds. And what that means is it's just the more, we believe a more investor friendly vehicle, right? Typical venture capital firm will charge the management fee. There's also a carry on top, which means every dollar past a hurdle rate, 20 % of that goes back to the fund manager. So it's more investor friendly product. The other thing is, I think a lot of these companies are interested in retail, and no other venture capital firm can say, hey, actually, our LPs de facto, not technically LPs, but the people investing in your company and who will get the underlying exposure through this fund are normal people, mom and pop.

20:46Joe Weisenthal:And I think that's something that nobody else is offering. So that's a unique differentiator. And some people don't like that, to be fair, but other people really, really like it. And for those people, and I think in the future, less people will not like it because of the uncertainty. And that'll just make it more attractive. So the headwinds are receding headwinds, right? It's never going to be as difficult as it is right now to get companies interested in it. And I think it'll actually get substantially easier. We kind of went through this with IPO access, actually. So we have the largest retail platform for access to IPOs where we function as a selling group member.

21:26Joe Weisenthal:And, you know, we first rolled this out slightly before our IPO. The intent was Robinhood's IPO would be a big retail offering. And I think at the time it was the largest for its size. It was north of 20 % retail allocation. The other companies that allowed us access to their IPOs that year, I mean, they were early adopters. They saw the vision. We also just had to like scratch and claw and bang on a lot of doors and ask a lot of favors, right? There was some skepticism. Then the IPO market shut in 2022. And then when we reopened, an interesting thing happened. Now everyone's coming to us and asking us about retail strategy.

22:07Joe Weisenthal:Pretty much all of the IPO-ing names are coming to us to talk about retail. And so we saw that shift in just a few years. I think this will be even faster for privates.

22:18Tracy Alloway:I want to ask, so, okay, you mentioned the advantages is, okay, there's no carry, there's things like that. That all sounds nice. I foresee a potential conflict of interest that I'd like you to talk to me about. In a traditional VC fund, it's pretty obvious. The goal is to make a lot of money, right? You make investments and you want them to go up. It strikes me, and especially when hearing the names of the companies in RVI, it's like they're very sexy names, right? They're the kind of household names to the extent that that exists within private companies and boom and Databricks, et cetera. It seems to me like the traditional VC fund, like you're going to optimize for making the most money, the best returns, including names that no one has ever heard of.

23:00Tracy Alloway:Why should I not think that Robinhood's portfolio has been optimized for retail awareness, not for the best returns, but for the collection of companies that will spark the most triggers in people's heads to get them invest because they've heard of them and they're sexy and not necessarily the best options out there in terms of investing?

23:17Joe Weisenthal:Well, I mean, first of all, we are incented to make this firm perform well, right? We, everyone will see it. It's going to be highly public. The returns will just be out there. And, you know, we have a fiduciary obligation. We've got a great fund manager that we've hired and we're underwriting all of these deals extremely rigorously. I think the biggest worry that you have with things like this is actually adverse selection, right? Are you just going to get into the deals of the companies that need the money and are desperate for it? This is what you run into with new things typically. It's like, when am I going to start looking at -

23:57Tracy Alloway:No, this is what I think because I've got, like I mentioned this on another episode. Someone was like, Joe, someone is selling some Anthropics shares with this interest. I'm not investing in companies I cover in the private market, so I'm not going to do it. But like I always have the thought like, you know, if someone's offering to sell it to me, they must really want to get like when they're asking us when they're like offering the equity to Joe. Like that's like a bad sign. I'm not necessarily a bad sign, but that adverse selection of like by the time it's getting allocated to retail, like a bunch of people have decided to part with it.

24:26Joe Weisenthal:We have to flip that on its head. And actually, all of the deals that we've gotten into have been competitive deals. Like we've had to work for these allocations. You know, I have a lot of friends that are venture capitalists. And I think some of them, like I've been talking about this for a while, this general idea of we want to get in and actually start competing with you guys, you know, and they never took me seriously. But then we started getting allocations and deals that they wanted allocations in. And I've started getting calls and they've been telling me, hey, this Robinhood Ventures is a real thing.

24:58Joe Weisenthal:I have to contend with you now. So I think we're very proud of the companies that we've gotten thus far, I think.

25:05Tracy Alloway:You made the point that one of the drawbacks is liquidity, which is always going to be a phenomenon in private markets. Another drawback to this is that the investor doesn't know anything. There's no 10 Qs. There's no earnings calls or anything like that. And, you know, you don't know, OK, you own some tiny slice of a private company, whether via a token or whether via RVI. You don't really know what the share count is. You don't know, like, how much have they, like, allocated to employees this quarter? because they're under no obligation to think that. Are we heading towards a world, do you think, in which the tradeoff is like, OK, investors can get access to almost everything via some instrument, but are we heading to a world where the flip side is and they're going to know a lot less about the companies that they've invested in?

25:50Joe Weisenthal:I don't think so. I don't worry about that. And in fact, one of the innovations that we're putting out there with the launch of this offering is private company detail pages. So you'll actually be able to search for the private companies themselves in Robinhood and see all of the information.

26:07Tracy Alloway:But they're not going to like, they're like revenues, like earning, like all the traditional, like they're not.

26:12Joe Weisenthal:It's publicly available information, what they've chosen to share, but it's all in one place. And you get a lot of useful stuff in there. You see the valuation history. So you can see like, you know, the chart of companies like Databricks, for example. Yeah. And I think there's just a lot of information out there. I mean, if you think about investing in a private company today versus a retail investor investing in a public company, say in the 80s, I'd venture to say there's more information. You have like App Store analytics data for consumer products. They're out there. A lot of these late stage privates are doing public company like disclosures and audits on a regular basis because these aren't$100 million companies.

26:59Joe Weisenthal:Some of them are in the hundreds of billions of valuations, tens of billions. Probably 15 years ago, these would have gone public a while ago. So, I mean, we've generally started with household names, with some exceptions, that are already established at the frontiers of the industries. And these are like the companies that would be closest to being public. So if you think about public company, IPO access candidate, Robinhood Ventures, Robinhood Ventures is feeling, it's like gradually extending backward. Actually, the thing I'm most excited about, if I had to point to something, it's eventually getting to the earliest possible stages.

27:40Joe Weisenthal:Like I think retail should be funding seed rounds. Like the first capital in a company should have a retail participation. And I think we hear from the customers, one of the concerns is, well, these companies are fairly late stage. How do I get exposure to something that's earlier so I can get in on the ground floor? And I think that's something we're excited to dig into and work on.

28:04Vlad Tenev:Would that be like a GoFundMe competitor or something? Because there are some good Kickstarter. That's what I'm thinking of, not GoFundMe.

28:10Joe Weisenthal:Well, the difference is with those products, you don't actually get any ownership. You're giving you're making a donation.

28:16Vlad Tenev:Sometimes you get early products, I guess, but that's about it.

28:18Joe Weisenthal:Yeah, but what they want is ownership. They want to invest in something when it's at a valuation of, say,$10 million.

28:24Tracy Alloway:Yeah.

28:25Joe Weisenthal:And if it gets to$10 billion, that's a—

28:27Tracy Alloway:And then they'll learn that 99 % of those companies go to zero. That's true. But they have to learn that lesson for themselves, it sounds like.

28:32Joe Weisenthal:Well, you know, that's where we come in, right? And we think that we can figure out what the right deals are. And what we intend to do is offer great companies to customers.

28:44Vlad Tenev:Well, on this note, and just going back to the Ventures Fund as well, I mean, one other issue I foresee is that you see a lot of flow and information in the market. And you can imagine some of your competitors potentially thinking that, you know, maybe some of that flow would inform how the fund is actually managed. I mean, in some respects, like you're starting to get a little bit investment banky where you have this huge flow business that you can glean market insights from. And then you also have managed funds. How are you sort of hiving off those two activities? Or how are you thinking about how like the data and the flow data that you see, how will that actually inform management?

29:24Joe Weisenthal:Yeah, I mean, certainly one of the advantages is we know what retail investors are interested in. Yeah. And by and large, what we try to do is give people things they're interested in. You know, if they're not interested in it, it's not going to be a successful product. So I think that's a big differentiator as we think about this product. In terms of how the fund is managed, it has a separate board with great board members, separate everything, auditing, compliance. So it's like a company within Robinhood, the management company.

29:55Vlad Tenev:So there's a Chinese wall, effectively.

29:57Joe Weisenthal:Well, you know, you get into legal questions. I don't even know if that word is appropriate to use anymore.

30:04Vlad Tenev:I was going to say, I don't think we're supposed to use that anymore, so I'm sorry.

30:06Joe Weisenthal:But yeah, of course, you can imagine everything that we do is highly regulated and scrutinized by armies of professionals. So yeah, that's the one thing. We're so established at this point that we have to play everything by the books.

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31:30Tracy Alloway:Can we talk about prediction markets for a little bit? I have a lot. We have a lot of questions about this. You have a relationship with Kelsey, so people can actually access Kelsey's markets through the Robinhood platform. When trying to understand who is going to make money in prediction markets, which is more valuable, the liquidity pool and activity that emerged on Kelsey or the distribution that you have through Robinhood and like, which is the harder thing to replicate here?

32:03Joe Weisenthal:Yeah. I mean, it's fundamentally two different businesses, right? You can think of Calci in this case playing a role similar to an exchange in the equities and options markets. So it's like institutional business predominantly, although in CFTC land, it's interesting that the exchanges also have the ability to go direct to consumer, which you don't see in traditional equities. and it's a business where you're matching orders. So you're working with market makers, you're working with professional traders, you have retail as well. And to win there, you have to have great technology, low latency, you have to be good about listing products, maintaining market integrity.

32:48Joe Weisenthal:And it's like a complex business, right? And that's why the businesses that have gotten scale and traditional assets are worth, tens of billions of dollars, sometimes more. We have a slightly different business model. The way to think about Robinhood is we're a financial super app. We should be the best place to keep your money and your assets. And we're building products to make sure more and more of your financial life. Ideally, all of it is on Robinhood. So if you want to trade prediction markets, options, futures, you're an active trader, we should get 100 % of your active trading activity and we compete for that.

33:26Joe Weisenthal:We also want your retirement account, your kids' custodial accounts, your trusts, all of your mutual funds eventually, your spending activity through our card products, your banking through checking and savings. So it's really about how do we own the entire financial relationship? And we vertically integrate where it makes sense, where we think we have a unique advantage, but it's not like a focused exchange business. Although, you know, I should say we entered into an agreement. We've acquired a stake in Rothera, which is formerly Ledger X, which is a DCM. So we do intend to actually vertically integrate the prediction market side of the business.

34:09Hmm.

34:10Vlad Tenev:So one of the things we often hear in defense of prediction markets is this idea that like, well, actually, if you're an institutional investor, this could be a way to hedge some exposure that you have. So I don't know if you're an airline and a huge part of your expense account is oil. Maybe you would take a position on what's happening in Iran or something like that.

34:29Joe Weisenthal:Yeah.

34:29Vlad Tenev:I know that.

34:30Joe Weisenthal:Or if you're a retail investor.

34:31Vlad Tenev:Well, this was going to be my next question. I know that you see mostly how retail investors are behaving, but do you see any evidence that people are like thinking through it that systemically versus just like placing a bet on whatever particular contract kind of catches their eye?

34:45Joe Weisenthal:Yeah, I mean, I think there's lots of stories out there that have been covered about people being incredibly scientific about all their trading. And prediction markets gives you a wide surface area to do that under. I mean, you have obviously the sports contracts, which everyone likes to talk about, but economics. You've got a contract on alien disclosure, which I really that's one of my favorite ones. Last I checked, 22 percent chance that there will be alien disclosure by the U.S. government this year.

35:17Vlad Tenev:And rising, I think, rising recently after all the.

35:19Joe Weisenthal:Well, there's been some some some chatter about it for sure. But, yeah, I mean, I think that like there's people out there that are studying these things in detail. They're building models. And what you find is with any nascent market, before you get like full institutional participation, there's more opportunities. And I think now we're before the point where these opportunities are arbitraged by the big players.

35:45Tracy Alloway:I asked this question recently to CFTC chairman Michael Selig, and I think we kind of got a no answer, if I'm being honest. So maybe I'll try it with you. As you understand it today, would there be any limitation legally on Robinhood setting up a live stream of a giant roulette wheel and having people make futures event contracts on whether it's red or black?

36:09Joe Weisenthal:Yeah, I mean, currently, our policy has been to have them be backed by real events. So we don't want to do like derivative. We haven't done any derivative prediction markets. And there's different forms of that as well. Like, you have like prediction markets, and then you have a prediction market on how this prediction market is going to go.

36:33Tracy Alloway:So, like, for example, Polymarket had a market where it was the coin toss at the Super Bowl. You could bet on heads or tails and was trading at 50 percent before the toss. And then it went to 100 percent.

36:43Vlad Tenev:I mean, that seems very much like gambling, right?

36:45Tracy Alloway:Well, like, why even bother having the Super Bowl at that point? If people are willing to, like, bet money on a coin toss, why not just have a continuous coin toss? Why just forget the Super Bowl, just have a coin tossing machine and let people trade on it. Is there like is there anything actually like stopping you from doing that?

37:01Joe Weisenthal:I'm not sure. Yeah, I mean, I'd have to look into that. We don't offer any of those contracts. I personally, you know, I'm a former trader, probably wouldn't trade those. I think the purposes for people trading them is probably more entertainment. But yeah, that's not to say that all prediction markets are like that. And I'm not against people innovating because that's how we discover things, right? Like, generally speaking, I'm in favor of people trying new things and seeing what happens as long as nobody is getting hurt and, you know, market integrity and investor protection, all of that is being upheld.

37:37Tracy Alloway:Just on the relationship with Kelshi, like you want to be this one-stop shop for all money. Presumably, Polymarket is going to build out its US version. I don't know exactly what state of that. There's my other competitors. Is that going to be an exclusive thing or is the goal so that a user of Robinhood can trade predictions on any platform?

37:58Joe Weisenthal:Yeah. So even currently, our relationship, we connect to multiple prediction market back-end exchanges. is Calci obviously is the larger because they have the vibrant sports contracts. And they've been moving fast. We also have ForecastX, which is the prediction markets subsidiary of interactive brokers. And as I mentioned before, we've got Rothera, which is ours. And also, we're continuing to talk to these guys. Everyone's interested in having access to Robinhood customers, sending our orders there. And I think the way this plays out is similar to our other asset classes where we prioritize for where the customer is going to get the best execution and also contract variety.

38:44Joe Weisenthal:And we'll send our orders there. And I think where this ends up is you'll have lots and lots of destinations. You'll have smart order routing. And the contracts, I think, will be increasingly fungible. So at some point, there's going to be a way to cross books and actually offload risk. And, you know, you'll have the election contract here and election contract there. And there will be a layer where you can actually like, even though there's technically on different exchanges, exchange one for the other.

39:15Vlad Tenev:I'd say more about this because this was actually going to be my next question. But when you think about what makes a good prediction market, the complaint that we often hear is, well, there's just not enough size. There's not enough liquidity in the contract. So I imagine a big component of who you're partnering with is just like the largest platform that's out there, like a Calci. But can you describe like actually what you think makes a good prediction market for investors? Like what are the pros and cons of each one?

39:44Joe Weisenthal:Yeah, I mean, I think volume and liquidity and contract selection are the big things. Contract selection, customers want selection. They want variety. they want to be able to explore. And both traders value this because they can trade more things, but also the casual use case of just looking at the markets and figuring out what the odds of events are. Liquidity obviously improves things. It improves the prices and also improves the odds of getting filled if you bring in an order with size and costs, transaction costs. Yeah. I mean, I think those are basically the main things.

40:23Tracy Alloway:It's very easy with prediction markets to replicate things that we don't think of as event contracts. So you can recreate a line that looks like equity or futures on a prediction market. You could have. And I'm curious.

40:39Joe Weisenthal:And I think some of those products are very useful.

40:41Tracy Alloway:Yeah, that's exactly what I was going to say. Do you see a point where particularly from the perspective of a trader where essentially the exchange itself can be disrupted or sort of Napsterized or something like that because they have the instruments to get the price exposure that they want without having to interact with the traditional equity layer? I think it's different.

41:06Joe Weisenthal:You know, I think that obviously equity exposure is extremely low cost right now. Yeah. In large part due to our efforts in the space. But if you want to buy an equity, I mean, it's just never been cheaper. Right. Right. Our all in monetization on equities business is like two basis points. So I don't really think it's competitive with that product. The other thing is you have leverage, which, again, Robinhood for our active traders, great margin rates. I mean, I think the most competitive margin rates in the industry, at least that I'm aware of. Will you provide leverage to prediction market traders?

41:47Joe Weisenthal:Right now, leverage is not permissible in prediction markets, but that's something a lot of people are talking about and asking about. Well, I guess we're working on it to some degree, which is just driving towards clarity. But since that would have to be an exchange product, the exchanges would actually have to get clarity. But I think it's coming. Look, I mean, I don't think you can imagine the market's still in its infancy. So you'll get all of these things introduced. And when you look at the options markets for traders, the leverage is actually a very attractive element of it, being able to put in a relatively small amount of money and get large exposure.

42:28Joe Weisenthal:So I think there's a lot that prediction markets – there's a lot of growth and a lot of evolution that's needed before it becomes like a full institutional grade asset. But it's underway and we should assume that it's going to happen and it's going to happen quickly. And I think there's all sorts of – we view this and we have early insight because we're actually, I think, one of the only places where you can have all these assets in one place. We don't see any cannibalization. Traders love it. And I think we see an opportunity in combining all of these assets into one cohesive picture. For example, you can imagine you have a particular equity in that equity detail page, say it's a Tesla or another company, you see prediction markets related to that company.

43:17Joe Weisenthal:And then that gives you a comprehensive view and you can trade very specific things. We think there's a big opportunity in earnings as well. A lot of people have thoughts on how companies are going to do with earnings. They have models. Stock price is an imperfect proxy for that. So EPS and revenue contracts directly would be very attractive. And right now that's in a little bit of a limbo because it meets the criteria of a securities-based swap, which would be an SEC product, right? So harmonization is needed to clear the path for listing products like that, which we're working with the regulators and collaborating to try to figure out.

43:56Joe Weisenthal:But yeah, it's exciting from like a market standpoint because we're in the early innings and you can kind of see the future of how it's going to evolve. It's going to be a much bigger asset class, much more institutional. It's evolved similar. I think it'll evolve similarly, but more quickly to other asset classes that have come in in the past.

44:15Vlad Tenev:Just going back to tokenized stocks for a second, does consent matter at all? That sounded more like Epstein-ish than I intended it to sound like. But like if an open AI comes out and says like, we have some reservations about this, we have some concerns, would that give you pause for providing a token in that particular company? And then, you know, your role in the market is expanding as you start these new venture funds and things like that, you might not want to annoy a bunch of private companies at this stage. So how are you balancing those considerations?

44:49Joe Weisenthal:Yeah, these are all considerations that we're thinking through. Obviously, right now, the policy that we have is we'd like to get the consent of the companies. We want them to be on board. I think that if you think about it from now, here's the nuance. Let's say you're an accredited high net worth individual. There are ways to get exposure to these companies without the company consenting, right? They just don't care. But legally, you could become a LP and an SPV that exists. There's these ways where companies have already lost control of who their shareholder base is. And not to mention when they go public, you've completely lost control of your shareholder base.

45:34Joe Weisenthal:so i think since it's early obviously our approach is we want to make sure everything is we don't want anyone saying they don't want robin hood ventures uh invest in their company and throwing ice water over it not to say that that's going to be the policy forever but that's kind of the that that's the approach we're we're taking now do you want to just drop your new card on the table

45:56Tracy Alloway:i know my god so you have we can just i don't we don't need to do a big like ad for like all the great people can look that up but you have this new platinum card is this really bad opsec if

46:06Vlad Tenev:he's like dropping his credit card no i just want to hear how it sounds it's very this is the most secure credit card on the market your number is not on it oh all right oh that is legit would you

46:16Joe Weisenthal:like to hold it i would i yes so this is nice this is really nice so heaviest card on the market beats out the robin hood gold yeah wait actually drop the gold card now let's hear the difference

46:28Tracy Alloway:of very different no one watched that puny gold here here's the pointing here's the platinum

46:33Joe Weisenthal:drop again let me drop the platinum so let me tell you uh i can tell you the thesis behind this card if it makes sense we want this to be like the james bond card yeah no it feels if you are james bond this is the card for you if james bond sean connery himself were to have a credit card he would have this card and i think we tried to evoke that feeling not just in the design of the card But if you look at the website, we have a scuba diver. Nice. We have like these nice planes. So, yeah, we really tried to think.

47:05Tracy Alloway:If I pulled that out, my friends won't make fun of me. No.

47:08Joe Weisenthal:I will, too.

47:09Tracy Alloway:You would try to see what.

47:10Joe Weisenthal:If you pull that out.

47:11Vlad Tenev:Actually, I really like it.

47:12Joe Weisenthal:Well, actually, it's got 5 % dining credit. That's probably. Nobody offers that with a high limit. So it's actually intended for you to treat your friends. Okay. And take it out. They're not going to complain.

47:23Tracy Alloway:They're not going to make fun of me when I'm paying for dinner.

47:25Joe Weisenthal:And what we found was with the gold card, a lot of people don't really use physical cards anymore. It's Apple Pay. But the moments when you use your physical card, it's less of a payment instrument. It's more like, let me show you my watch. It's a fashion accessory. It's a luxury good. And I don't know if the credit card industry has really evolved. I think to the same degree, iPhone. You have the orange iPhones now. Now, it's a fashion accessory, less of a utilitarian good. And I think physical cards the same way. It used to be that people wanted physical cards that were as light as possible because it served a utilitarian purpose.

48:04Joe Weisenthal:You want to keep it in your wallet. You want your wallet to be light so that you're not hunched over. Now, I think it's a little bit different. It's an extension of your personality.

48:13Vlad Tenev:I'm a big fan of physicality in everyday products. Remember the cube, the tungsten cube? Oh, yeah. I have one. Like, that was a direct response to, like, the ephemerality, ephemeralness.

48:25Joe Weisenthal:Of crypto, yeah.

48:25Vlad Tenev:Of crypto, right? Like, you want something that's tangible and, like, feels heavy in your head.

48:29Joe Weisenthal:I keep telling Deepak that a tungsten card for crypto people would be cool.

48:34Tracy Alloway:Yeah, get on that. Ooh, you should do that.

48:36Joe Weisenthal:Not a bad idea.

48:37Tracy Alloway:Vlad Teno, thank you so much for coming back on OddLabs. Great chatting.

48:41Joe Weisenthal:Yeah, always a pleasure. Thank you, guys.

48:55Tracy Alloway:Tracy, I love catching up with Vlad. I mean, Robinhood is a company that is like so far ahead of the curve in basically everything that's happened with like the retailization of every market. The complete breaking down of every distinction between what's a stock, what's a future, what's a token, et cetera. Like they're right in the middle of all of it.

49:16Vlad Tenev:Absolutely. And also there's a reflexivity here, right? Because the bigger Robin Hood gets, the more its offerings kind of matter for the way the market itself behaves. So I think it's definitely a worthwhile discussion. I got to say, though, like the financialization of everything, I do find a little bit dystopian. I remember like I went to Macau once and I was really looking forward to it because I was thinking, you know, the Las Vegas of the East. But a lot of the gambling I found like pretty depressing because some of it was as basic as like, let's roll the dice. And if it's a high number, you win.

49:52Vlad Tenev:And if it's a low number, you lose. And taking like those kind of very simplistic binary bets. Yeah. And I feel like a lot of that is sort of creeping into the financial system.

50:02Tracy Alloway:Yeah. I mean, in our daily lives. People bet on the coin flip of the Super Bowl.

50:06Vlad Tenev:Yeah, I know.

50:06Tracy Alloway:Why even have the Super Bowl at that point? If people are just betting on a coin flip, the Super Bowl is kind of an irrelevancy. if people are inclined to bet on the coin flip. I don't know if like people will bet on a coin flip, but it's not like that much. It's basically the same thing. It's like betting on red or black, which people do online, which is really depressing. Actually, the most depressing thing I've ever seen on the gambling front was I was in Iceland and I think they have this -

50:33Vlad Tenev:I do not think of Iceland as like a hub of gambling, but go on.

50:36Tracy Alloway:Like I was looking for stuff to watch on TV in my hotel room and they had a stream or they had a video of like this like video casino where they had like an attractive woman dealer dealing cards and the people could phone in their bets. Oh, wow. So like recreate kind of this casino-ish thing. But like it seems like that's where we're going. And then the other thing too is that, as I mentioned, like whether it's like technological arbitrage or regulatory arbitrage, every type of bet can be turned into, done with any type of instrument. Yeah. You can replicate stock and options with futures. You can do sports betting in the form of prediction markets.

51:15Tracy Alloway:You can then take prediction markets, and we've already seen this. You can take prediction markets and bundle them into ETFs. And so you could have buy an ETF that is a series of long Democrat in the Senate markets, et cetera. And so everything could be wrapped in every other sort of wrapper. And everything is just sort of seemingly, once you find the right wrapper, kind of allowed within our current sort of like regulatory framework. And honestly, even if it's not allowed, you do it offshore with crypto, et cetera. And so there's almost no way to sort of stop this stop this progression.

51:47Vlad Tenev:But the other thing I've been thinking of is, you know, we used to hear of markets described as, you know, there were upsides to capitalism, right? Like, you're supposed to be efficiently allocating money.

51:58Tracy Alloway:I still think there's some pretty good upsides.

52:00Vlad Tenev:Of course, of course. But like that used to be the thing. Right. And now you see more and more money that's kind of being diverted away from like, well, this is just going to fund a company. Well, we're just going to bet on the line in the company going up or, you know, some other real world outcome or whatever. Here's what it is. We were talking about this the other day, but like it actually feels like if you think about the 1980s, you had that greed is good. Yeah, yeah, right. Right. And even that was controversial. And now you fast forward to 2026 and it feels like morality doesn't even like necessarily enter into it.

52:34Vlad Tenev:Everyone is just like so resigned to this idea that like, well, of course, people are going to try to make money. Of course, we're going to just bet on random things to try to win.

52:42Tracy Alloway:Everyone just accepts that like securing the bag is is the one other thing I do worry about is like I think American capital markets are good in part because we really do have excellent disclosure. And, you know, from time to time you hear about like an accounting scandal, but they're rare. Like they're a lot rare. I think anyone who looks in any other market around the world would find them way more frequent. and market manipulation would find it way more frequent in other markets outside the U.S. because we have this very good regulatory regime and expectations and the SEC mostly does its job very well.

53:18Tracy Alloway:And it's going to increasingly sort of like be taken over by tradable instruments for which investors really do not have the same level of information at all. And the expectation that an investor would like be able to know the share count of a thing they're buying or be able to know the earnings or the margins of the thing they're buying, like that's going away. And we might regret like having so much traded without as much transparency at some point down the line.

53:43Vlad Tenev:No, absolutely. Actually, this is a good reminder. I wanted to call back to two episodes. So on that note, we did that really good episode about private credit in particular, kind of turning the economy into a black hole. Do you remember that? I think that's really good. You know, obviously it's focused on credit, but you can extrapolate to more and more companies just going private in general. And then secondly, Vlad mentioned he's really into aliens. We got to get Paul Krugman back on to talk about aliens. Let's do it. But in the meantime, there is an existing episode that people should check out.

54:13Vlad Tenev:Anyway, shall we leave it there?

54:15Tracy Alloway:Let's leave it there.

54:15Vlad Tenev:This has been another episode of the Odd Lots podcast. I'm Tracy Allaway. You can follow me at Tracy Allaway.

54:20Tracy Alloway:And I'm Jill Weisenthal. You can follow me at The Stalwart. Follow our guest Vlad Tenev at Vlad Tenev. Follow our producers, Carmen Rodriguez at Carmen Armin. Dashiell Bennett at Dashpot and Kale Brooks at Kale Brooks. And for more Odd Lots content, go to Bloomberg.com slash oddlots for the daily newsletter and all of our episodes. And you can chat about all these topics 24-7 in our Discord, discord.gg slash oddlots.

54:42Vlad Tenev:And if you enjoy Oddlots, if you want us to bring back Vlad on a quarterly basis to follow up on our previous questions, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening. Thank you.

55:36Vlad Tenev:This is Special Agent Regal, Special Agent Bradley Hall. The time is approximately 11.15 a.m. About to start consensual telephone call with Dr. Daiwa Zhang.

55:54Tracy Alloway:China's Ministry of State Security is one of the most mysterious and powerful spy agencies in the world. But in 2017, the FBI got inside.

56:17Joe Weisenthal:I've never seen that much evidence in my entire career, and I don't think we'll ever see that much evidence again. I now have several terabytes of an MSS officer, no doubt, no question, of his life. and that's a unicorn. This is a story of the inner workings of the MSS and how one man's ambition and mistakes opened its vault of secrets. Listen to The Sixth Bureau from Bloomberg Podcasts starting on February 13th on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.