Robinhood CEO: Making Everyone An Owner

27:08But also like every other brokerage, pause trading in GameStop and AMC, right? Pretty much, yeah. I think there were a few that didn't. Because even the ones that didn't, I feel like, I remember Interactive Brokers, like they probably. Oh, yeah. Like they all, they eventually got there and it wasn't because, but it's just, it's hard to explain to somebody who's not a lay person because it's like, well, wait a minute, I sell you stock, right? I get cash, you get stock. Well, it's done. And it's like, no, no, no. There's this like deposit trust clearing corporation. It's like, what are you talking about?

27:38You crazy conspiracy theorist. no, no, no, this is how it works. And it's just, it's so complicated to explain because there's all, it's like the duck that paddles furiously behind, you know, underneath the surface. Like, I have the cash, you have the stock. What are you talking about? And it's like, no, no, no, there's this other stuff happening and that's the hard part to explain. I think we learned a lot of valuable lessons. A simple lie is much more powerful than a complicated group of people. So yeah, the Robinhood's colluding with hedge funds. Right. Very compelling story. It's like, ah, Robinhood, look, They're actually stealing from the poor and giving to the rich.

28:11It just writes itself like it's good. If I was in charge of marketing for a competitor, I'd probably come up with that, right? It would be a good one. And this whole thing about collateral and Dodd-Frank and financial solvency and protecting the financial system, it's a complicated truth at best, right? It's an order of magnitude more time to refute bullshit than to produce it. That's the other one. Yeah, yeah. Yeah. And everyone, the simple, I think the simple antidote would be to just point the finger at someone. It's like, oh, this thing, that's the enemy, which a lot of the other brokers were able to do by pointing the finger at their clearing firms or Apex Clearing or, you know, one of the other folks and saying, you know, we disagree with their decision, but they did this.

28:58So that was also a learning, probably find someone to blame who isn't us a little bit earlier. But of course, we're very chivalrous folks. We don't like to, I don't like the idea of blaming someone. And I prefer to take responsibility for everything, even if it's not my fault. So that ended up biting me a little bit, I guess. But it feels like you're getting even now because it's like going back to the whole, like it took five days to settle a trade, then three, then two, then one. Yeah. Right. Versus the future that you're helping build, which is if you tokenize everything, like there is no more of this middleman that can, oh, you got to post collateral, but wait a minute, why am I posting collateral on top of the stock that I'm giving you or on top of the cash?

29:44Well, because the stock price can change by 50%. That's why there's always a logical reason for it. But like, why is it that in 2025, it takes one whole day to settle a trade, right? Yeah, I think you're totally right. And I mean, there are strange things that happen in the crypto world, right? I mean, actually, probably if you look at solvency and liquidity issues, you had the Celsius and BlockFi and that whole liquidity crunch there culminating a few months later in the collapse of FTX. A couple of weeks ago, you had forced liquidations. I mean, even when Bitcoin dropped below 100 ,000 a few days ago, it was just a torrent of forced liquidations.

30:34It's a little bit more niche, right? It wasn't the products that are experiencing this, whose customers are experiencing this, aren't number one in an app store overall getting millions of new customers a day. So I think it's contained. And so we shouldn't make it sound like crypto is just a panacea. But certainly moving forward and improving with technology can solve a lot of these problems. Yeah, with tokenization, I think certainly if done right, you can prevent that specific issue. You also get 24-7 trading through holidays and weekends, which is very cool. There's also something that I probably, it's not in my interest to talk about, but in some ways it is.

31:19if you self-custody your stocks, you're immune to outages from the broker. You can just sort of like easily replace one brokerage for the other and you don't have to, the blockchain would have to be down for you to lose the ability to trade, which I think is very powerful. Not to mention something you're probably familiar with, the securities lending landscape, which is a huge source of revenue for brokerages and counterparties, is very opaque and very inefficient. A lot of these trades are still happening over Bloomberg Messenger, you know, counterpart, like peer-to-peer. If you do it tokenized, then you have these, like, liquidity pools, which just makes that a very simple thing.

32:04Like, you imagine lending and borrowing your stocks on Aave or some equivalent would be much more efficient and much better for the end user than the current morass of securities lending that's, you know. evolved to be this way after multiple decades. Is it inevitable that the most popular private companies' stocks will be tokenized? We're talking about the dynamics there. Yeah, for sure. Yeah, that's definitely happening. And even if they don't want it, how is it going to happen? I think eventually they'll want it, but there will be an adjustment period. And they'll want it because their customers will want it?

32:43Or like, why would they go there? Well, I'll give you an analogy that I think is actually pretty close. So in 2021, we launched this product, IPO Access. And the idea is pretty simple. IPOs have been dominated by institutional investors since the dawn of time. And we're going to just make it so that retail can participate in IPOs. And not just private wealth, but actual mass market retail. And we had this big chip, which was we were going public. So we, we at the very least could guarantee that they'll get access to ours. And so we at the time had the largest retail allocation, I think certainly of any IPO of our size.

33:27It was between 20 and 25%. And then, of course, we had built all this great technology for ourselves. Let's get everyone else to do it. So we got a bunch of other firms to participate in retail IPO. Most of them, we kind of had to ask for favors or strong arm a little bit or use our bankers because they didn't get it. They were like, this is a strange thing. I'm just trying to get my company public so I could focus on running my business. Everyone's telling me this is a bad idea. We weren't really in the room to advocate for retail allocation, much like the bankers were. So it took a lot of work, and the allocations we got were also quite small.

34:07It was like, okay, we'll make these guys happy. Let's give them 1 % or 2%. And then the market shut down at the end of 2021. Nobody was going public anymore. And then something interesting happened. And in the middle between the reopening of the IPO market, it started becoming clear that stocks that had retail followings were actually being rewarded with higher multiples. I mean, you had Palantir, you had some others. Someone put us in that category as well as a big retail following stock. And so people started calling me to ask about their retail strategy. and now you look in the past couple of months, pretty much every IPO of consequence is on Robinhood and with increasing allocations.

34:56You know, we had bullish that gave 20 % of their IPO to retail. I think Gemini was very similar and we were fortunate to get a big chunk of that. So it went from this being this weird thing that was a little bit, I mean, we had to be annoying to get people to participate to now everyone kind of gets it and wants it and is like interested in even doing more post-IPO. So I think when you ask, private markets access has very similar properties. If you talk to these CEOs of private companies, they generally are aligned with the intent and the mission. Everyone's like, yeah, I would love normal people to be shareholders and not just these like three-layer SPBs It's at least better than the three layer SPV.

35:46So they kind of agree with it. They're like, oh yeah, power to the people, you know. At least not very many people with a straight face have told me, no, I just want to hold the equity and give it to just the big institutions, you know. And I think it's genuine. Most people don't actually love that. And so it's the practicalities that get in the way. Like, this is a new thing. I don't want to be an innovator. in giving private access to retail. That's not the point of my business. I don't want to be a guinea pig, which makes me very confident it's going to evolve in the same way too, where they'll start to see it a little bit.

36:27It'll become normalized. And then the advantages will become clear. Like you'll have retail fans as a private company, many of whom could be your customers or at least your advocates. and then it'll become much more clear. And I actually think for AI companies, it's the most critical because if you look at AI as a category, you have the fastest product adoption of any products in history with chat GPT and all these, you know, cursor and all that, fastest revenue ramps. And at the same time, they're kind of the, it's the most hated category. You interview people and their perception of AI is worse than social media because nobody's worried social media is going to take their jobs, right?

37:14But there's this underlying fear that, you know, these guys, these companies are automating everything. And, you know, where's my job in that list? Is it easy to automate? Is it hard? People are freaked out about that. And I think we could end up in a very bad place if we don't figure out how to be a little bit more egalitarian in the ownership. Like it shouldn't just be owned by a small fraction of VCs. In fact, we should make sure that there's ways to distribute it. Because the best way to not fight against something, as we've seen in public markets with these retail stocks, if you're an owner of it, you'll defend it.

37:53Not a lot of people are defending the AI companies in the public markets. It's like it's both— It's the VCs. The VCs are defending them because they own them. But it's offensive defense, right? Because, I mean, to your point, you have this virtuous cycle where it's like, how many people that bought Tesla stock, how many of, like, this has become almost, I don't want to call it a meme stock, but it's become a very, very popular retail stock. Absolutely. Right? And a lot of the people that bought Tesla and, like, the Tesla bulls are all people that own the car. Right? And, like, there's a virtuous cycle there.

38:26And the flip of that is exactly as you said. It's like, hey, you know what? Everybody's going to be an owner of these things. And I think it's a little bit of a back-to-the-future thing, which is, I think when Amazon went public, like they had like a$600 million market cap. Like 25 years ago or 30 years ago, like the normal, like there was no such thing as a Series D, right? Series D was called an IPO. And it's funny, there's a company in our portfolio that just raised a Series K. Oh, yeah. And H-I-J-K, right? It's like, you know, like Series I, you got to go public by the Series I, right? Like that's IPO, but - We felt a little funny.

39:00I think we did a Series G. Yeah, it's like that's, when you're getting up into the upper letters, the upper consonants of the alphabet. The GameStop round was really a Series H. Yeah, I mean, it's like that's a lot of consonants. And you're better off. Like, you get that. Like, this is so counter-conventional wisdom. I love it when conventional wisdom is wrong or experts are wrong. And this is a big one, right? Which is like, to your point, it's like, oh, you got to have like T. Rowe and Fidelity like buy into your IPO. And that's what's going to give you like a great multiple. And actually, no, no, no, no, that's completely false.

39:30Like, the fact that Palantir is like a runaway tech favorite, or sorry, retail favorite and trades at a very high multiple. And like, it's not just about like trading at a high multiple. Like that's beneficial if you're a CEO of a company, you want to hire and reward talent. Yeah. Right. If you want to retain people like, and if you want to buy a company, having a high currency is actually very, very valuable to you. And retail is actually part of that. And by the way, retail actually benefited from all this stuff 30 years ago. Yeah. But then when series G's and H's and I's and everything else kind of started staying in like the private domain and accessible only to accredited investors.

40:07One of my favorite stories is from, I think it's 1986 in the Wall Street Journal. You know this one? You might remember in a second. Massachusetts banned their residents from buying into the IPO of Apple Computer. The Apple IPO, yeah. Because it was too risky. It was a little earlier, right? 1981. Oh, yeah. It was like in the 80s, but you can just Google like dangerous Massachusetts Wall Street Journal Apple IPO. So 49 other, like, states, you're okay. Like, no nanny state there. But Massachusetts, uh-uh, too dangerous. And, like, Apple's gone up in value, like, 10 billion times. And, by the way, they have, like, one of the largest and most robust state lotteries at the same time.

40:44Which is so bonkers. But, and it's just sad that you used to be able to, like, companies would go public so much earlier. And Dodd-Frank, actually, not Dodd-Frank, Sarbanes-Oxley made this a little bit harder. So like coming out of Enron, it's like, okay, we have to have more controls. It's expensive to be a public company. So you don't want to go public until you get to a certain level. And therefore, nobody goes public until probably conventional wisdom right now is like$300,$400 million minimum revenue. And then it might be worth it. And actually for the best companies, it's a bit of an adverse selection because the companies going public at$300,$400 million are actually probably lower.

41:27Yeah, and the ones that are at a billion, right? The ones that are just like growing like crazy, they're incentivized to stay private longer. It's why I have this volatility. Like my favorite way of framing what private equity firms do, I won't say venture capital, I'll say private equity firms, is they launder volatility. Because every day, what is the price of an asset? It's like whatever anybody will pay for it. But if you're an investor in a private equity firm, it's like, wow, like this crash happened on this day. I'm like, my value in this private equity fund didn't fall at all. It's like, that's not really true.

41:57And there's actually a benefit to having these things be liquid and not launder the volatility. Yeah, but, you know, that's compelling. And that's actually one of the reasons why companies like to stay private and don't like the idea of a real-time price, you know, which is an element if the stock is tokenized. But we're working to solve this problem through tokenization in the EU and also through Robinhood Ventures in the U.S., which is a closed-end fund that we're going to be taking public. And the idea there is, yeah, using whatever means we have necessary, can we get through our retail channels exposure to these assets?

42:39And I think I'm personally very involved in this and like driving it forward. I'm going and giving companies term sheets. That's great. Because I think it's so important. And I think it's not just important for us as a business. Yeah. We'll undercut, we work to undercut fees across anything. So it's not just, you know, that it will be a business for us, but I think it'll make technology adoption of these frontier technologies go much more smoothly. We don't want the people to be against AI because ultimately regulation follows the will of the people. And so I think that if we can get them on board with the technology, we'll just have better outcomes as an industry.

43:22Yeah, have everybody be an owner. I mean, there's a funny website called WTF happened in 1971, which is kind of when you decoupled from the gold standard amongst other things. But wages were kind of stagnant, but asset prices went up a lot. So you would say, I mean, people agreed that there was inflation in 2022. That's why we had all the, you know, the Fed kept raising interest rates. But that was like inflation for like milk and eggs, like things you would buy every day. But meanwhile, for like dozens of years, the price of assets had been inflating massively, which is great if you're on the side of that.

43:58If you own an asset, that's great. But if you just get paid cash, I wrote a little blog on this where, do you think home prices in the Bay Area have gotten more expensive or cheaper in the last 25 years? What would be your guess? In the last 25 years? Yes. Since 2000. Have they gotten more expensive or less expensive? Recall it 20 years even. Yeah. That's a good question. I feel like it must be a trick. It is a trick. They've gotten nominally more expensive. They've gotten cheaper if you price it in a basket of tech stocks. Not gold. Oh, yeah. Gold, they've still gotten more expensive. But how many shares of Apple stock does it take, you know, split adjusted?

44:35So I built like an index of every single Bay Area employer, market cap weighted. Yeah. How many shares does it take to buy a house today versus 2005? It's a lot less today. Yeah. Which is kind of this like, and unfortunately. Apple stock is a unique benchmark to use there. But this is why it's in. Before iPhone came out, right? Sure, but this is important for the same reason that you mentioned, I think. which is if you are paid in assets, right, or if you own assets, you benefit from all of these amazing new things like the iPhone, right? Like you're now an owner, you participate in the ownership economy.

45:10If you're not, if you just get paid cash, and some people get paid a lot of cash, but like they just get left behind versus people that are able to own assets. And it turns out like all, like if I just own stock, you know, pick a different day, 2009, 2002, too, like you, these other assets have gotten cheaper. Yeah. And that's the thing that ideally as a society, we want to, it's not like a fix, but you want everybody to be invested. Like, I love this thing. You were participating in this, right? Like the new, what's the new, the thousand dollars when you're born as a kid? The Invest America Trump accounts.

45:45That's awesome. Right. It's like, give everybody a thousand dollars, get them invested. So now, now they're an owner. This compounds so much. There's another chart that I love that shows the delta and like social security basically that earns nothing in this kind of quasi Ponzi scheme versus if you would just put money in the S &P 500, what does that turn into over the next 50 years? It's just like these things really compound and you want people invested in capitalism. Otherwise, they're not going to like capitalism. Totally. Yeah. Capitalism has kind of become a controversial word. Yes. But yeah, people need to have skin in the game and own this stuff.

46:22And that'll will just lead to a more stable society. Agreed. Alex, we wanted to ask about company strategy. I know you had a question you wanted to ask about going deep versus going broad. Maybe I'll tee you up for it. I kind of think of when you were building this, maybe this goes back to the origin story of sorts, but Robinhood is effectively like a bank account for a lot of people now, right? Which was not the origin story. A lot of people think about it. It's like I have a Robinhood card, which I use, my little green card, right? Which, well, I don't even have the physical card. I just use it on my Apple wallet.

46:55I'm going to hook you up with the gold one. I got to get the gold one. It's on my to-do list. But you can, you started off with this kind of narrow thing, and then you've built a deeper financial relationship with customers. That's kind of how I thought about it, which is I can now direct deposit my paycheck into my Robinhood account. I can use it as effectively a bank account, but it's much, much better. It's cheaper. But also there are different types of traders. Like you could go very, very broad in terms of the types of products that you offer in the trading landscape. And I guess how have you navigated depth versus breadth?

47:30Like go deep with the customer, all the customers that you currently have right now, or concentrically expand to different types of customers? Yeah. Yeah, it's a great question. And the answer is we're trying to do both. We're probably the only company that is looking to go broad. But as we're going broad, we're looking to deepen in each of those things. So, you know, equities trading, we're very deep in. We do 24, we were the first to introduce 24-5 trading. We went self-clearing, so we literally built our own clearing stack. And we actually innovate on the infrastructure there. Same with options trading.

48:11Same with crypto, you know. It's not just spot crypto trading like many of the neobanks or folks that are just adding crypto as an asset. We're doing perpetual futures in the EU. We've got crypto futures in the US. We've got staking, tokenization, right? So we're looking to go deep as well. And I think the reason it works is we can't go deep everywhere simultaneously. but we have to kind of pick the areas where it's most accretive and highest leverage for us, which is active traders. Active traders, like the engineering of the business, it's where new product features translate to revenue most quickly.

48:54And, you know, if you improve the active trading product by half of a percent, you immediately see that in the bottom online and then we can use that as a engine to make further investments. So yeah, active traders very much, we're going deep. But then, you know, if we look at the end goal of getting all of your assets into the platform, there's a kind of an algorithm that we run, which is how do we make it as easy as possible to deposit and remove all reasons you would have from withdrawing your money? And then we can kind of look at why are people withdrawing money? Where is it going? how easy is it to actually bring that in Robinhood?

49:37And, you know, the great thing about our industry is there's so much to do that even though you see this great product velocity and we're shipping new stuff, you'll sometimes be surprised at the basic things that we don't have. Like up until a couple of years ago, you couldn't actually do an ACAD transfer in Robinhood. We added that in 2022. We had one account type individual brokerage account up until a couple of years ago when we added IRAs. We still don't have trust accounts and custodial accounts. And so, you know, when I talk to high net worth individuals, and this is, by the way, a new thing.

50:14It used to be that when I'm on the phone with our best customers, it was someone that had maybe a couple hundred K or maybe a million in their accounts. Then it went to talking to customers that have tens of millions. And nowadays, I'm routinely talking to customers that are looking to move hundreds of millions and have that in Robinhood. And so, you know, for a high net worth individual, there's just tons of things that we have to do. But the goal is, if you have a family office, you should be able to run that family office on Robinhood. or we can automate the running of that for you and you can have tens of billions on there and feel like you're actually at a disadvantage using any other brick and mortar or other brokerage-based solution.

50:57So I have a question. Would you give Elon Musk a deposit bonus if he put all of his Tesla stock on Robinhood? How much does he have? I think he has 200 billion. He did reply to my tweet. Oh, he did? Okay. He did reply to my tweet with a little fire emoji, which I thought was very nice of him. I think we'd have to have a couple conversations with him. We'd have to see, you know, how much he trades. Yeah, okay. And, yeah, see, make sure we can make money from that. But I would try. I would definitely work with him to figure out something that works. Duly noted. Yeah. Yolanda, if you're listening.

51:35Yeah. A few billion dollars you'd make right there. Well, actually, there's a little bit of a strange thing. I'm sure as a public company, you have, like, your RSU provider. Right, right, right. You're a 10B51 manager. Yeah. And one of the things that pains me is we don't offer those services. So if you're under a 10B51 or you have employee stock rewards, we have to use one of our competitors. They're so bad. I mean, this is why I asked the question around like kind of breadth versus depth of I'll never forget this conversation that I had with, do you know who Dan Rose is? He was head of BD at Facebook.

52:08Yeah. Kind of during like the mega growth period of Facebook. and I ran this payment company called TrialPay. I'm pitching something to Dan. And what Dan says to me is like, Alex, that's a great idea, but you're pitching me a gold brick that's like all the way on the other side of the room. And I have all these gold bricks like right around me. And I love what you're talking about. That sounds great, but I got to pick up the gold brick here and here and here and like come back to me in five years for that gold brick. I've heard you say this, I think, and I've been using it in conversations with people.

52:38Yeah, the reality is there's so many things to choose from. And sometimes there's great uncertainty. Like who would have guessed two years ago that prediction markets would be our fastest growing business? So, you know, it's a lot of this is just conversations with me and the GMs and the leadership team where we make decisions about whether we prioritize something over something else. And it's like, do we have the right person to take on this thing? How much conviction do we have? And, you know, there's the easy stuff that we know we're missing, the product gaps. But you can't just build product gaps.

53:18You also have to have things that are available uniquely on Robinhood. Because if we're just building to product gaps, we'll probably never catch up fully. And then we'll always be behind. But I like to make sure across some of the product portfolio, we're just doing things you can't find elsewhere. because you can point to those things like 24-hour market, like prediction markets, like tokenization. And, you know, that's a strong incentive to try Robinhood if you can't get her offering anywhere else. It just feels like that's, like, by starting with product, I mean, there is this giant divide, going back to assets, right?

53:56There's this giant divide of, like, the baby boomers have all the money. Yeah. Right? But eventually they won't have all the money. And you have this millennial generation that they're going to use the best product. And I'm not just saying this because I'm a proud owner of Robert. Like, it's like, it's just like, try using Schwab. Like, I'm on the board of a company where I get my stock grant in Morgan Stanley E-Trades. It's like, they bought E-Trade, but the Morgan Stanley site doesn't interoperate with the E-Trade site. It's just, it's so comically bad. So the younger generation are going to use these things that are good.

54:32They're going to pick the better product, and you have the better product. But now it's like you got to get the assets. Yeah. And by the way, I talk a lot about the great wealth transfer, 120 trillion moving into the hands of younger generations from the baby boomers and silent, which I think we can be the prime beneficiary of. But that's not our only strategy. Also, I think we can get the baby boomers while they're still alive. And we're working very hard towards this. And I think we're actually quite successful because, Because, I mean, you look at customers in their 70s and 80s who use Robinhood, they're super happy.

55:09And to them, it's like magic. Like they're used to crappy brick and mortar experiences. Your Gen Z or Gen Alpha customer, they're used to Instagram and TikTok. And they're like, why is this app clunky? It should just like instantly load. And I should, you know, they're, to some degree, their expectations are much higher, which makes it so that we have to work hard to serve them. But if we get someone in their 70s who's actually gets over the hump to use Robinhood, like that's a great customer for us. And we have more tools. So one is we're really leaning into family finance. If you use our banking app, the family is like a first class tab, which makes it really easy to manage, you know, your partner, your children, all the finances in one place.

55:53And then these matches that we're running, because we have better economics and we can split more with our users, is very compelling to someone with a lot of money in their account. You imagine, you know, we offer you a 3 % match and you're someone that's five years away from retirement and you have$10 million in your IRA. That's$300K. Like you could buy a nice new Corvette immediately that we instantly give you. So that's been a very strong value proposition to, you know, our customers' parents, their grandparents in some cases. Or Elon Musk. Yeah. I mean, he could get a nice McLaren F1. Yeah, exactly.

56:32Exactly. If he moves some shares. He could buy an F1 team. Exactly. You know, a small subset of people will say this argument. I think it's a lazy argument. I think it's an anti-capitalist argument. But I'm curious for the best to come back to it. They'll basically say things like prediction markets, things like crypto, things like trading, especially among younger set. They'll call it something like a financial nihilism or something. It's small subset. What is sort of the best comeback? It's not nihilism, but what is it? Could you remind me what financial nihilism is defined as? I remember I looked into this a while ago.

57:07I think they're sort of making this argument that young people, because they don't have options elsewhere, are getting into sort of, you know, prediction markets or crypto. and is this kind of like make money, make money, but I don't know, they're sort of accusing this pool of activities as like evidence of some nihilism in some form. Yeah, I mean, the first thing I would say is everything is growing. Like we're seeing record growth in retirement too. I think a lot of people sort of like look at this as two different users. Like you have your active traders or nihilists or degenerates and then the folks that are doing respectable things.

57:45But in reality, the most engaged users actually use more of our products and have more accounts. So the path that someone takes when they use Robinhood, typically they come in because they want to buy one stock or one crypto. And then some of them are more active, others are not. But the active ones are the ones that paradoxically adopt retirement, adopt products like strategies. And the way they grow with us is not necessarily more trading, but just expanding into more accounts and putting more assets onto the platform. So we don't see it. I think there's not a huge trend where, you know, the percentage of our assets as an economy that are margined or in high-risk investments is growing.

58:38The whole pie is growing. And I think that takes with it the speculative activity. Now, a lot of people will say, well, you know, there's a lot of speculation. And is this good? Is this bad? So my take on that, and prediction market is probably a great example, where the big debate now is, well, wait a minute, this is just gambling. That's what we get asked all the time. It's been asked about every new financial asset that gets traded. There was a big debate when futures was created as an asset, whether people are just speculating here. And it's because speculation is just critical to the functioning of every financial market.

59:18You can't have a working market without speculation. And I'm not to say that everyone should speculate with all of their money, right? I think that probably most of it should be either passively managed or retirement or in sort of lower risk, lower volatility investments. But I think you should have a bucket. And most people do have a bucket where, you know, they invest and they exercise discretion. And I think for that one, we compete over who can offer the highest diversity of products. And can we give you that ideal product for you that allows you to sort of like trade your precise point of view?

59:59I think prediction markets are a great example of that because if you had a view that, you know, Trump was going to win the election, before prediction markets, you would have had to maybe buy equities and crypto, right? You'd say, okay, Trump, I believe Trump's going to win the election and Trump is pro-crypto, so Bitcoin's going to go up. And that somewhat worked, but it's a little bit indirect. And a lot of people have the same view on companies with earnings. They think, okay, I'm pretty sure Tesla is going to blow out, for example, blow out their deliveries in a given quarter. So I'm going to buy the stock.

1:00:37But then you have weird things like they blow out their deliveries. maybe a company beats on eps and revenue and the stock goes down right and and to me for a trader this is an inefficiency because i have a point of view i want to trade that and these proxies make it a little bit less efficient and prediction markets solve that which is why i think for traders it has the potential to become a really big market and for mass market consumers it could be a better source of news and forecasting like i i came out with a statement a couple months ago about how I think prediction markets are truth machines.

1:01:12Like we're constantly being bombarded by all this information and noise. Anyone can be an influencer. Anyone can have a podcast. How do you sift through that and figure out what's actually going to happen? Well, prediction markets actually take advantage of all of these sort of like forces to consolidate into a more accurate forecast. That's not a guess. It's not a poll. It's, you know, a price formed by people with real skin. Well, you remember that DARPA pioneered this 25 years ago? You know this? No. So DARPA is the Defense Advanced Research Projects Agency. So the internet came out of, it was originally DARPAnet, and then ARPANET became the internet.

1:01:55Right. At the Alpine Inn, they have the plaque, right? Right. So DARPA was like, how do we get good at knowing who's going to win this foreign election? where we could hire lots of CIA agents that like go bribe people and all this kind of stuff. But you know what? Let's have a prediction market. And they designed this in 2002. Was that the Iowa? They eventually shut it down because there was just too much controversy. Like you don't want to have the government go build something. And part of it is, I think this is the interesting thing with prediction markets, although of course it's true for the stock market as well.

1:02:26Like if I have a prediction market for like, will something bad happen to Eric tomorrow? And it pays out$1 if true and zero dollars if false, well, I could do something bad to Eric tomorrow. Right. And now I can change the market. It's like the insider trading version of prediction markets, which is not relevant for the weather. Yeah. Well, maybe it is. Like, you could do cloud seeding or something. But that was part of what DARPA wanted to know, was, like, they wanted a truth machine. Mm-hmm. And this is a much more efficient truth machine than, like, the Central Intelligence Agency, if you think about it.

1:02:59Right. Right? For exactly, because, like, markets are efficient. I remember Google - Like, the truth will get out. Google had an internal prediction market where people would speculate on which products would actually ship on their ship dates. And it was a much more accurate. Yeah, it's always more accurate. Yeah. But it's good to see it live in practice now. Yeah. And there are real questions like how granular are these contracts going to get and how do you ensure safety? Yeah. Which, you know, they're regulated. And I think that's the best argument for doing prediction markets inside a regulated framework.

1:03:32Because if we don't, they could go offshore, much like a lot of the crypto business. And, you know, if it's offshore, it's much difficult to contain the negative externalities. Yep. Yep. Yep. I love the idea of speculation as curation, as accountability. Vlad, thanks so much for coming on and talking to us about the story of Robinhood. Thank you, guys. Yeah, it was fun. Thanks for listening to this episode of the A16Z podcast. If you liked this episode, be sure to like, comment, subscribe, leave us a rating or review, and share it with your friends and family. For more episodes, go to YouTube, Apple Podcasts, and Spotify.

1:04:14Follow us on X at A16Z and subscribe to our Substack at a16z.substack.com. Thanks again for listening, and I'll see you in the next episode. As a reminder, the content here is for informational purposes only. Should not be taken as legal business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund. Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see A16Z.com forward slash disclosures.

1:04:54Thank you.