The CEO Who Lost 80% of His Company's Value (And Built It Back): Vlad Tenev

21:17Vlad Tenev:And then maybe eventually you can do it for three or four things simultaneously. I'll give you an example. during COVID, we introduced a lot of, it was this thing that from the beginning, I just like, didn't really like the idea of, but a lot of people felt very strongly and there was just too many things happening. But yeah, we were like, we had these wellness days where entire teams would like take a wellness day after working particularly hard. And at one point I was just like, let's kill these wellness days. And there was just a lot of fear. I mean, some people actually legitimately like the idea of wellness days.

22:02Vlad Tenev:I was like, I don't want to be a wellness day company. We have generous PTO, take a PTO. And this whole idea that an entire org or team would take the same day off, that seems like a problem. What if there's an issue and we need someone? The entire org is taking a day off. Doesn't make any sense. I think this was like one of those COVID era things that some companies probably still have. But yeah, anyway, and there was fear. Like we were taking back a perk from employees. They like their wellness days. They'll complain. Well, we took off the wellness days. There was complaining for one day and then we never heard about it again.

22:42Vlad Tenev:So I think once you start doing these things and you realize our deepest fears about the consequences were wrong. And yeah, you learn some things.

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24:24Shane Parrish:How does Robinhood operate internally? Like if you were to distill the operating principles that you use to run the company, what would they be?

24:34Vlad Tenev:Our values are high performance. So So we make it clear to not just employees, but anyone applying for a job that this isn't meant to be like a cushy, chill job. Like this is for people that want to stretch and to do in one year what maybe another company would expect you to do in 10 years. So we keep a very, very high performance bar. and that filters into how we compensate. We reward people disproportionately based on impact and we try to stay away from rewarding people on conventional things. Think about a typical company. People are paid generally proportional to the org size that they manage.

25:25Vlad Tenev:And if you think about what that incentivizes, that incentivizes empire building. I want to have a big org with a big team because then according to traditional hr metrics i'm more important yeah um but really what we want to incentivize the opposite can you can you have a lot of impact with the smallest possible team so high performance is one of them safety always we have a safety always value which means sure we're going to move fast you know sure we're we're holding ourselves to an absolute performance bar, but you can't use that as an excuse to cut corners or compromise on the security of customers and their money.

26:05Vlad Tenev:So that's a very important one. You know, regulatory compliance is very, very important to our business as a trusted financial platform. So we have that one. Lean and discipline, another one. I always ask, how can we do more with less? we scrutinize every dollar and every process as well um and uh yeah i mean i think that if i think about culture uh i won't go through every single value but uh those are the big ones if i think about culture it's it's a few things it's how we hire um the talent that we that we bring in, how we performance manage and reward people, and also the working environment.

26:53Vlad Tenev:What's the environment like in the office? So hiring, it's really top talent. I'd rather have a small team of the best people than a large team of mediocre people. And that goes along with the high performance uh how we compensate and performance manage we want to make it we want to reward people disproportionately based on impact and also if it's not working with someone we want to make it as easy as possible process wise for that person to go somewhere else right we don't

27:27Shane Parrish:want to we don't spend too much time how quickly does that happen is this like you know somebody's there for three weeks and you're like oh this isn't working out or is it do you give it six months, which sounds like an absurdly long period of time, especially given what you're trying to accomplish.

27:41Vlad Tenev:We want to make it. I mean, sometimes it's pretty obvious that, you know, for whatever reason, we made a hiring mistake, usually, that someone's not a fit. And at that point, we want to make it as easy as possible. So, yeah, if it's three weeks, it doesn't make sense for us or for the person to continue. To continue it. I think six months, once you know it's not a fit, is way too long. But of course, sometimes we've had people that have come in and for whatever reason, they don't hit the ground running right away. But if we see potential in someone and they're extraordinarily good at a particular thing, you know, sometimes they actually get there and that could take six months.

28:32Vlad Tenev:But yeah, generally speaking, I think what most companies suffer from is process getting in the way and actually making it very, very difficult for people to get rid of low performers. And I think we try to make that very, very, very easy.

28:50Shane Parrish:If I was looking from the outside in, is there anything about your hiring process that would stand out as unconventional that works for you?

28:57Vlad Tenev:Well, I should say I'm not super familiar with how every company does it. Right. So I'm sure some companies do many of these things. But yeah, yeah, perhaps one thing that's unconventional, at least in financial services, is emphasis on early career people. I think from the very beginning, we put our company next to Stanford University. We would spend a lot of time, you know, recruiting interns and engineers from there. And that was my alma mater and Beju, my co-founder as well. So we would spend time actually when we were individually hiring everyone, going to career fairs at the top tech universities.

29:46Vlad Tenev:And, you know, I still spend a lot of time with early career folks and interns. And I think it's very, very good for the company because a lot of the companies in our space tend to get older as they get further along. And, you know, the folks working there can be more disconnected from from the young people. And then that puts you puts you at risk of becoming a more of a generational company in the sense that, you know, Charles Schwab serves baby boomers very well. You had E-Trade coming later that was really a Gen X company. But I think. They've struggled a little bit getting the younger generation excited.

30:26And I know, you know, they try very hard to get there.

30:33Vlad Tenev:But I think the best way to do it is to actually make sure that the company itself has the point of view of young people.

30:40Shane Parrish:And you're sitting with them, working with them and learning from them at the same time.

30:45Vlad Tenev:Yeah, yeah, yeah. Sitting right next to them. You know, I always like to have some interns or early career people working on important things. And I like to be around the people that are working on the key priorities as well. So, yeah, we don't just stick them in the basement and have them fetch coffee. The big thing is we actually want you to have to work on projects that ship to production and do meaningful work. And what I like to say is I started off as an intern at Robin Hood. I mean, I didn't have any career experience. I went straight from school into becoming an entrepreneur. And so I kind of have empathy for what it's like.

31:22Vlad Tenev:And, you know, if I can succeed and become the CEO of a company from an internship, and then everyone should have the ability to do that.

31:33Shane Parrish:How do you run your weekly leadership meeting?

31:36Vlad Tenev:Yeah, so weekly leadership meeting is a big meeting. There's a lot of people involved. And I like having large groups of people involved because then everyone can sort of like hear what's on everyone's mind. I don't like having a lot of one-on-ones. Some people are big one-on-one fans, but over time, my one-on-ones are basically on demand when you need something critical or some important decision needs to be made. So the leadership meetings are either important information that I want to cascade, like they're at the beginning of the week. So a lot of it is, you know, I spent some time thinking over this weekend about this or we should be moving faster on this.

32:22Vlad Tenev:Or it's we also review goals. So I like a very simple mechanism for sharing progress on goals. It's either green, yellow or red. If it's green, we don't really have to talk about it. If it's red, I think it deserves some scrutiny. So, you know, sometimes we go through the red goals and see how we can help turn it around as quickly as possible. And that involves a little bit of ceremony. You know, I have a gavel and I hit the gavel. Do you actually?

32:57Shane Parrish:That's awesome.

32:58Vlad Tenev:Yeah, yeah. And yeah, you know, it's I think that sometimes it's it's really nice to lighten up some extremely serious things so that people actually enjoy talking openly about, you know, goals that things that aren't going well. Because the assumption is everyone in the leadership team is, if not exceptionally strong, at least very, very strong. So usually if things aren't going well, you know, there's a good reason. It's usually not for lack of effort. And sometimes having the perspective of multiple people can really help us quickly improve things and turn them around.

33:40Shane Parrish:Are there any other meetings that you have on a weekly basis? Like I think about a founder's time being the most valuable and most highly leveraged.

33:48Vlad Tenev:Yeah.

33:49Shane Parrish:And then where do you get involved uniquely as a founder to add that leverage to the organization? And where do you sort of like get hands off?

33:56Vlad Tenev:Yeah. I mean, usually I'm involved in the most critical product launches or projects that are going on at any given time. And a lot of times we are so we do a lot of product events. events, I think this year we're going to have five of various sizes and scales, but usually the product events tend to have themes. So actually we're doing one in a couple of weeks. Well, I should probably be more explicit about the date. We're doing one on December 16th of this year. So towards the end of the year, and it's called Yes, No. So it's an event on prediction markets and AI. And we spend a lot of time just making sure the messaging is right, the design of the event, the look and feel, of course, the products that go into it.

34:49Vlad Tenev:So yeah, there's a big component that's just making sure that the next event that we're going to do is...

34:55Shane Parrish:Are you in the weeds on that?

34:57Vlad Tenev:Yeah. So I, you know, present at the events and I introduce the products. Not just me, but with the teams that are working on them. So the event is like a television show. Yeah.

35:12Shane Parrish:I'm excited to watch. What factors do you think makes your marketing communication so good? It seems so clear and crisp and like on point.

35:20Vlad Tenev:Well, thank you. It wasn't always the case. I think we have great people that think entirely about the storytelling of what we're doing, what the purpose is. I think the events themselves are a good forcing function because if you're communicating a new product to 20 million people, it really forces you to distill it into the essence of what 20 million people can understand. So I think where I tend to sometimes make mistakes in communication is I can get too jargony, too in the details, because I just assume the average person watching is in the details of the business like I am, which I think is not a great assumption.

36:10Vlad Tenev:So I think like really thinking about it from first principles, if you're someone who has never heard of a prediction market, for example, how do you explain what a prediction market is and why it's innovative, why it's important for society for these things to exist? We start there. And then I think once you have the foundation, you try to make sure all the products plug into that foundation. You tell a coherent story. I think it's really just about storytelling and you have to spend time and have people thinking about it. And, you know, if I don't think about it or if the CEO doesn't think about it, then I don't think the story gets told.

36:52Vlad Tenev:So as a founder and CEO, you have to spend a lot of time personally getting involved in that, I think.

36:58Shane Parrish:As you were saying that, what came to mind is like Steve Jobs and features and benefits. It's like he didn't come out and say like, you know, here's 32 gigs of music capacity. He's like a thousand songs in your pocket. Is that what you mean by that?

37:13Vlad Tenev:Well, actually, yeah, you know, when we started doing this events, that was a huge inspiration. We were like, well, we should just make them exactly like the Apple events because they've perfected it. But then, you know, now we're on our fifth event this year. We started it last year. And it's really just we don't think about the Apple events at all. I think it's almost like learning to play a new instrument, right? When you first learn to play an instrument, you just have to practice and do what the other greats have composed in the past. But then once you get to a certain level, you know enough to innovate and to break rules and to change things.

37:55Vlad Tenev:So, yeah, now we really try to make it different each time. Like, how can we from first principles make this event as good as possible? And we don't feel like we have to be tethered to the old Apple model, which some people just replicate. But to answer your questions, no, I think I don't think that was necessarily a rule that Apple had for the events. Actually, in a lot of their events, they get really into the technical details of the computers and they share the megahertz of the processors. And they even had bake-offs where, you know, they would load a website with a PC and they would load it with a Mac.

38:33Vlad Tenev:And obviously the Mac would load 10 times faster and everyone would be like, oh, my God. You know, one second, 1.5 second load time versus 7.9.

38:43Shane Parrish:Well, Jobs was, I mean, he had this element and you see it throughout history and showmanship, right? Like there was a story to it. There was a presentation. There was like you were anticipating. You were like you could feel what was going on.

38:58Vlad Tenev:Yeah. And I think, you know, he was basically an artist. He was probably the greatest of all time at that particular element of it.

39:06Shane Parrish:How are you guys using AI internally? Like what would surprise me about how you're using it? Yeah.

39:14Vlad Tenev:I think we haven't talked too much publicly about it, but we're doing a AI event on December 16th, which is our first big event focused on AI, as well as prediction markets. But AI is going to be a big part of it as well. I think that when we talk about internal operations, what we told the team from the very beginning is, look, there's two areas where we want to start with and be absolute best in class in our space. And that's customer service and software engineering. Because if you think about what really moves the needle, those are the big teams that have multiplicative impact. Customer service interacts with, you know, all of our customers that are having issues or need help with the platform.

40:02Vlad Tenev:And traditionally, that's been a big cost center for our peers and competitors because it scales with with number of customers on platform. And so we've we've done so much innovation there. By and large, if you interact with customer service on Robinhood, you're you're interacting with our AI agents. And I think we are best in class on that side. On the software engineering side, you can think of it as accelerating product velocity and development. So we've seen tremendous increases in product velocity from our engineering teams because from a very early point, we've made it as easy as possible to use every AI tool.

40:51Vlad Tenev:It started with a GitHub co-pilot because that was the only game in town. And then, of course, Cursor and Windsurf until that got acquired. And then, of course, Claude Code has been a very popular command line interface tool recently. And I think the important thing about AI adoption is you have to track the right metrics and actually look at them very, very carefully. And I think the great thing about software engineering and customer support is the metrics are pretty easy, right? For customer support, you have to look at AI deflection rate. What percentage of tickets that would otherwise be going to an agent are actually being fully self-served by AI.

41:35Vlad Tenev:And you want to drive that up as high as possible. And for software engineering, you're looking at percentage of code commits generated by AI. But you also want to check that with is the total engineering velocity or the total monthly commits per engineer continuing to increase because you want to make sure that it's not just AI is doing a larger and larger percentage of the software engineering contributions, but that in aggregate, you're making more contributions and being more productive. And so I think we started with those internally. And now we're, we have it baked into the process where we almost think of it as headcount.

42:17Vlad Tenev:Okay, how much, how much compute do you need next year? Instead of this headcount, how hard have you tried to like, use AI agents in the workflow for every team? And I think the next frontier where we're going to see really interesting stuff is on creative and marketing. So you can imagine to create really high quality advertising collateral would have taken a lot of like deep work over a long period of time by great artists. But if you can empower those artists with the best tools, 11 labs, mid journey runway, you know, the total amount of creative can increase by a hundred or a thousand X and you can actually make them much more personalized.

43:04Vlad Tenev:So I think that's the next frontier that companies aren't really talking about. But I think we'll get to the point where next year you'll see a big step change.

43:13Shane Parrish:So what does that mean, though? Walk me through the second and third order effects of that. Like, if you can do that, that means anybody can do that. And if anybody can do it, well, all of a sudden, like, what is the consequence of that?

43:24Vlad Tenev:I actually don't think anybody can do that. But I think these are really hard problems to get right. Yeah, because it's not just, of course, most people don't even have metrics to track this stuff, which is, I can give them the metrics. Hopefully they're useful to listeners. But thinking about, let's just say customer support, for example, I like to break down customer support progress in AI into three stages. And you'll see more phases than stages, I should say. Phase one, phase two, and phase three. Phase one is a company puts the help center into the AI chatbot. And so the chatbot can answer any question from the help center.

44:19Vlad Tenev:Most companies doing AI for customer support are in this phase, right? Where it's just, that's pretty easy to get going. Most people just kind of stop there.

44:28Shane Parrish:It's almost like a better search function.

44:30Vlad Tenev:Yeah, better. Well, you know, and it's better than actually having links to the help center that you'd have to navigate, which actually I think probably still most companies aren't using AI for customer support and they're still pushing you towards just navigating a help center. We were there too, probably five years ago, five to 10. Phase two is, all right, you're getting a little bit more sophisticated. You're not just taking the data from your help center and feeding it into the AI, but now the AI can actually go into the database and they can say, okay, I can see Shane's account. He's got, you know,$50 ,000 in there and he just deposited some money yesterday from Chase Bank.

45:10Vlad Tenev:Okay, so you can pull that data and you can use it to provide better contextual support, but it's still read only. Yeah. Right. So rough numbers, let's say 90 % of companies are in phase one. 90 % of the ones that aren't in phase one are probably in phase two. Then you have phase three, which is, okay, now I can actually do non-read-only actions. I can change stuff. Maybe I'll refund you if you're not happy with your purchase. You can refund your gold subscription fee. So that involves actually some pretty deep work, deep integration into all of the backend systems. So you can imagine the utility goes up as you get deeper, but the cost also goes up.

46:01Vlad Tenev:And so actually, I think very few are in phase three. That's where Robinhood's in. And yeah, it's actually not easy. And I think that most companies are vendoring this. And this is the thing that vendors are hard at because, you know, vendors not going to be able to save you much time in the actual process of plugging into all your systems. That's going to be work that your engineers internally are going to have to do. But I think what made it easier is from a pretty early point, we wanted to make our data easily queryable internally because we wanted to run good analytics to understand what was going on.

46:42Vlad Tenev:And so once your data is queryable, it makes it so that you generally have good systems hygiene. It's, you know, in one place. It's like got clean interfaces. You spend time making sure that it's correct. And I think the work that we did, not really thinking about AI, made it a little bit easier to plug in these models and actually run inference and, you know, build agents. And that's just the stuff we do internally. In the product, we have Robinhood Cortex, which is our AI model. And the most visible use case of it in Robinhood right now is stock and crypto digest. So if you go to a stock that's moved, it'll give you a real time view of what's actually driving it.

47:30Vlad Tenev:I think some of our competitors have done this as well. But I think what makes our offering especially compelling is it updates basically every minute. It updates whenever new information comes in. Whereas, you know, I think most companies do it once per day. And it's just, it's basically stale for companies in which lots of news happens.

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49:55Shane Parrish:Go to GoDaddy, Namecheap, Cloudflare, or wherever you buy your domains and get your.tech domain today. You have an AI company now too, right? Yes, that's right. Talk to me about the limitations of how we train the models and what the implications are. I think about this in the sense of, you know, the models are trained on the whole internet. There's a lot of garbage out there. Yeah. They're predictive in the sense of they're really, you know, walk me through maybe the prediction versus reasoning, pure reasoning from first principles up and how you think the current limitations are and where we're going with this and what the alternatives are.

50:34Vlad Tenev:Sure. Sure. Yeah. And basically the company that I started a couple of years ago that I'm chairman of is called Harmonic and it's building mathematical super intelligence, which is AI that can solve math problems at a level exceeding humans, the best human mathematicians. and it's not quite at a level exceeding all of the best human mathematicians, but it certainly exceeded my level, which I didn't think it would do so quickly. But yeah, earlier this year, we actually achieved gold medal performance at the International Mathematical Olympiad, which is the world's most prestigious mathematics competition.

51:16Vlad Tenev:Um, these are like cracked high schoolers, like five people got perfect scores in the international mathematical Olympiad. And, uh, just to contextualize, I say high school, but I bet you, I would struggle solving a single IMO problem. Uh, yeah, yeah. Right now. So Aristotle, which is our model solved five out of six. and the bet always was that this would actually generalize to other things. So if you're good at math, as a human, I felt this because I was a math major. If you could figure out how to solve a math problem, you could solve pretty much any problem. So that could generalize to general problem solving, like be better at making business decisions, for instance.

52:07Vlad Tenev:And so we've tested that actually over the past few weeks, they released a product for mathematicians and researchers, and it's been used to solve unsolved math problems. I saw that. You saw the Erdos problem? Yeah. Yeah. Yeah. So Paul Erdos.

52:26Shane Parrish:I didn't understand it. I just saw that you solved it.

52:29Vlad Tenev:Yeah. I mean, yeah, the problem itself is too complicated for me to understand and solve. But Paul Erdős was this like very prolific mathematician. He would actually travel around the world, stay at people's houses and work with them for a week or two weeks at a time solving math problems. And so there's like a collection of articles and books of problems that Erdős conjectured. They're usually conjectures like it seems like this thing is true mathematically, but I can't prove it. And so now there's, you know, websites that collect these things. There's something like 1100 Erdős problems. About half of them are open, unsolved.

53:13Vlad Tenev:And yeah, Harmonix solved at least one of them. There's always some debate like, is it solved somewhere else on the internet and nobody found it? So, you know, there's always some controversy around these announcements. But I mean, it's solving an unsolved problem that people care about is a big deal. And you've seen making the jump from competition math to solving unsolved Erdős problems in a couple of months. And the goal is to ladder that up to unsolved problems that everyone cares about that are of like massive importance. And actually yesterday they released an update that Aristotle learned to write computer code to.

53:53Vlad Tenev:So on a software verification benchmark, it hit a new state of the art of something around 97%. Amazing.

54:03Shane Parrish:What's different about how you're training that versus how somebody like Anthropic or OpenAI, like what's different about the model itself?

54:12Vlad Tenev:Yeah, two things. One is they tend to train. So, I mean, they do a lot of little things to train these models. And I think these models used to be like a monolithic LLM. Now they're actually a network of agents, which Aristotle is. It's actually a network of agents that are optimized for slightly different things. I guess at the highest level, the interesting thing about math is you can pose a math problem as computer code. And if you pose it as computer code, there's actually a way to machine check the validity of the proof.

54:53Shane Parrish:Oh, yeah.

54:55Vlad Tenev:Yeah. So it can be checked automatically. And what that allows you to do is to create a synthetic data pipeline. And so all of the data that the vast majority of the data that trains Aristotle is actually data that we generate. It's not, you know, Internet data. And what happens is you ask a question. The model reasons about it. It tries to solve it. And on the way to solving it, it solves, it generates some lemmas and facts that are proved. And because you can machine check them, you know that they're correct. And if they're correct, you sort of like put them into the training. And so as it solves problems, it gets smarter and smarter.

55:42Vlad Tenev:And that's basically the idea. So there's similarities. It's probably closer to training a model to play chess really, really well than it is to training just like a English language LLM. But I think the fundamental techniques tend to overlap. I mean, there's a lot of reinforcement learning and post training. there's pre-training as well. But yeah, the main difference is this ability to machine check the results, which gives you a good reward signal for your reinforcement learning.

56:19Shane Parrish:What do you think the limitations are on the way that we're sort of like doing the large scale language models now in the sense of training on huge data sets and being more predictive than I would say bottoms up first principles, if that makes sense? Yeah, I mean, I think that we've already shown an ability to create new knowledge.

56:43Vlad Tenev:And I think that's going to continue. So, you know, right now, let's say you can easily at low cost produce a proof that's 10 pages long. And actually, we can produce longer ones. But just as an example, per unit cost and time, you can produce a 10-page proof. Well, in a year, it'll get to 100 pages. In three years, it'll get to 100 ,000 pages. And then you can say, okay, what type of problem has 100 ,000 page proof? That's probably some of the deepest problems in mathematics. And at the same time, that same thing is not just going to happen in mathematics, but all dependent fields, physics, computer science.

57:23Vlad Tenev:And what's the equivalent of a really deep result in physics? I mean, we can understand the fundamentals of unification, which has been a big problem for, it's been the problem in theoretical physics for 50 years. Like, how do you align the theories of gravitation with the other forces? And we haven't had much progress in that. And probably AI could help with that. And then if we can figure that out, the consequences for building new engineering are profound.

58:05Shane Parrish:Do you think AI is going to be like one model sort of like takes all? Or do you think it's going to be fairly like you're going to have multiple models that maybe are slightly nuanced, a little bit better at different things? Like how do you see this playing out in the next five or 10 years?

58:21Vlad Tenev:I think it depends on, I think there's going to be multiple models and it's really going to depend on the data that is used to feed them. So, for example, one thing that's great about Aristotle, which is harmonics model, is you've got mathematicians that are using it to ask very complex math questions. So if you've got all the mathematicians using the model, then you basically have an advantage with mathematics data. And I think that's true in other domains. I think that generally people tend to use chat GPT as a first crack, but it's, you know, it's a good general model. It'll probably give you a reasonable answer, but I don't think they're going to spend the time to go deep on every single domain.

59:11Vlad Tenev:And I think that's why you're already starting to see a little bit of specialization. Anthropic has a very good coding model, and they've basically done very well in the enterprise for software engineering. They've kind of specialized there. Google, obviously, very, very strong model in general reasoning. Gemini 3 came out and surprised some people. Though, if you were looking at the Robinhood prediction market, we had a prediction market for the majority of the year on what's going to be the top AI model by the end of the year. I think it became pretty clear mid-year that Gemini was going to take it.

59:47Vlad Tenev:Interesting.

59:47Shane Parrish:I mean, they should based on the data access that they have. They have probably the highest quality data source in the world. Yeah. And full access to it with very few restrictions.

59:58Vlad Tenev:And limitless compute and big printing lots of net income to fund it. Yeah, they've got some advantages for sure.

1:00:06Shane Parrish:I would say chat GPT.

1:00:07Vlad Tenev:And they actually compete with Harmonic. So they have a similar mathematics model called Alpha Proof. Oh, interesting. Yeah, which is, again, it converts mathematics from English into a programming language and you get that reward signal. And actually, interestingly enough, Alpha Proof was the first AI model to get a silver medal, to achieve silver medal performance at the IMO last year. Okay. But Alpha Proof, they did not announce a gold this year. So, yeah, the Harmonic team was excited about that, that in a year we were able to surpass alpha-proof capabilities.

1:00:49Shane Parrish:I will say Gemini has far passed on my usage of just in the last two weeks. It blows away at ChatGPT.

1:00:59Vlad Tenev:A lot of people have been saying that, yeah.

1:01:01Shane Parrish:Yeah, and I love the race as a consumer. It's great. And, you know, better technology for everybody is sort of and competition is good for everybody. Like it pushes everybody to be better and work harder and get ahead.

1:01:14Vlad Tenev:Absolutely. Yeah. I mean, I heard there was reports of OpenAI calling a code red. And it's funny because when ChatGPT came out in 2022, Google called a code red. Yeah. Right. And they said this is an existential threat to Google search. And then at that time, everyone was counting them out. They're like a big, slow company. How are they ever going to catch up? They're just getting disrupted. Look at the Google search market share. So it's just amazing how quickly the narrative can shift. But yeah, I think Sundar and Sergey and the team have done an amazing job. You know, you got to tip your hat off to them.

1:01:54Shane Parrish:I want to come back to something you said earlier about how math helps you make decisions at Robinhood and just decisions in general.

1:02:02Vlad Tenev:Yeah.

1:02:03Shane Parrish:What's the connection there?

1:02:04Vlad Tenev:I think math is a good way to train your brain into doing hard things. Right. And it's almost like. If you can deadlift 500 pounds, then picking up your crawling baby from the floor is very, very easy, right? So no business problem is as complicated as solving a really, really hard math problem. So if you get used to the pain and the suffering and like the mental stress of beating your head against the wall for 12 hours on one single math problem, which Bajor and I did very, very often when we were in college, we'd like pull all-nighters working on these problem sets. I think that's really, really good training.

1:02:55Vlad Tenev:It's like going to the gym for business problems. What are you obsessed with lately? I am obsessed with the business world. The thing that I'm most focused on right now in sort of my life as Robinhood founder and CEO is getting more people into the markets and in particular giving access to private markets. I think that's the biggest inequity in capital markets today. And I think it's very important because you see all of these companies who are building AI models. We're in the midst of possibly the greatest technology revolution, not just of our time, but of all time. And there's going to be disruption.

1:03:48Vlad Tenev:There's going to be large scale dislocation. And it's simultaneously the fastest growing technology and product out there, but among the least popular. People are worried AI is possibly going to take my job. Do I really like it? And the majority of AI companies out there are private companies, even though some of them are in valuations of tens of billions or even hundreds of billions of dollars, which means retail investors can't invest in them. And juxtapose that with the fact that going public as a company keeps getting more challenging. There's more process, less companies are doing it. There's more opportunities for institutional capital to fund private companies.

1:04:38Vlad Tenev:And you get an inadvertent situation where retail investors are shut out of some of the most important companies. And it's not just AI. I think AI is the most important, but there's also space technology. You look at SpaceX, its valuation in the hundreds of billions. It's basically the largest and most impactful private space company. Retail has been shut out from the very beginning there. And so I'm trying to figure out how to correct that and reverse it, give people exposure to these companies and make it so that everyone's an owner of our industry. And if we make sure everyone is an owner, if you own something, you want to protect it.

1:05:24Vlad Tenev:And I think we're more likely to have a stable and prosperous future.

1:05:30Shane Parrish:Well, I was going to start with how you operate internally, but let's dive in right here about tokenization and how we sort of allow retail access to private, otherwise private investments. But maybe the way to talk about that, so we have space, which is arguably one of the most important technologies over the next, you know, we can anticipate over the next 50 years. We have AI probably in the same bucket. And then we have real estate, which is another one that people sort of talk about and tokenizing. Yeah. How do you think about all three of those different types of assets where I would imagine AI and sort of space are the same?

1:06:05You're tokenizing a private asset that you need to own the underlying shares.

1:06:11Shane Parrish:Yeah. What about real estate?

1:06:12Vlad Tenev:I think real estate is incredibly meaningful, especially now that most people are unfortunately at a point where they're having difficulty buying their first home. And I think that could be attacked from multiple angles. One is by breaking it up into little pieces and making it so that, okay, maybe I don't want to take on a mortgage and own my own home. but maybe I want to be an investor and be exposed to either one or multiple homes and areas that I think will do well. So I think that'll happen. But my priority, I think, is late stage privates. We launched this thing in the US called Robinhood Ventures, which aims to solve this problem.

1:06:59Vlad Tenev:And we have our first closed end fund, which we filed to go public, which is in the quiet period right now. So I can't talk in much detail about the mechanics of that. But I think the biggest opportunity and the biggest problem is in private markets. And I think there's also opportunity in early stage venture. We want more people to be exposed to companies at the earliest possible stages, even though the risk is greater because the opportunity for upside is also greater. So I think there's interesting opportunities and products there. And if we can streamline the capital markets aspect and make it easier for entrepreneurs to raise money on the other side, then we could lead to more entrepreneurship and innovation too.

1:07:49Vlad Tenev:Yeah, and real estate is interesting to us as well. And I think the way real estate's been done is not amazingly inspiring. I mean, it's sort of like generally low quality properties in random parts of the world, commercial properties. So I think that real estate is so visual. The purchasing experience of just going on a Zillow or Trulia and browsing has gotten really good. And I think it's far ahead of the experience of actually investing in real estate. And I think those don't exactly overlap. So I do think there's room for a real estate investing product that is actually legitimately good and low cost and easy to understand.

1:08:40Shane Parrish:So how would that work? Would Robinhood buy the real estate and then sort of tokenize percentages of it almost like shares? Like what would be the mechanism for that?

1:08:49Vlad Tenev:I think tokenization as an underlying technology can be done, but it's not really permissible. in the US. And the reason for that is what you'd be tokenizing is essentially a company. And so when you tokenize a company, it goes into security regulations. And security regulations have an established framework that is not currently compatible with decentralized finance in crypto technology. So that's one of the things that is being worked out. But there's another mechanism in the US using sort of traditional rails, which are called 40 act fund structures. And I think there's been, well, there will be a flurry of innovation in this space, partly because the current administration has declared that they're open to using these vehicles to provide access to alternatives and privates.

1:09:55Vlad Tenev:And the limitations currently are that it's hard to take an individual asset, like if it's real estate, an individual property or an individual private company in the sense of late stage privates, and make that tradable. But you can do a portfolio of things. So at least as a passive investment vehicle, we can give people that type of exposure.

1:10:18Shane Parrish:So you're buying access to a bunch of late stage, maybe there's sector specific like AI or space or just broadly speaking.

1:10:25Vlad Tenev:Yeah. And tokenization will work outside of the US. So you might have seen a couple of months ago, we did a crypto event for a crypto business in Europe. And there we tokenized hundreds of public equities and also did a tokenized giveaway of OpenAI and SpaceX, which was very popular. And so I think similarly to how stablecoin has evolved, tokenization will be the primary vehicle for ex-US investment until we get regulatory clarity. And you'll see tokenization of privates seep into the US as well. And the US already has robust structures for traditional finance that Robinhood will work to make more digestible and accessible to retail investors.

1:11:14Shane Parrish:So if that's the first step, what do you see as the second, third order, the intended and unintended sort of consequences of that?

1:11:22Vlad Tenev:I think it depends on the asset class. So for example, for privates, I think the The second order consequence is that for entrepreneurs, the other side of the market, you'll have an easier time raising capital. So rather than going through this opaque process of spending a lot of time meeting investors one-on-one, pitching in person, you could imagine a digital fundraising process where you're plugged into an electronic market. and you can push a button and you get the capital to run your business. I think that'll happen, not just for crypto companies, but for all types of companies. Secondary liquidity will be much easier.

1:12:11Vlad Tenev:So if you're an early employee of a company or an executive and you have quite a bit of shares locked up, you'll be able to sell easily on a transparent market without the complexity of dealing with paperwork or waiting till IPO. So I think those are the things. And I think the third order consequence will be an explosion of entrepreneurial activity. Like if it's easier to get funding for an early stage venture, for example, and you don't have to spend full time as CEO raising capital, I think there will be much more capital for startups and consequently much more startups.

1:13:00Shane Parrish:Are there unintended consequences to a company like Stripe where you're, I would say by and large, controlling the price? Like it's fairly stable. Whereas if it goes to retail and it gets marked by the day, that price could change dramatically. And then employees who are getting options. I'm just trying to think through the chain here. If employees are getting options, but those options are highly variable because if you're the company, you want to tie the employee's tenure to the growth of the business. And you can kind of distort that, couldn't you, with secondary marks? Because they would have to consider those marks when they're valuing the company internally for options, or no, I don't know.

1:13:38Vlad Tenev:It really depends on the vehicle. So, for example, there's tender offer vehicles in the U.S. that allow trading only at the NAV, the net asset value, which is sort of like the price that these assets are priced by independent valuation bodies. The problem with that is if you're a company that hasn't done a round of financing in four to five years, the nav is not necessarily reflective of the true cost of the asset. And so there's other vehicles that allow for real-time pricing. And I think that the platonic ideal is for the price of the asset to be driven by supply and demand and willing buyers and sellers in a transparent market.

1:14:34Vlad Tenev:I think that's where everyone gets the best outcome because in any other scenario, someone could be taken advantage of, right? Like if, you know, one side has more information than the other, you know, you could end up in situations that aren't fair. So I'm generally a proponent of price being discovered transparently through two-sided markets. Now, again, that's not necessarily the world we live in today with private assets. And so there will be a transition period and not all companies are going to like the changes. But I do think it's inevitable to some degree that this happens because what will happen is there's going to be active derivative markets on these private shares.

1:15:29Vlad Tenev:I mean, you've already seen that. There already is, yeah. And the data is getting out. And I think that's a hard genie to put back in the bottle. If the price is out and then the company is doing a round of financing anyway, it's like, well, why are the derivatives here and you're pricing the round at this price? Why don't I just hedge my exposure? So I think that it's going to be tough increasingly in a global market to have as much control over the price as maybe private companies have historically had.

1:16:06Shane Parrish:One of the other impacts of that that I can think of off the top of my head is LP is selling their interests in a fund or a vehicle that they have where that is not a liquid market these days. And if it is to the extent that it is liquid, there's often huge discounts or haircuts. on LPs trying to exit early?

1:16:24Vlad Tenev:There's been a lot of activity in this space, and I think it'll continue, particularly for LP interests and special purpose vehicles that are highly concentrated in one or two companies. I think those are in many ways becoming an alternative to direct investments in companies. I think our preference and how we approach access to privates is we always would prioritize coming through the front door, right, and making sure that the company wants exposure to retail. And, you know, we want to work with companies who actually see this. And I think in the case of the OpenAI and SpaceX tokenization, we were sort of running an experiment and we wanted to be the first.

1:17:15Vlad Tenev:You know, if there's a Guinness Book of World Records for the first tokenization of OpenAI and SpaceX, I wanted to claim that. But, you know, it was a small giveaway in the grand scheme of things. I think the scaled solution is best when actually the companies are involved. And what I've seen in the past few months as we've gotten Robinhood Ventures off the ground is that great companies do want to be a part of this and do see the value of retail. We've made a number of investments that have actually been public about how much they love the model and how they think this is the future. And we saw the same phenomenon for our IPO access offering.

1:17:59So we have a great IPO access offering, which is the number one retail channel for IPO participation.

1:18:06Vlad Tenev:And we started this in 2021, around the time that we went public. And we've done, I think, roughly 50 IPOs since the beginning. And around the beginning of this program, generally, we got a skeptical reception from companies. They didn't understand why they would want to do it. Their bankers would kind of talk them out of it. So we had to ask for favors and we really had to elbow our way into getting even small allocations into some of these deals. And this year, there's a complete profound change where the best companies that are going public are coming to us and asking for feedback about their retail strategy.

1:18:45Vlad Tenev:And you see the CEOs going on national television and talking about how, you know, they want to contribute to the disruption of the traditional IPO model and giving retail larger and larger allocations. as time goes on. So people are embracing it. And I think the same thing is going to happen for private retail access. It's just going to go earlier stage. But the benefits are so strong that I think that it'll be standardized as time goes on. And I think also we could make it easier for companies to go public. There was actually a roundtable that I was part of here in New York two days ago. It was called Make IPOs Great Again.

1:19:28Vlad Tenev:We had the red hats and everything at the New York Stock Exchange. And I think that there's improvements. The IPO process has gotten so ossified and the branding of it is bad at all stages that you can really just like systematically make improvements across the board. So I think we should do that as well and make it improve the brand of being a public company and also make it easier to get public. And at that point, we'll really be attacking the problem from multiple angles.

1:20:05Shane Parrish:How do you think about what to expand in next? Like what goes into that decision? What are the factors, the variables that you're thinking about in your head as you're looking towards the roadmap the next 10 years? There's all these things we could do. How do we allocate what we are going to do next?

1:20:20Vlad Tenev:Yeah. I think like our North Star is really just maximizing equity ownership, direct equity ownership from retail across the world. Right. And, you know, that's what we get into. How do we get more people invested in public stocks? Can we start at a younger age? And which is why we're excited about initiatives like Invest America with the Trump accounts. Can we get people outside the U.S. plugged in as well and make that as easy as possible? Can we do private markets which are inaccessible to people? I think that if we maximize equity ownership and actually the percentage of it held directly by retail, we'll end up in a more stable and prosperous society.

1:21:11Vlad Tenev:society that's more and that's a future that I feel much more confident in. So we kind of think through that. And that's why we care so much about Robinhood Ventures, the Trump accounts. I've been talking a lot about multi-generational financial services. How do we make Robinhood work really well for you, for your whole family and make it work better if your spouse or your parents or your children are on Robinhood. And I think that there's a huge wealth transfer coming. So over$120 trillion are going to change hands and go from the old generation into the young. And I think that's a big opportunity to actually accelerate our goals.

1:21:57Vlad Tenev:And I think if we do that, Robinhood itself as a business should benefit as our customers benefit.

1:22:04Shane Parrish:One thing I love, and you might have a unique opinion on this, given your background, your family's background, is giving people a stake in the American economy, the Canadian economy, whatever economy, giving people ownership in that as a means of fending off communism. but you came from a communist country. I mean, your father was there and walk me through how you think of that and like how important it is to actually sort of fend that off and fight up front against that. Yeah. I mean, the year that my father left Bulgaria, he had an opportunity

1:22:46Vlad Tenev:to study at the University of Delaware. So in Bulgaria, he was a professor of economics in tourism on the Black Sea coast, which is our warm weather summer capital, they call it. So anyway, the Berlin Wall fell, the Iron Curtain was lifted, and suddenly folks from Bulgaria could leave. People from the West could come in and we could leave. And so my dad was given an opportunity to go to the University of Delaware to pursue a master's degree. And the year he left was 1991. So we couldn't, we weren't in a position where my whole family would go. We didn't have the resources for that. And we also weren't sure at the time whether it was going to work out in America, whether there's a future there.

1:23:31Vlad Tenev:So my dad went. In 1991, the inflation rate in Bulgaria was over 100%. So we talk a lot about, you know, 5 % inflation here, but literally it was like triple digit percentage inflation. And I remember my mom would look out the window. We lived in an apartment in Varna. And I still remember the line for the grocery store. Like you had to actually get there at the right time or otherwise there were no eggs available, no milk available, you know. and the milk would be in these like big plastic bags. So yeah, and there was also power rationing. So, you know, when inflation hits that high, you get all kinds of problems, not just food shortages, but also electricity and power shortages.

1:24:25Vlad Tenev:And so they would have these rolling blackouts. So I remember being huddled around the radio and the radio was like battery powered. And, you know, the power would go out pretty much every night. So we would just be like listening to the radio with with my grandparents um and then we came to the country uh to the us my mom came about a year after my dad i came six months after her and um i remember i was five years old so i could still uh i still remember some things like it was very clear you know i have memories from childhood in bulgaria and then when i came to the u.s and one thing that shocked me was that there were bananas in the grocery store like you go to the grocery store and you'd see the big thing of bananas and in bulgaria bananas were like a crazy like gold well because you had to get them from cuba yeah right that was that was our i think that was the banana trading partner so it's like bananas are what 20 cents um so yeah that that seemed crazy and then i also remember when i was a little bit older.

1:25:33Vlad Tenev:So this was 1996, 1997, five years after I came, Bulgaria had the unfortunate distinction of having the highest inflation rate in the world. It was 1 ,800 % in one year. So you had the currency essentially collapsed and they kept having to add zeros to it. It used to be two Bulgarian leva to$1 and I think it got to 2 ,000. So they kept having to like recycle cycle all the bills and add more and more zeros. And at that point, I was actually looking at this earlier. My parents had the bank statements for my initial savings account. So my grandparents opened up a savings account for me when I was born.

1:26:21Vlad Tenev:And you see all their deposits. And it was you know, 10 level, 20 level. It got up to 2000 level in the mid nineties. And then the next one, it was like basically zero. Yeah. They, they had to do all sorts of crazy things. My, my grandfather would invest in copper cookware. So he had, we had this closet in, in his apartment that was just full of copper pots and pans. They would hold value better than the currency. And I think that if there was an easy way to invest and to protect your wealth, it would have been much better for the country at the end of the day because, you know, the country got set back.

1:27:05Vlad Tenev:It was sort of like the year I was born, 1987, maybe the time around that was the heyday of the country. And then for a long time, it was just a gradual decline. And I think now there's promising signs. But, you know, I think that so much of it starts from the will of the people and how optimistic they are about the future, being able to raise children, the economy. And, you know, I just saw the impacts of having a market system that just didn't work. So, you know, it made me appreciate what we have in this country and wanting to make it more global, export it to everyone else and just making it easier for people to own companies that are producing stuff.

1:27:58Shane Parrish:I love the idea of owning a part of the American dream in that sense. And is there another leading sort of indicator of that that can change things? Like, is it housing affordability? Is it optimism? Like, what can be done in a way to sort of give people a rung on the ladder, if you will, if you want to think about it in that way? So the ladder is not outreach. And I think about that in terms of, like, how do we get more people invested in capitalism? and one of the ways is his ownership of assets yeah and tying that i love what um they're doing with tying that back to education in schools and the portfolios and stuff what's the other one like what is the next big thing that we could do to sort of like give people a stake in capitalism yeah i mean we talked about real estate uh we've definitely talked about real estate in the past

1:28:52Vlad Tenev:And I want to, you know, I'm a proponent of a diversified portfolio. I don't want to say one asset is better than another asset. I think that if we make it easier to, I think the general approach that we have is look at what wealthy folks have access to. What are the tools they have to protect their wealth and grow their wealth? and they have access to all sorts of things that are not easily accessible. A lot of alternative investments, real estate, private credit, private equity, venture capital. And if we're in a world where it's easy for the mass market to have access to these, then I think we'll be in good shape.

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1:30:42Shane Parrish:How do you think about something like Bitcoin? I think Bitcoin has been, in hindsight, the top performing asset of the past decade. And you're starting to see it becoming more institutionalized.

1:31:01Vlad Tenev:I mean, not just with the DATs, but companies putting Bitcoin on the balance sheet, institutions and asset managers embracing it. I mean, for a long time, Vanguard, one of the largest asset managers said, we're not going to offer Bitcoin on our platform. But, you know, even companies like that are changing their tune and offering it. And yeah, I think you should expect that to accelerate. I mean, Bitcoin as the original crypto asset is always going to be singular. or nobody else is going to be the first or original. And I think that's why so many people, that's why there's such like a mystique and aura about it, right?

1:31:47Vlad Tenev:Because you go to these Bitcoin events and there are believers and they'll tell you, it doesn't matter what's going to happen. It goes up, I buy more, it goes down, I buy more. I'll tell everyone I know to buy it. And so, yeah, at this point, I would definitely not be a long-term Bitcoin bear.

1:32:20Shane Parrish:If trading retail assets and allowing easy access to that, you guys offer no fees on that. How do you make money on that? You still have people to pay, you get an organization to run. If I can go buy a share of Tesla or SpaceX or Stripe or whatever through the app, how do you make money on that?

1:32:39Vlad Tenev:Well, we do have fee-based products. I think that in the beginning, yeah, Robinhood was a simpler business. We offered equities trading. At the very beginning, we didn't make money, and eventually it became payment for order flow and margin lending and interest on balances. But now Robinhood is a financial super app. We have 11 business lines as of the last earnings call that generate$100 million in revenue or more. And I think the general principle is we make money in all of the standard ways, transactions, interest on assets, lending-based revenue. but we like to compress the margins and operate much more efficiently.

1:33:28Vlad Tenev:So through our use of technology, we can offer our services at much lower cost and we can actually give to our customers the difference so that you're actually at a financial disadvantage using any other product than Robinhood. um so yeah i think unfortunately it's not as simple as like oh free trading or not commissions we do make money in other ways but generally using using robin hood should be cheaper higher value more cost effective across our entire product suite than any of our competitors why

1:34:05Shane Parrish:do you think your credit card was so successful like everybody has a credit card yeah there's a hundred different ones they're super it's almost like when i saw how simple yours was in a way i I was like, oh, my God, this is like Steve Jobs coming back to Apple, taking 400 product lines and making like, no, we're doing four computers or simplifying everything.

1:34:24Vlad Tenev:It's easy to explain the value prop. Three percent cash back on all categories. Right. And if you're a credit card nerd, which many people are, if you're like one of those people that follows the points guy.

1:34:37Shane Parrish:There's some higher businesses like related to like just optimizing points.

1:34:42Vlad Tenev:Yeah. But, you know, a lot of people don't want to play that game either. They want to say, OK, I don't want to spend my time working in spreadsheets and figuring out, OK, if I spend this much on travel, I use this one card. And for my groceries, I use that. And for my gas, I use this. So it's very, very compelling value proposition is, say, 3 % on all categories. Because what that allows you to do as a spender is to say, this is just my default card. I'm just going to, this is going to be at the top of my wallet. Sure, I have the opportunity, the ability to do more work. If I wanted to do more work, maybe I'll pull out some other cards for other scenarios.

1:35:24Vlad Tenev:But I also know that if I don't want to think about it, this card is really good in general as a default. And I think, I mean, in some cases, if you look at the really successful e-commerce companies like an Amazon, what they've been able to do is do such a good job that they've become the default place you go to buy stuff. And sure, maybe at this point, if you want a comparison shop and you want to buy a new belt and you really wanted to like save on the belt, you could probably find it cheaper somewhere else. but they do a good enough job and they serve you well for such a large majority of things that they become the first option.

1:36:10Vlad Tenev:I think that's what we've been able to achieve with a credit card. And, you know, even though it's still not completely generally available, we do have over half a million cardholders and we're among the fastest growing credit cards. and, you know, more people keep joining. It's like credit card companies typically have had to really think about cost of customer acquisition because they have to pay for customers to come in. But we have such strong word of mouth that customers are coming faster than we can let them off. And that's just entirely from peer-to-peer reviews, existing happy customers posting about how much they love it on social media.

1:36:58Vlad Tenev:I think that's been a huge driver of its success.

1:37:02Shane Parrish:Two questions. Why do you think somebody like Amex just doesn't copy that? Can they not because it's a structural problem and they can't do it from their cost structure is different than yours? What prevents them from doing that?

1:37:14Vlad Tenev:I think it's a cost structure problem. You look at the big credit card companies and they have tens of thousands of people, right? tens of thousands of people that are manually servicing these accounts. And, you know, they spend a ton of money on marketing. So, yeah, I think the actual economics of the card program itself are dwarfed by the economics of like the large headcount needed to operate the businesses. I think those are very, very painful decisions because not only are you talking about shrinking headcount, but also in order to do that, you actually have to have the technology to be able to automate the entire servicing process and the underwriting.

1:38:08Vlad Tenev:And I think we had an advantage because we were able to build this from scratch. So you could start from first principles. so i i think um yeah i think it's it's very very challenging problem to solve i don't envy them

1:38:23Shane Parrish:no it's hard when you're the incumbent and you're faced with it you can run up i think of this as like uh you know if you're you don't have the resources maybe as like american express in some sense you do now but i mean when you started you didn't yeah and what do you want to do you want to run upstairs because they're like fat and happy and so it's going to suck to run upstairs but they can't chase you because they're going to be out of breath. They're going to be panicking. They're going to have hard – like they can't keep up with the velocity that you can move at.

1:38:52Vlad Tenev:Yeah, and by the way, I think that if we can put pressure on the credit card companies to start modernizing, that will be good for them and for the consumer.

1:39:04Shane Parrish:But you don't get 3 % like in a transaction fee. So like how – is that from balances? Is it from like you're only paying that out once a year so you get to keep that during the and earn interest on it? Like how does that work?

1:39:16Vlad Tenev:Yeah. So here's the great thing. The other thing that we have that at least the pure play credit card companies don't have is a brokerage business that ties into it. So in order to get the 3 % cash back, you actually have to deposit the funds into your brokerage account. And so we've created this flywheel through Robinhood Gold where by using the credit card, you also use the brokerage product. And of course, at the beginning, it was mostly the other way. So existing brokerage customers would adopt the credit card. But increasingly, we're seeing people coming to us for the credit card. And then we actually get them to use brokerage and our wealth management offerings as well.

1:40:01Vlad Tenev:And what we've seen is that the more products you use of Robina, the more engaged customer you are, it lifts all boats. So each of our other product lines benefit. And I think that's what's really pushed us to more rapidly diversify and add new adjacent product lines rather than just getting deeper and deeper into brokerage. So basically, and we saw this with retirement as well, if someone uses the credit card as their primary card, they put more of their wealth into Robinhood and more of their money into it, and they become a more profitable customer to us. And that allows us to close the gap between the rebates we get from the networks and the 3 % we pay back to customers.

1:40:48Shane Parrish:If you had to rank sort of the three products that matter most when it comes to transferring my financial institution, making you the primary financial institution, what would they be?

1:41:00Vlad Tenev:Yeah, I mean, making us your primary financial institution is really about coverage. And the goal is for Robinhood to be not just your secondary, but also your primary account. We want to be both. We can be your secondary account and your primary account, your backup and your main. And most of the time when you actually ask people, what's your primary financial account? They'll talk about where their paycheck lands up, their bank account. And, you know, for a while we weren't really playing in that space. But you might have noticed a couple of weeks ago we started rolling out Robinhood Banking.

1:41:35Vlad Tenev:And if you look on social media, Robinhood Banking is a hit. I mean, people love everything about the product experience. We've really the team there has really done a nice job sweating the details and building a comprehensive banking offering. And it's a combination of things that you won't get anywhere else, like real time cash delivery, which is available in New York. So if you're actually here domiciled, you can try that out. That's rolling out more broadly as well. But also just the bread and butter, child savings accounts, joint accounts so that you can have shared finances with your spouse, a family first experience where you can actually manage the finances of the whole family in one place.

1:42:20Vlad Tenev:So it's a combination of differentiated features you won't find elsewhere. Amazing economics where you have the opportunity to earn a high rate of interest, not just on savings, but also on checking, which, by the way, is a huge annoyance for people that the banks play this game of like, yeah, your money goes in and out of your checking. and of course will penalize you if you try to take money in and out directly of your savings too many times for no reason other than to collect the high spread on checkings. So it's basically a little bit of a stupid tax where they try to like penalize you for doing wrong things.

1:42:58Vlad Tenev:And I think that, or sorry, penalize you for doing the right thing. So I think, you know, not to be too pejorative, They're running their business and they provide valuable services for people. But I think that's an opportunity for us to differentiate.

1:43:16Shane Parrish:It's almost like the run for the institution versus the customer. That's how I think about it whenever I deal with a bank and they do this thing where it's like, oh, if you want to earn interest, you have to open a savings account. It's like, are you incentivized by me opening a savings account? Because like even if it makes it harder for me, so there's a bit of friction and like you get a little bit more float because of that. Yeah. Like that's oriented around you as a bank. That's not oriented around me as a consumer because me as a consumer, I don't want another bank statement. I don't want another pin card.

1:43:46Shane Parrish:I don't want another thing that I have to keep track of. Yeah. I just want one account. Just pay me the interest on that account.

1:43:53Vlad Tenev:Yeah, I think that's right. And I think sometimes, to be fair, there's a delicate line between these things because, you know, they have to they have all kinds of like safety and soundness constraints and all of that.

1:44:09Shane Parrish:So we'll go deeper on that for a second, because I would really love to understand why legacy is not adapting quickly to a changing world, perhaps in the most optimistic sense, or it just remains that way.

1:44:21Vlad Tenev:I mean, I think at one point there was a rule. I think this was I didn't study this. So you might have to look it up and we might have to correct it. But I think for a long time, banks were actually prevented from paying interest on savings. And the fear was that, you know, if they start competing over paying interest or sorry, they're prevented from paying interest on checking. And the fear was. If there was a ton of competition over paying the highest rate on checkings, it would affect the safety and soundness of banks and it would lead to more bank failures. And so the you know, the the FDIC or OCC came in and they said, you know, no, no interest on savings.

1:45:06Vlad Tenev:I think that was later repealed. But, you know, by that time, of course, the interest you collect from from the checking accounts was such a big line item part of the P &L that it's hard to part with that. Right. And so they sort of like became structurally reliant on it. And, you know, how do you how do you adapt if you have trillions of dollars in checking that you're used to paying to earning 5 % on and you suddenly are talking about giving the majority of that back to the customer and taking no profit? You know, you do that very, very quickly and your earnings go down. Profitability goes down.

1:45:49Vlad Tenev:if you're public, you know, that could have an impact on the stock price. And suddenly it becomes a safety and soundness concern. Yeah. I was thinking about this driving here this morning.

1:45:59Shane Parrish:I was like, I wonder if the ultimate endgame is like the mortgage ties people to financial institutions in a way because they can tie the mortgage to other products. They can tie it to your paycheck. It's deposited. And then I was thinking, well, Open Door wants to enable like one click buying of a house. and if they were to integrate with robin hood or somebody else or a financial institution you could literally enable that on the spot you can enable like oh your mortgage is granted it's approved uh and it seemed it'd be like seconds yeah and we have a mortgage uh partnership with

1:46:36Vlad Tenev:sage home loans that gives you 75 basis points off of the national average because you have better information about people too, right?

1:46:45Shane Parrish:So you have history, complete history, information, and you can use that with AI, I would imagine, to actually probably generate better predictive outcomes than humans.

1:46:58Vlad Tenev:Yeah, I think the hard part about the mortgage business is very rate dependent. So I don't think we necessarily want to get into the mortgage underwriting business or holding mortgages, but we want to help people with all of their financial needs. And I think for that one, being a network and allowing different banks to compete over who can offer you the best possible rate as a consumer is probably the road we're going to keep going on.

1:47:30Shane Parrish:But ultimately, doesn't that come back full circle a bit to the tokenization? So, like, you might pull those mortgages at the risk of sounding like 2007 here. Pull those mortgages and allow people to, retail investors to partake in those mortgages, no? I haven't thought deeply about whether we would securitize mortgages.

1:47:52Vlad Tenev:Um, my feeling is that, I mean, at the end of the day, um, we just want, we'll just enable what offers customers the, you know, lowest cost, whether it, whether tokenization enables that, or, you know, you can connect directly to a network of banks that can compete over your mortgage traditionally, I think remains to be seen. you could argue actually tokenization at first would have a disadvantage because the banks won't be tokenizing. And so you probably have to meet them where they are and give them the information in ways that they can support. But yeah, over time, that's likely to shift if they tend to be laggards of technology.

1:48:42Vlad Tenev:So if, you know, five to 10 years, they're doing mortgage originations and on chain, then you could imagine it being the primary market for that.

1:48:54Shane Parrish:We always end these interviews with the same question, which is what is success for you? For me personally, I think success is

1:49:08Vlad Tenev:creating dramatically more value for the world than you create for yourself. So So, yeah, I think I would feel good if the aggregate impact on the rest of the world, and I think obviously it should be positive, I think it is, is much bigger than what happens to me personally. And I think that's what's pushing me to, as you said, further ownership, make it so that everyone has skin in the game. Because I think that if I can play a part in doing that across privates, publics, post-IPO, and make it so that more people own the great industries of this country, will lead to not just smarter and more well-off individuals, but also a more stable and prosperous society.

1:50:09Vlad Tenev:And I think that's the that's a legacy that I would I would get excited to tell my grandchildren proudly about when they're, you know, huddled around the fire on Christmas. It's a great answer. Thank you so much for taking the time today. Thank you.

1:50:28Shane Parrish:It's been fun.