Industry veterans, degenerate gamblers & besties Chamath Palihapitiya, Jason Calacanis, David Sacks & David Friedberg cover all things economic, tech, political, social & poker.
Sat, 13 Feb 2021 04:33
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0:00 Bestie intro, congrats to Friedberg on a big beak wet
1:44 Jason intros Vlad Tenev
2:48 Vlad fields questions on Robinhood's choice to stop the buying of $GME, his CNBC appearance, self-clearing, liquidity & more
11:02 Allowing access to margin, Robinhood's prior SEC fines, Robinhood accounts that go bankrupt, debunking conspiracy theories, WallStreetBets & more
21:57 Should there be more transparency in the financial markets? Will Robinhood's IPO shares be sold to their retail users? What will they change internally going forward, and how would they have handled the meme stocks situation differently?
31:04 Vlad tells the real story of Jason investing & signs off
33:51 Vlad's returns to answer more questions on users that lost everything, future of payment for order flow & more
41:36 Debriefing Vlad's performance
Now wait. Glad you have to turn your camera off. And then I'm going to do my little bit. Where the bestie guesting door knock? No, no, Jason, no. Let's not do silly. This is silly. Here we go. You can do it. It's very easy for me. Don't worry about it. Don't worry about these guys don't want to do it. They don't like. They don't like my bets. 3/2. Let your winners ride Rain Man David Saxton. We open sources to the fans and they've just gone crazy. Love you guys. I'm going. Hey everybody, hey everybody, welcome to another episode of the All In podcast with us again. The Queen of Kin Wah himself, David Freedberg the Rain Man. Definitely counting cards. Yeah. Burn baby David saxes with us Chamath Palihapitiya. The dictation by the way and by the way. Call JL. I'm Jay cow, AKA baby seals. Jakal, could you take longer with the intros? I mean, this is like, this is like your one moment to shine like the torture. I know you do a little branding here. I'm branding you guys as characters on the show. I do wanna, I do want to give a big shout out and congratulations for David Frieberg wetting his beak in a big way. The story, by the way, we should actually have a founder. Crazy founder stories and we should have. Liebert tells the story of Metromile, but it closed its SPAC transaction and went public, and it's doing great. And congratulations. Thank you. Thanks, guys. Well, golf, clapping for the support tomorrow. Yeah, thank you. Thank you. Very nice. And joining us this week as our second bestie guestie, after a triumphant performance by Draymond Green on the last All in podcast is Vlad Tenev, who is the cofounder and CEO of a new startup we wanted to introduce. Everybody too. It's called Robin Hood flat. Tell everybody, what is Robin Hood and what's the mission of this new startup you've you've got. Thank you for, for having me, having me here, hanging with you guys. Robin Hood's mission is to democratize finance for all. It's somewhat new. We've been around for a little bit over five years and we have a mobile app and a website that allows customers to invest in stocks, options, cryptocurrencies. We offer a debit card. In the high yield savings product as well Commission free and with no account minimums. Vlad, I think you've done an amazing job building this company and you guys have done an amazing job democratizing access to to to the ability to trade. But can we fast? Let's Fast forward to to the issue that I mean this. We discussed a I guess a few pods ago because there was intense interest in this. I think it's our highest rated pot ever was discussing the GameStop issue. So you had these, these traders from Wall Street bets, these redditors. Who, like you said, they perceive themselves as the heirs to Occupy Wall Street. They're they're trading for profit, also for revenge. And and then, you know, you you guys, I guess, get a call in the middle of the night from the clearing house and you have to freeze the buy side of the trade the next day. I guess let's Fast forward to that, because that was the thing that, you know, got everybody up in arms. Could you, I guess, talk to us about kind of what happened? And I'm sure you didn't want to have to freeze trading, right? But you were. Being compelled by this clearinghouse, can you kind of explain what they told you and why you had to do it and and and and why not just ask them to give you the order and writing so you could post on your website so everybody would know you didn't have a choice. Could is that something you could have done? Well, I think the challenge was that no doubt we could have communicated this a little bit better to customers, right? By the time by the time we restricted these securities to PCO and it was 13 securities that we limited to sell only that process is actually operationalized within Robin Hood. So it's we do it from time to time under various circumstances like corporate actions. So when something has a reverse stock split or something like that we can PCO it for a little bit. So there's a button in a dashboard that you know you can click and. Automated emails get sent out. So it's a, it's an operational process that I think in hindsight, we probably should have exceptionalities used to make it to make it clearer why we were doing this, just given all the swirl around all these meme stocks online. But by the as soon as those emails went out, the conspiracy theories immediately started started coming. So my phone was blowing up with, you know, how could you do this? How could you be on the side of the hedge funds? And of course, we're not on the side of the hedge funds. I mean we're, we're building products for our customers and we just had to do what we did to meet our deposit requirements because if we didn't do that, we would be in violation. And the consequences of that could have been much, much worse than simply halting buying in the 13 stocks. I think that's where, you know when you were on CNBC with Sorkin. People either thought you were obfuscating or you were lying, you know, and part of it is sort of the the the guts of your business is that at some point as well you guys decided to self clear right? And then going into self clearing you become liable for every single trade that happens on your platform. Like if you look back on those two medience, what self clearing means, it means that you know, typically you can work with the wholesaler to offload the risk. So Vlad acts as a transaction layer and as a UI and somebody else is responsible. At some point these guys, for economic reasons decided to take that responsibility on themselves. But when you do that, you take on the full-fledged liability of the value of every single trade on behalf of your customers. Yeah, I would think about it. I would explain it as there's like pre trade, right, then the trade and then post trade. So Robin Hood obviously does pre trade with that's the app and what's called the introducing broker dealer. Our market makers do the trade, so we route it to all the firms like Citadel Execution Services, 2 Sigma and then Robin Hood Securities does the post trade, the clearance and settlement. So we manage the exchange of cash and stocks that happens on TV. Us too, so two days after after the trade is made so. What was not, I mean, if you had to give that answer again when Sorkin said you have a liquidity issue? Was the answer, yes. We have a liquidity issue and here's why. Or is it still the same answer? It wasn't. So I I stand by what I said and I'll explain it and thank you, by the way, for giving me a chance to explain it. First of all, restricting securities, restricting the buying of securities is something that every, pretty much every broker did to some degree during this week, right. So when you say the L word and financial services, it reminds you of Lehman Brothers. Where you literally are not able to operate your business. We met all of our deposit requirements. The new capital that we raised the 3.4 billion wasn't to meet our our ongoing deposit requirements. We had met them and in order to relax them and eventually unrestrict them, we needed to raise some more capital and eventually have more cushion so that if we keep seeing the type of growth that we kept seeing, we didn't have to impose position limits again. So I stand by what I said, I think if you described. That as you know the L word every pretty much every broker would have had that issue. And I think at that point the word kind of loses its meaning and the the gotcha factor that the journalists are trying to to get out of it. Do you think that the the risk in the business went up when you decided to self clear or would this risk have been the same if you worked through a wholesaler? Well, I think a lot of the a lot of the other brokers who relied on clearing firms had the same issue, right. You know, there's there's firms like Apex clearing which has introducing brokers cash app for example, clears through a third party as well and they all had this issue and of course their response was they they kind of threw their clearing for them under the bus, right. So obviously we're not going to do that because our clearing firm is Robin Hood securities. But I think understanding the space a little bit better since Robin Hood securities is, you know, a subsidiary of, of my company, I realized these clearing firms had to do what what they did like there's no, it's not negotiable to meet your deposit requirements. Of course we can ask what can we do? Are these deposit requirements sensical? What can we do to drive change in the system? And I think that's where my what's that? That's those requirements. That's the clearinghouse, right? Is that the DTCC? Yeah, it's the the DTCC. And a lot of this stuff is actually spelled out in Dodd Frank. So if you look at Dodd Frank, you'll see descriptions of the VAR charge and the various special charges there. But I do think one thing that I'm very excited about is. You know, not going beyond just talking about our problems, right. We can. I've, I've talked about our problems a lot, but talking about solutions and how we can create a better financial system in the future. And I really think if you understand the underbelly of what T2 settlement is, you immediately ask yourself, why aren't we settling trades in real time? And I wrote a post on that. I had a tweet storm. I'd also say, you know, some of the feedback that I've gotten is, you know, here's Vlad from Robin Hood telling us about trying to change T plus. To do so that he can meet, he can lower his deposit requirements. I think there's lots of other systemic issues that fall out of that. In particular, right now you can short sell more stock than the shares that are outstanding, right. So you know some of these stocks had 140% short interest, right. So more, more shares were shorted than actually outstanding. And I just think that's pathological and it stems from the fact that, you know these shares are tracked on pieces of paper, so they're basically not tracked. And someone can you, you can, I can lend you my shares, you can short them. The person that's buying them from you can lend them again and you can do that multiple times and you end up with this situation that could destabilize the financial markets, right? So, OK, so T plus moving from T + 2 to T + 0, that's one issue. Where do you think margin? That's what I was going to ask, where, where is your margin? What's your, what's your thoughts on margin? Well, so margin wasn't involved in this particular situation. In fact, there was an escalation path. Not a lot of people noticed until Thursday, but pretty much all the brokers, including Robin Hood, were ratcheting up the margin requirements for for all of these securities until they got to 100%. So by the beginning of the week, they were pretty much all at 100%, which means you can't use margin to buy them. You have to, you have to have them 100% covered. So do you guys have a more specific question on March? I meant I meant more like, I meant more like. So for example, I think it's true, but you tell me if this is not true, you guys paid like a $65 million fine to the SEC for gamifying Robinhood, right? And not not exactly true, but go ahead. OK, do you want to do you want to just tell us what the truth is? Yeah, well, so the the fine wasn't for gamifying Robin Hood. It was for. Payment for order flow and business model related related things. The gamification one is the Massachusetts Securities Securities 1, which is a separate thing. And look on the SEC thing, we're a fast growing company. We obviously scaled a lot between the period in question. Obviously the the Securities and Exchange Commission felt like we could have done things better and and I owned that. I think that we're fine being held to higher standards. We have to hold ourselves to higher standards and what we can do is just do some of the things we've done, staff up our compliance team, staff up our legal team. We brought on a new Chief legal officer who is a former SEC Commissioner 2 new chief compliance officers for Robin Hood Securities and Financial who had. Decades of experience and the level to which we're investing in compliance. I mean, the goal is to build the finest legal and compliance team that the financial industry has seen. Let me tie it back flat to what to what we were talking about before. So do you think that it's OK if we're trying to build a generation of investors to give them access to margin as easily as some apps, including Robin Hood does and then separately allows them to trade? Highly transactional high Vol instruments like options on top of that with margin. What do you think about that? Just as a general philosophy, forget business building for a second. And then also can you say what the margin you allow is for a new account? Because I don't think people understand what that is. Maybe a little definition there. Well, there's a couple of things I want to clear up. #1, you can't trade options on margin, so options are all fully paid for, right? Margin is not suitable for everyone. I'll admit that. You have to understand it. And you also have to be a Robin Hood gold customer, which means you have to sign up and pay $5 a month. Most brokers don't gate margin behind a premium offering, so we're already a little bit more restrictive on that front. You have to have $2000 in your account before you can borrow. And in December, we did lower our margin rates to 2.5%, which is very, a very competitive low rate. But let me tell you a use case for margin that I actually think is quite powerful. So obviously one use case is kind of the typical one of buying more stock with your money. But if you build a large portfolio, you can actually use margin as a line of credit and we offer this feature with our debit card. You can turn on what's called margin spending. And what that means is if you invest in your portfolio, you can borrow collateralized by your portfolio at a very low rate, which is 110th of what you would borrow through a credit card. So I actually think. It's a it's a powerful tool. Certainly customers have to understand it and be suitable for it, but it unlocks the type of borrowing not just for buying stocks, but for for for meeting your daily purchasing needs that I think is is very useful. If somebody puts $2000 in blood, can they trade 4000 dollars? 6000 dollars, $8000? And does it matter what equities they're holding? How does it work? Yeah, the, the actual calculations are there. There's no blanket formula I can give you because it does depend on the securities that you buy. So the example I gave was, for example GE and some of these other meme stocks. We raised the requirement on those to 100%. So those have to be fully paid for. Other stocks have an initial requirement as low as 25% if it's one that you know is deemed by the operational staff and our processes. Is not being super volatile and it can go in between, so 25% initial requirement all the way up to. So you could trade four times your money if it's a really blue chip secure stock. More or less, yeah, with some nuance around that. You know, time and again, Vlad, there's studies that show that it's really difficult to beat the market and make money, you know, trading in an efficient market like the market we have for stocks or options or or what have you, there's a lot of players, there's a lot of liquidity. As a lot of people with information it's, you know, these great fund managers overtime underperform just the S&P, right. And you know I, I think I mentioned this when we had that pot a few ago, that's. That was involved in a 4X trading company and 6060% of accounts eventually ran out of money. Can you share with us what percent of Robin Hood accounts run out of money? And, and, you know, do we mask generally, and I'm not accusing Robin Hood specifically of this, but do we mask the idea of investing in businesses, as, you know, a way of kind of highlight of, of a way of hiding that people are really just using this to trade in and out and try and make money in the short term. And ultimately the majority of them end up losing most of their money because the fees and the spread and the margin or whatever it is. That, like that kind of adds up, you know, wipes out the account. And that's what I saw this forex company I was involved in. Can you share with us, you know, in a very candid way, like how many accounts do you eventually go bankrupt at Robin Hood and how much of that do you really see? First of all, I'd say Forex is a little bit different because the leverage you get in 4X is like orders of magnitude. Yeah, I'll admit to that. It was like 10 to 50 to 1 leverage. So you're totally right. Yes, 100%. So I I do think the businesses are a little bit different. Most of our customers don't use leverage. Most of our customers aren't active traders or trading options and if you look at some of the features that we've rolled out, the theme of this year has been how do you turn a first time investor into a long term investor. So fractional shares, recurring investments drip these tools allow someone to create a diversified portfolio of individual stocks and recurringly buy into them over time. So but is is that the majority of users today or the minority you know are? How many accounts do you see kind of cycle down to 0? Over what period of time, I think a very small percentage of accounts have that have that property. I mean I think if you look back in 2020, we had a huge increase in growth and interest in investing right at the bottom of the market crash in March, right. And I think people have taken advantage of that and our our customers in general have benefited from the recovery very, very significantly. So I I wouldn't. I I would reject the the meme that, you know, Robin Hood customers are active traders that are just, you know, churning their accounts and and losing all of their money. That's that's just simply not what we're seeing. I know Sachs has a question, but one question I had with the conspiracy there is. But I would just love to hear like a yes no to like, did Citadel call you and say stop this madness because they had exposure through one of their hedge funds with GameStop? And did Sequoia call you and say, hey, stop this madness or is there pressure and you forgot you forgot the White House one? No, no. This was a formulaic decision made by Robin Hood Securities due to Citadel. Didn't call and ask. Didn't call and ask. Did the SEC call you and say this has to stop. No, but the clearing house did, right? Yeah. Well, they called and they said here are the deposit requirements and we worked with them to lower the risk so that we could meet the deposit requirement. Got it. And and so just just me pick up on that so at the same time that was happening and I I know this wasn't Robin Hood that's not your company but but Discord and Reddit we're receiving reports that the Wall Street Bets Forum was engaged in in hate speech and there was an organized effort to get them censored and taken down and discord basically fell for it and took down Wall Street bets read it to their credit, did not do you have a take on you know what happened there and. I mean, I assume you you don't think Wall Street bets was engaged in hate speech. Well, so that happened Wednesday, I believe. And yeah, we we were watching it. It was first it was like, oh, wow, Discord, discord shut down. And then I think Wall Street bets went dark on Reddit for a little bit as well. But I'm not quite sure of the the reasoning behind that. Look, I I mean, I disavow, hate speech, misinformation. I'm not, you know, judging. Which of the posts are hate speech or or not? I think that's the social media companies that that that should take a look at that. The mods, I think the mods closed down Reddit for like a little bit and then turned it back on. Yeah, I mean a lot of these things get triggered. If 10 people reported at the same time, it just it sets off seems, it seems, it seems to me that and certainly this is, if you want to call it a conspiracy theory, it seemed like you had this Wall Street bets group. They were on one side of the trade, you had these Wall Street hedge funds are on the other side of the trade. And there was an effort to weaponize the speech rules of Reddit and discord to cut off the lines of communication of Wall Street bets. Because the only way that Wall Street bets, as a decentralized group of millions of traders can can stick together and compete with these hedge funds is if they can communicate with each other via these services. And so, you know, it seems like there was an organized effort to try and take them down at the exact same time that that they were frozen out of the buy side of the trade flag. Do you think that there should be more? Transparency in the financial markets, meaning everything from payment for order flow, how much money companies make lending out their stock, how, what? Which company is short, which stock? Which company is long, which stock on a more frequent basis, how much margin people are running. Do you think like we should move to perfect transparency in the financial markets? I I do think that there should be more transparency, and I'm glad you brought up payment for order flow because it's something that I'm trying to take on. You guys might have noticed I published a post on payment for order flow. I started a tweet storm that is meant to just start the conversation around it. I want to understand kind of the misconceptions and the theories and knock them out one by one. And I think that'll lead to some positive discourse around it. And there certainly might be things that. Have to change and I think the the first step is actually engaging in the conversation and kind of connecting the people that understand the details with the people that have issues with it and I don't think that's been happening enough so for sure. But what about stuff like margin shorting you know short like do you think that we should move all of this stuff so that it's just out out front for everybody to see. Well I think I think if we if we migrate to a better settlement infrastructure and move to real time settlement. Get a lot of that stuff for free, right? So you do get, and I know a lot of the crypto people came out after I published my post and said, you know, crypto solves this, you could just put it on, on a blockchain and everyone could see publicly what's going on and which share which shares are, are being being held short where they are, whose owning them. So I think I would be in favor of of more transparency. I'm not sure at what point there's sort of like negative secondary effects. I haven't kind of unspun. The thread fully, but I think we can keep taking it one step at a time and see more transparency generally I think is much better. Hey flat when you guys go public you've talked about having a a listing at some point here soon. Why would you not have all of your chairs sold in the IPO through Robin Hood to your retail users. Why would you sell any shares to institutional investors? Wow good question. It is a an interesting question. It's it's one that I probably that's probably the one I can't give too much detail on. Hopefully you guys understand my recommendation. If you're going to democratize access, do it all the way. **** the hedge funds and the big guys if that's the if that's the point and you give retail equal access, you know in all these transactions as you know institutions get get all the access and the retailer something interesting like give a have your entire listing done through retail. It would be a it would be a game changing transaction. Yeah. So I mean a lot of this, it's really interesting that this turned into a, you know, individuals versus hedge funds because I I think that's a really powerful story. But you also have large institutions like fidelity that are holders of all these stocks, right. You have individuals on a lot of platforms that were short selling them as well, not Robin Hood, because Robin Hood actually doesn't doesn't allow short selling by individuals, but a lot of the other brokers do. And you have, you had statistics, statistics coming out that actually show retail versus institutional and, you know, there was some counterintuitive results. So I I think if you actually look deep into the plumbing, the story of, you know, long individuals, short institutions on opposite sides, I think there's a little bit more nuance to it than that flat. If you had to do it over or actually forget about the past, think about the future, what do you change inside the company? Well let's see. I think the 3.4 billion in extra capital certainly helps. I think I'm, I'm very proud of the transition that we made between Thursday and Friday. So Thursday we had the blunt hammer of PCO in these stocks, right, which obviously was not ideal. By Friday we had moved to a much more sophisticated system where intraday we adjust the position limits in it was up to 50 stocks and we published that on our website so that that. Gave us a lot more granular control over it and is a better system and we're going to only improve that and kind of take the learnings to other parts of the business. So I think the great thing about these sorts of crises is sort of months and years worth of work get compressed and people are just like super aligned on the key priorities we need to do to, to move the business forward. And we saw that. And then the third thing I'd put is just maybe you guys have. I mean, you know, I, I feel like I've evolved as the chief executive and as a leader. I I didn't used to be on social media telling our story very much, but I'm out there trying to encourage more transparent, I would say much better today than with Elon, much better with Elon than Sorkin. So progress has been made. I have a just a basic question. I know we got to wrap soon when things get super heated and you have this viral momentum where I don't know how many people tried to sign up on that day, but maybe you could give us an idea on that. Wednesday or Thursday was it, you know, 5 Figure, 6 figures or 7 figures worth of new accounts? Why not throttle the new accounts and say, hey, we're, you're on the wait list. We on board 10,000 people a day. Your day is going to be next Thursday so that you don't get caught in this. You know, everybody uses the fact that it's friction free to sign up to do an emotional bet in a, you know, let's call it mob behavior. Right. Like this turned into a mob and and I guess some people believe it's a good mob to go up against the hedge funds. Uh, but it it could have equally been something, you know, something more deranged and even more Edge case is going to happen. So when that does happen and a million or 10 million people sign up, can't you just pause it and say we're not going to do any new accounts today. We've reached our limit. We actually did do that. So we, we have been pausing new account approvals off and on depending on the load and customers have been experiencing in some cases short delays with account approvals. Obviously not an ideal solution from our standpoint, but you know, if we have to do that, we will do it and we have done it. How many people signed up on that Wednesday? Like, just ballpark? Like, was it hundreds of thousands? Millions? Jason, are we are we running an ad for Robin Hood? Stop. No, I'm just curious about the Skype. None of us cares. None of us cares. Flat. Last question. Hit me. Hey, listen, if you had to pick two different CEO's reactions to how you dealt with it, let's say Tim Cook on one end of the spectrum and suck on the other, how do you think they would score what Robin Hood did? And what they are doing? Timco Zuckerberg. You know, I'm. I'm not sure I think that. I think I'm proud of of of how the firm navigated this. I think obviously there's ways to improve upon it. I think that, you know, anytime you get a phone call in the middle of the night saying you have to put up $3 billion, all sorts of things run through your head, right? I've had it happen, I know. And that was just money from the cage for poker. I got a lot of people reaching out to me, which was amazing. If you had to do it over again, why not just post A blog that morning saying, hey, we got a call in the middle of the night, we have to do this? Is that is is that the thing you do over again? No, because he'd be throwing his own company under the bus. He'd have to say Robin Hood securities is telling Robin Hood, the broker to post this money because Robin Hood securities is being told by their downstream clearing. So it's like you're, you're, you're in a, you're in a possible situation saying it now. So better to say it at the time it all happened and it would have diffused the whole crisis, right. Well, first of all, I'm not throwing anyone under the bus. We had, we did, the team did what they had to do. I don't think there was any way to navigate that differently. I think the automated emails that went out to customers. Saying your stocks are you're restricted from buying these stocks probably could have been handled a little bit better. We probably could have offered more detail and that with the foresight that maybe customers would think that a hedge fund forced us to do it or something like that. So certainly, certainly there's areas we can improve upon across the board. And one, an early investor called me throughout this and said, hey, chin up, you know, navigating a crisis. Successfully unlocks the next level of value creation for the company and I've had that in mind at the entire time and I'm just doing what I can to to make that for sure reality both for Robin Hood and for the financial system. I think that this could lead to some really positive change industry wide. Yeah. And I'll just just just one last softball here that this is not about what happened that that with GameStop we've had a debate on this pod. It got kind of heated between Jamath and Jason about the nature of Jason's investment in Robin Hood. Can you tell us, can you tell us your side of the story of what happened at Antonio's nut house and how much, how much stumbling was involved? Precisely? OK. I'm, I'm very glad you brought this up because I've been meaning to call Jason out on it. He has this great story. Of how you know, we met at Antonio's nut house and he wrote a check. I think the the real story is that on OHS. No, on Robin Hood launch date, which was a Saturday, and we violated every rule of PR and marketing by launching inadvertently on a Saturday. I gotta reach out from from launch, who was one of the first one of the first outlets to cover our launch on Saturday. And Jason's Jason's friend, Simon's ex employee, who ended up running social for us for a bit, was a big fan of Robin Hood. So he joined us as kind of our first social person. He introduced me to Jason. I met Jason at Sequoia. Jason, where you agreed to invest and then six months later we met at Antonio's nut House when we were raising our Series A and I think you you gave me the advice to to go with index ventures. No, I know, I said. Second all the way. Don't get me in trouble. I I promise. Michael Moritz, Doug leoti. Whoever's watching I told him was Acquia was great. They they they unfortunately passed on our Series A as as did a lot of other funds out. All right, listen, thanks for coming on the pod. We really appreciate you taking the time and continued success. And I'm really glad we didn't give you a job offer back in 2008. Sounds like it was the right move for you. Funny how things work out. You know, apparently I interviewed him in 2008 for a job and he didn't get the job like it was you. And Alex, Alex Michalka was my was my my main interviewer. But it's funny, I graduated with a math degree, right? I was. I was doing pure math, which in 2008 made me unemployable. We were the only people hiring at that point. Yeah. Yeah. You were the only people that would interview me. Yeah, everyone else was like, where's your computer science degree? Can you code? So I ended up going to math grad school, which was one of the few options that I had, and ended up dropping out and. And here I am. So funny how things work. Well, good for you. Alright, continued success and thanks for coming on the pod. We'll see you soon. Thanks. Bye. Thanks for having me. Wait. Blades back. Wait. Blades back. Sorry, I thought I was supposed to leave. I didn't know. If you guys were. You could say I was saying you can stay. I was saying after a year of Jason asking us to run ads, he's found a way of trying to make this a 45 minute infomercial for Robin. Absolutely. I listen. I'm ride or die. Glad you know that I'm right or die. Needed. We're just trying to keep keep everything up and let all the people safely and who have been banging on our door. How how much have you been sleeping? Glad have you been able to sleep? I mean, this got to be exhausting. Uh, Oh my God. Really? Can you ask him something? Like at least semi ******* challenging? Honestly. That's why. That's why you guys are here. If you're walking down the road and the Robin Hood customer, this is a tough one. I'm sorry you thought you were over this, but you logged yourself back in. So and and a Robin Hood customer that lost all this money when they got locked out of trading that day comes up to you and screams and cries. I lost all my money. What do you say to him? You know, I got completely destroyed. My life savings is wiped out. I mean, I've read a bunch of these comments on different boards and so on. Like, what do you say? Because I I know that's a tough one to swallow and I know that, you know, we've heard that the, the the story around what happened, but what do you say to that person? Well, first of all, I'd be very, very empathetic. I'd probably want to understand how someone could lose money. When they couldn't buy a stock at the all time high. So I think the details around that, I mean if you look back and obviously this had nothing to do with the decision, right. But Thursday was the all time high. Yeah. Yeah, but that's but the reason for that is because the ability of Wall Street bets to continue the trade was was basically interrupted, right. They were, they were engaged in a short squeeze against these big hedge funds and in order for this to keep driving the squeeze up and up and up, they needed it. Basically to to be able to buy and then once they got frozen out of all the online broker accounts, not just you guys, but all of them, that was that, that that that broke the trade. Right, that's what? That's what. But that's what they're so, but that's what they were so upset about is because they got they got locked out of the buy side of the trade. They weren't locked out of the sell side, right, they got locked out of the buy side and that allowed the the big hedge funds 24 hours to regroup and and cover the trade, the price went down and that basically cracked the whole thing. Well, I'm not sure about the the exact details there on the on the hedge fund side or what happened. Look what I can say is we're going to do our best to make sure that we get better and we serve our customers whenever whenever they want to buy stocks and we'll do that and we're going to get better and better every day. And the truth is if you had had the money in the bank account to for DTCC to be compliant, you would have been like you weren't trying. I mean you're in the business of letting people try out. Question. Yeah. You, you make nothing if people stop trading, you need people to trade the core of the business, right. Yeah. This wasn't, you know, a value judgment or some kind of moral stance and we weren't pressured into doing it by anything other than our regulatory deposit requirements. What do you think is the future of payment for order flow and revenue sharing on sort of like the the the the ways in which like meaning how much do you think of that payment for order flow revenue should you share with customers? Yeah, that's a good question. I mean this is all highly regulated and it's it's become the industry standard business model, right. So I'm not sure we're we're excited to have a conversation about it, I do think. Exchanges are here to stay, market making is here to stay. Market making is a profitable enterprise and so some level of revenue share between the market maker and and the broker makes sense and it is regulated. So I'm not quite sure what if any changes need to come, but hopefully this will be part of the conversation that that we can, we can help create and and work through. And I think part of the problem is just the opacity of it, you know it's. It's kind of like interchange. Does anyone know that interchange is this sort of like hidden piece of revenue every time you transact with a debit card or a credit card, it's it's sort of analogous in a way, right? Well, I think I think more people do just because the technology companies that have come around like, you know, Stripe and others will eventually just try to take it to 0. And so if anything, I think what the the business model or at least the business strategy of all these companies is when you find to your point these opaque pools of revenue, the innovation is just to give consumers power by taking these cost to 0. If you've laid decided tomorrow to do Robin Hood Pro, you know, higher level than gold and charge 50 bucks a month for 50 trades and then $5 each trade after that would solve anybody's misgivings about this, right? You could just offer both options. Well, I think it's it's. Payment for order flow enabled Commission free trading, right. It helps cover the costs of the business that that that leads to our ability to offer Commission free trading and moreover it allows smaller investors to participate. So certainly I think. That model would work, but the the consequence would be smaller investors would would not benefit, right? If the option is there would be like Facebook saying we have an option for you to pay and not see ads and be tracked right? It would just be great option. What do you think is the difference between investing and trading and what do you think has to happen so that you know back to where you started? If you want people to close the inequality gap, how do you allow them to do it? Trading versus investing? Well, I think the difference between trading and investing. Investing is a little bit more about accumulation. So typically you're buying more stock and building up positions. Over time, trading comes into play. I think when when you're selling right, when you're selling sort of strategically and you're doing it not driven by. Outside needs for the for the capital, but more for for sort of like intrinsic needs. So I think the question is would we, would we ever prevent people from selling ideally not. I mean people have various needs that that they could have for getting out of positions and I think as a platform we have to allow for that. Awesome. Uh, your PR people are literally going to come freaking out, breaking your glass in your house. She, your PR person is literally running from HQ. She's going to be start back on the back window. You cannot be on this pod. No. Great job. Glad and remember, use the order code bestie and get your kind of your first free month. Well, thanks for having me, gentlemen. Alright, thanks, man. Take care. Thanks for answering our questions. Thank you for coming. You're gonna log back in in 2 minutes, right? Yeah. OK. Back for the Chessa Boudin and Gavin Newsom recall. Dudes, your PR people will be delighted if you comment on that. Yeah. Are we going to do a debrief? The debrief from my opinion is that I I think that there have they have to really tighten 2 things. One is they need to make a decision how do they want to make money. Because I think this is the third time these issues have come up, it's probably not going to be the last and because there's going to be more market volatility, not less. And so you just got to decide how you want to make money because there is no amount of money that's possible if you're going to build a successful business and run into these margin constraints, right? You can't. There's just no amount of money that you could have. Meaning, if you look at the folks that didn't get called were folks that have like Schwab accounts. Why? Because Schwab is investing. And if you look at the folks that did have these margin issues because Robin Hood wasn't the only one there, all the trading and and sort of like high frequency shops. And so, you know, that's a decision and then it's back to what David said, which is like once you make a decision, you have to be able to tell people like this is what you want to stand for and you have to have the right internal controls and governance. And so, you know, if he gets these things right, maybe they can be on the other side of it. Otherwise they're just going to continually step on this stuff. And I think that the, you know, if folks lose enough money, they're going to be pretty upset, I think. Sounded to me like David Frieberg. You had a good point about offering the the Robin Hood. Consumer based the ability to buy the shares, I think 100% of it should go to the the the retail investors. He didn't say no and he kind of, I kind of got the inclination that he was gonna do that 100%. He will not. Yeah this came out in the past where he said they were going to offer some of the IPO shares to Robin Hood customers. And so that was a few months ago. I I I think I said publicly on Twitter, why don't you offer all your chairs to IPO customers like why take any of them direct to I mean could he technically become a clearinghouse. An IPO people. But then what would be like partnership in it? Yeah, like why didn't you just take, you know, if if fidelity wants to buy shares, let them buy shares on the open market like all the retail customers are forced to do. And then the fidelity argument is, well, we're buying fifty $100 million blocks at a time, so we don't want to have to be in the market doing that. But the marginal cost of buying a single share versus the marginal cost of buying a million shares is much, much higher. And you know that's the, that's the challenge with, you know, with retail access and financial markets that Robin Hood has set out to solve. As have many others. And it would be a really powerful statement if they said, you know what? We're going to show the world that the market can all go direct and be efficient and actually make all of their IPO shares available. And then you know what, if the big block trade guys want to buy some, go ahead and buy it from the retail guys in the open market or do 5050, you know, offer everybody who's a Robin Hood shareholder. I just think that they would if they could fill their demand, their demand on their book for their IPO from retail do that and let anyone else let fidelity sign up for Robin Hood account by their share. Robin Hood, you know, like the the fact is the big block buyers always get a discount, right. They pay wholesale pricing in these markets and that's also part of why it's so difficult for retail to actually find a footing. And so it would be a really powerful statement for them to kind of go all the way. Sure. I think it's almost certain they're going to give some of the shares available in the IPO through to Robin Hood customer. It's great. It's a great kind of, you know, publicity point, but it would be really powerful if they shifted the whole, the whole thing. I mean years ago when I was at Google. Maybe IPO, I don't know if you guys remember this, but it's the first time we try to do this Dutch auction. So the reverse pricing, so anyone, any individual, any retailer and retail customer and any institution could bid on Google shares. And then there was a clearing price that was hitting everyone got their shares at the same time. So there wasn't this order book that was built by going to the big guys of the banks all know and love like fidelity and KIRO and so on selling a big discounted shares. It was a, it was a, it was a true market auction. And the direct listing is the new model for this that totally democratizes access to the shares creates. They're transparent pricing for everyone and so you don't end up with these like discounted shares that pop 80% on day one. OK, sacks, what is your debrief on the Vlad appearance? So I think Vlad did a pretty good job handling our our questions, answering some be minus answering some deflecting some. I think that look I I think I I don't think Plaza a bad guy. I think he's a good guy. I think Robin Hood wanted to do the right thing. I don't think they had any reason to want to freeze their own users out of their accounts. I don't think they wanted to do what they did. I think that there was a little bit of a blind spot there on his part in terms of understanding the consequences. Of that freeze out. Right, because it did break the buy side of the trade for Wall Street bets. And then that that basically allowed the hedge funds to recover and that was that moment, you know, and so that that was that was a big deal. I think the consequences of that decision were a big deal. But it's a counterfactual, right? We don't know. We'll never know if that would, of course. Look, it was, it was that Thursday where the short squeeze ended because Wall Street bets couldn't keep buying. They couldn't keep engineering their side of the trade, obviously. That's why it cracked, right? And Robin Hood was a big part of that whole thing collapsing. Now, it was gonna collapse at some point. There's no question that the air was going to go out of the balloon, right, but would have gone to five or 600 is the question. Yeah, but, but but how much money the hedge funds were going to lose, whether they're gonna get busted out of the game for good and who is going to be left holding the bag? Those were all questions that got answered in a completely different way because Robin Hood did what it did. Now, I I don't believe that they had a choice. I think they did it because they were forced to do it. But it did have huge consequences. I thought he did. He's he's doing a better and better job explaining this highly technical stuff and you know, obviously if they can't talk about their IPO, that does tell you certain things. I don't have any inside information, but he obviously there's thing. What I get from this is there are things he can talk about and there are things he can't talk about. There might be either things with the IPL or things with confidentiality between them. And some of these parties like I have a feeling people are not allowed to talk about this DTC and what goes on there because there might be. I would have liked it that that was an area where I really wanted to hear more details and get more clarity because I mean I believe, look the order came down in the middle of the night from the DTCC, right? And so that's why I kept asking why wouldn't you just say to the DTCC, give me that? It's not writing about them, OK? That's what I'm reading into it and I don't think, I think it might be one of these non disclosures where you can't mention the non disclosure. Which we've all maybe, maybe, but, but but but see, that was the heart of my question, is if you're ordered by somebody in the middle of the night to take an action that is, you know, adversarial to your own users, well, I would ask them for that in writing and post it on your website, post it on your blog. So to show that you don't have a choice. I mean, I believe that he didn't have a choice, but why didn't he say that from the very beginning, right? I mean, that's what caused all the problems for them, all right? They have folks. Everybody go to thesyndicate.com/all in. Boys, I love you. I gotta go. Great job. Talk to you soon. Talk to you guys later. Love you guys. Love you, bestie. Alright, we'll see you all next time. Bye. Bye. Let your winners ride Rain Man. David Sasha. We open sources to the fans and they've just gone crazy with it. Why? Best. My dog taking it out of your driveway. Ohh man. We should all just get a room and just have one big huge order because they're always useless. It's like this, like sexual tension that they just need to release stuff out there. Beat, beat. See what we need to get merchants?