Vlad Tenev, Co-Founder & CEO @Robinhood: The GameStop Saga & The Future of AI | E1222

Intro (0s)

• Robin Hood has eight business lines that generate $100 million a year or more in revenue, up from three a few years ago, with some benefiting from higher rates and others from lower rates (2s).
• Robin Hood is stronger in a declining interest rate environment than in a rising one (18s).
• Vlad Tenev, the Co-Founder and CEO of Robin Hood, has known the host for a while and is excited to be in the studio (33s).
• The host wants to discuss the challenging moments that define who Vlad is today (45s).
• Vlad's past as an immigrant moving from Eastern Europe to the US has shaped who he is today (57s).
• Vlad's family moved to the US after the Berlin Wall fell, with his father, a professor of economics, coming first to build a stable foundation (1m16s).
• Vlad was separated from his parents for about a year and a half, living with his grandparents in Bulgaria, before reuniting with them in the US (2m2s).
• Vlad's experience of being apart from his parents and adapting to new environments has made him independent and flexible (3m0s).
• Vlad's experience is similar to that of many successful founders, who have a high frequency of moving in childhood and are forced to assimilate with different environments and cultures (3m41s).

Is America Still the Land of Opportunity? (3m56s)

• The question of whether America is still the land of opportunity is raised, with a comparison to the UK and whether the best talent wants to come to London, with the answer being no (4m4s).
• America is still considered the land of opportunity, especially in terms of entrepreneurship, which has become a viable option in recent years (4m11s).
• Growing up on the east coast, entrepreneurship was not a common career path, and it wasn't until moving to Stanford, California, that the idea of starting a technology company became a consideration (4m37s).
• A childhood road trip to California, specifically a visit to Stanford University, left a lasting impression and created a desire to attend the university, initially to study law (5m7s).
• The visit to Stanford created a feeling of wanting to be part of a community that seemed happy and successful, which was a major factor in the decision to attend the university (5m23s).
• As time has passed, the feeling that America is the land of opportunity has only grown stronger, with the energy of innovation and entrepreneurship continuing to draw people to places like Silicon Valley (5m49s).
• Despite a narrative of people moving away from Silicon Valley, the area is still seen as the epicenter of innovation, with artificial intelligence companies and big tech companies continuing to innovate and attract talent (6m11s).

When Have Vlad Turned His Back on the Crowd as a Leader? (6m21s)

• Great leadership is about being a conductor, and to be a conductor, one must turn their back on the crowd when necessary (6m23s).
• The concept of turning one's back on the crowd is explored through the lens of Rick Ruben's book, which distinguishes artists from business people, noting that artists create for themselves and do not prioritize commercial viability or public opinion (6m35s).
• Artists must be careful not to listen to others too much, as good art often alienates as many people as it makes happy, and the goal is to create something memorable (7m36s).
• In contrast, business involves designing a product that is both useful to customers and something the creator can be proud of, requiring a balance between personal vision and customer needs (7m59s).
• The process of building a product involves starting with an inspiration and idea that comes from within, but also incorporates customer feedback to refine the idea and adjust the interface (8m30s).
• The initial idea for a product often comes from within, rather than from customer research or feedback, but customers play a crucial role in refining the idea and making adjustments (8m51s).
• The creation of a new product involves a combination of art and business, requiring a balance between personal vision and customer needs (9m15s).

Does Vlad Think He Alienates Enough to Build a Strong Brand? (9m19s)

• Brands like Nike, Adidas, Apple, Samsung, McDonald's, and Burger King often have strong followings and equally strong opposition, with people typically being either for or against the brand (9m23s).
• It is suggested that alienating people can be difficult due to natural human sensitivity to criticism, which can make it more painful to receive criticism than it is pleasurable to receive praise (9m45s).
• This sensitivity creates a tendency to avoid alienating people, requiring brands to exert influence to make their products, marketing, or messages compelling (10m2s).
• Alienating people effectively often starts at the top of an organization, but individual leaders can also take risks to promote boldness and diverse perspectives (10m25s).
• One approach to promoting boldness is to allow individuals with unique visions to try new things, even if their ideas are not universally agreed upon (10m35s).
• Embracing this approach can help foster a culture that values taking risks and having a distinct perspective (10m45s).

How Vlad Builds Resilience to Handle Criticism? (10m48s)

• Vlad Tenev is sensitive and it hurts when he sees negative comments about him on social media, which can be challenging for him to handle (10m49s).
• He is not an introvert, but rather someone who gets uncomfortable being alone, which may stem from his childhood as an only child who spent a lot of time alone (11m19s).
• As a child, Vlad would often walk home from the bus stop alone and let himself into his apartment, which is a rare experience for children today (12m0s).
• He finds it difficult to be alone at night when it's quiet and he's left with his own thoughts, which can be a challenging time for him (13m10s).
• Vlad gets energy from being around other people and doesn't find it difficult to be with others, but rather finds it hard to be alone with his thoughts (13m2s).

Lessons From GameStop Times (13m29s)

• The GameStop saga was a tough period as a leader, teaching the importance of storytelling, particularly in media settings where one has to deliver sound bites within a short time frame (13m47s).
• Before GameStop, there was discomfort in media settings, such as CNBC or Bloomberg, where one has to explain complex ideas within 3 to 5 minutes (14m6s).
• The GameStop fiasco occurred during the COVID-19 pandemic, with interviews taking place over Zoom connections, adding to the stress and lack of sleep (14m34s).
• The month leading up to the GameStop event saw volumes going vertical, and the crypto markets exploding, with Robinhood being a major player and the number one app in the app store (14m48s).
• Despite the success, there was a sense of fear that something could go wrong, and it was a challenge to juggle happiness and fear at the same time (15m20s).
• The experience taught the importance of clearing out voices in the brain and focusing on storytelling to communicate effectively (16m9s).
• Storytelling becomes more natural when one clears out what they think they should be saying and focuses on the actual story (16m37s).
• Reflecting on the GameStop saga, it is remembered as a very unsettling experience, being cooped up at home with small kids and not being able to eat for days (16m49s).
• In hindsight, there are things that could have been said differently, and it is a learning experience to review what was said and what was not said during that time (17m5s).
• A clubhouse conversation with Elon Musk took place on Sunday after the GameStop trading restrictions were put in place on Thursday, and there was nervousness about sharing all the details (17m19s).
• The goal was to ensure that no mistakes were made in communication, as correcting them would have led to conspiracy theories, and people already thought there was a collusion narrative with Citadel that was later disproved (17m38s).
• The communication of details was done in pieces, with some information being released earlier than others, and the full story was eventually shared on a Clubhouse interview with Elon Musk on a Sunday (18m19s).
• In hindsight, it might have been better to wait and release the entire story at once, rather than communicating in pieces, to avoid the pressure of having to get information out as early as possible (18m41s).
• When lawsuits started, many lawyers were involved, and interestingly, phone calls were received from people who might not have been contacted otherwise, including Elon Musk, who offered advice on handling the situation (19m25s).
• The situation also led to an expansion of the network, with people like Mark Zuckerberg and others reaching out to offer advice on how to handle the situation and providing feedback on interviews (19m41s).
• The experience was like a brainstorming session on brand marketing, business strategy, and business model with some of these individuals during a unique time (20m5s).

On Founder Mode (20m13s)

• The concept of "Founder Mode" was discussed, referencing an essay by PG that went viral, with the view that it resonated with people due to its vague and general nature, allowing individuals to relate to it personally (20m17s).
• The essay's vagueness made it feel like a horoscope, where everyone thought it was relevant to them, with founders feeling like it described their operating style and managers or executives feeling slightly offended (20m25s).
• The essay was seen as well-packaged but lacking in specifics, capturing a feeling rather than providing a tactical guide to founder decision-making (21m2s).
• Founders who read the essay felt like PG understood them and their approach, while managers or executives had a different reaction, feeling slightly offended (20m49s).

Culture Change During COVID (21m19s)

• The culture at Robinhood began to break down at the beginning of the COVID-19 pandemic, with two major challenges being the shift to a fully remote work setup and a massive hiring burst, growing from around 1,000 employees in 2019 to over 4,000 by January 2022 (21m37s).
• During this period, the company was opening offices everywhere, but ultimately had to downsize to between 2,000 to 3,000 employees, indicating that they had overhired in hindsight (22m18s).
• The rapid growth was partly due to a huge influx of customers, with revenues increasing by 4 times in a year from around $250 million to about $1 billion, which was both exciting and disconcerting for the company (22m40s).
• Despite the growth, the company didn't ship many new products in 2020 and 2021, as they were focused on dealing with infrastructure issues, historic volumes, and customer support (23m38s).
• One decision that was made during this time was to abandon efforts to expand to the UK, which was a tough decision but seemed necessary at the time to focus on the growing US business (24m3s).
• The company ultimately kept their UK license and went live three years later, but it's difficult to say whether abandoning the UK expansion was a mistake, as it's hard to compare against the counterfactual (25m35s).
• In hindsight, learning to be an international company a couple of years earlier might have been beneficial, but it's unclear how things would have turned out (26m4s).

Why Prioritize Europe and the UK Over the Larger US Market? (26m7s)

• Robinhood aims to be a global company, allowing users worldwide to download its app, access the best financial products, and invest their money using their local currency or cryptocurrency, regardless of their location (26m31s).
• As a technology company, Robinhood believes it has an advantage in achieving this goal, and it can help anyone with any financial need (27m0s).
• The company has made a conscious decision to prioritize certain features and markets over others, acknowledging that there are many great ideas in the space that they have not yet implemented due to trade-offs (27m8s).
• Recently, Robinhood launched improved margin rates in the US, making its product more competitive, and this change was made possible by investments in risk management (27m25s).
• The company's offerings, such as great margin rates and 24-hour access to the markets, are also relevant to institutions, including hedge funds, which could be a significant market for Robinhood (27m50s).
• Robinhood's infrastructure can be adapted for institutional use without requiring a complete rebuild of the technology, making it an attractive opportunity (28m15s).
• The company also sees potential in the B2B market, such as helping startups and larger companies manage their employee retirement plans, which could complement its existing retirement offering (28m31s).
• Servicing registered investment advisors is another significant market that Robinhood is considering, as it involves individuals managing money on behalf of other customers (28m48s).

Why Robinhood is Not Big on Crypto? (28m55s)

• Robinhood is close to the same size as Coinbase in terms of retail volumes in the US, despite charging lower fees and having less revenue (29m10s).
• Although Robinhood started offering crypto later than some other companies, it has grown its market share substantially over time (29m29s).
• The company has expanded its crypto offerings internationally, launching in the EU a few months ago (29m38s).
• Robinhood did not originally offer crypto, but has been building its product and becoming more aggressive in the space over time (29m45s).
• The company has made significant investments in crypto, including the acquisition of Bitstamp, a global company and one of the original crypto exchanges (30m6s).
• Despite not being as big on crypto initially, Robinhood has done well in the space relative to its competitors (30m15s).

How Vlad Decides to Build, Buy, or Partner for New Products? (30m23s)

• The decision to build, partner, or acquire when adding new products or enhancing existing ones is a constant question for technology leaders, and the approach can vary depending on the situation (30m25s).
• Robinhood has made some great acquisitions in the past, with the most notable one being the purchase of X1, a company with a nice credit card product, which led to the creation of the Robinhood Gold credit card (30m41s).
• The acquisition of X1 was made possible due to the challenges faced by credit startups during the SVB crisis, which strained the US banking system and made it harder for credit companies to operate (31m9s).
• The Robinhood Gold credit card has received excellent reviews and initial customer feedback, with some considering it the best initial feedback for any Robinhood product, surpassing even free trading (31m42s).
• The success of the Robinhood Gold credit card can be attributed to three key factors: the economics, offering 3% cash back on all categories; the digital experience, allowing users to create virtual cards and one-time use cards; and the design of the card, which is a solid gold card that can be upgraded to a metallic gold card by referring friends (32m7s).
• The features offered by the Robinhood Gold credit card, such as virtual cards and one-time use cards, are not new and have been offered by other companies like Revolut for years (32m34s).

Why Has Revolut Outpaced US Competitors Like Chime? (32m38s)

• Revolut has outpaced its US competitors, such as Chime, with a valuation of $45 billion, while Chime is valued at $15 billion, raising questions about the mismatch between the US and European companies in the fintech space (32m38s).
• Revolut's success can be attributed to its ability to expand internationally quickly, particularly in Europe, where it has established a strong presence beyond its UK roots (33m11s).
• The value proposition of cross-border spending has been a key factor in Revolut's success in Europe, where many travelers need to access different currencies (33m34s).
• The effectiveness of Revolut's investing product as an entry wedge and anchor product compared to a current account is uncertain, but both approaches can work depending on the time scale considered (34m4s).
• The example of Amazon is cited, which initially focused on software but eventually built its own fulfillment centers and warehouses, demonstrating that investing in difficult and hard-to-replicate infrastructure can pay off in the long run (34m21s).
• Similarly, Nvidia's success is mentioned, which started as a hardware company in the early 1990s but took 30 years to gain significant traction, highlighting the challenges of judging companies' success in the short term (35m7s).

Key Steps to Reach a $100 Billion Valuation (35m35s)

• To become a $100 billion company, two key steps can be taken: being number one in the active trading space and winning the active trader market, which is a large space currently dominated by Charles Schwab and TD Ameritrade, with little international presence (35m44s).
• Robinhood has been growing its market share, with options up 20% and equities up 14% last year, and is on the path to becoming number one, with net inflows, which will require several things but is a predictable path (36m15s).
• The second opportunity is to become the place where Millennials and Gen Z keep the majority of their assets, with over $70 trillion of assets moving from the Silent generation and Baby Boomers to Gen X, Millennials, and younger generations (36m50s).
• Robinhood has more Millennial customers than its main brokerage competitors combined, and the same is true for Gen Z, so building a better service for them and making it easy to move their accounts over could result in a significant increase in revenues (37m2s).
• Even a small percentage of the $70 trillion of assets in motion is needed for Robinhood to significantly increase its revenues (37m25s).

Is Investing in a Home Still Relevant? (37m29s)

• The idea of buying one's own home as part of the American dream may not be as relevant today, especially for young people who have a lot of cash but choose to spend it on other things like concert tickets and luxury items because homes are too expensive (37m31s).
• Viewing a home as an investment may not be the most efficient option, considering the costs of taxes, commissions, maintenance fees, and insurance, which can affect the returns (38m1s).
• Investing in the stock market through platforms like Robinhood can be a more efficient option, with no commissions on equities and the ability to diversify globally (38m40s).
• The idea of investing and access to capital markets should be considered the real American dream, allowing everyone to participate and own a part of the economy (38m53s).
• Bill Ackman suggested that every newborn baby should be given a certain amount of money to invest in the S&P, allowing them to take ownership of it over time and participate in the American economy (39m4s).
• Some venture capitalists, including Brad from Altimeter, are working on initiatives to make investing and ownership more accessible to the next generation (39m31s).
• As a public company CEO, it's essential to have a clear understanding of emerging trends like AI and to evaluate whether they can deliver tangible value or if they're just a fad (39m48s).

About NFTs (40m17s)

• NFTs have gone through several phases in the past, including the first NFT boom with Crypto Kitties in 2017, where everyone was buying and talking about them (40m34s).
• Other notable NFT booms include the Apes and other projects during the last boom, with platforms like OpenSea gaining popularity (40m48s).
• Robinhood considered storing NFTs on their platform two years ago but decided it didn't make sense at the time, despite having a big crypto business (40m20s).
• As a financial company, Robinhood views NFTs as an asset that customers want to trade and a fundamental technology that could change the financial system on an infrastructure level (41m14s).
• AI is seen as a powerful platform shift that could impact the financial system, and Robinhood has lived through a few platform shifts, including the adoption of cloud technology (41m23s).
• Robinhood was one of the first cloud-based brokers, which was unusual at the time, and they had to convince their account counterparties that using Amazon Web Services was secure (41m47s).
• The idea of not trusting Amazon Web Services for hosting servers seems laughable now, but it was a real concern 10 years ago (42m11s).

Integrating AI (42m21s)

• Large enterprises are hesitant to share their data with companies like Open AI, making data integration a crucial aspect to be worked out in the context of AI technology (42m25s).
• AI is expected to be a significant technology shift that will change the financial services space and the way companies operate (42m40s).
• Companies are exploring various ways to integrate AI products to enhance customer experience and provide more efficient services (42m56s).
• AI has the potential to replicate human services at a lower cost, making it a viable business opportunity, especially in areas where people are already paying for services that AI can perform (43m27s).
• In financial services, AI can replicate services such as financial advice, which customers currently pay for, and can potentially offer more value at a lower cost (44m5s).
• The real value of AI in financial services lies in providing a comprehensive service that includes budgeting, trust and estate management, insurance, and legal assistance, which is currently offered by expensive financial professionals (45m6s).
• AI can impact the financial services space in two ways: as a tool to assist existing advisors and as a full technology solution for customers who are comfortable with it (45m35s).
• The latest AI models that can reason and make better decisions have made it possible for good products to emerge, and these models are expected to improve over time, potentially replacing traditional knowledge workers (46m10s).

Managing Market Volatility & Interest Rate Impact (46m20s)

• Managing market volatility and interest rate impact is a challenging business view, as changes in interest rates can significantly affect the business, despite being outside of the company's control (46m21s).
• To compensate for this, diversifying the business is the best approach, as seen in Robin Hood's expansion from three to eight business lines generating $100 million or more in revenue each year (46m43s).
• These business lines include unique revenue streams that benefit from both higher and lower interest rates, such as money moving from interest on cash and low-risk products to equities, crypto, and options when rates are low (47m7s).
• When interest rates are low, margin becomes more compelling, leading to increases in the margin book, and Robin Hood has been growing its market share in this area (47m16s).
• Over time, diversification is expected to smooth out revenues, similar to how diversification helps smooth out investment returns (47m42s).
• While Robin Hood may be stronger in a declining interest rate environment, the company's continued diversification is expected to lead to a more stable revenue stream in the long run (47m34s).

Quick-Fire Round (47m56s)

• The book written before 1965 that is highly recommended is "The Story of Civilization" by Will Durant and Ariel Durant, which has been very interesting to read and provides valuable insights (48m9s).
• Becoming a father has changed the CEO's perspective, making them more patient, as having small children tests one's patience and requires a different approach to problem-solving (48m40s).
• The biggest near-death experience for the company was the GameStop saga, which involved a $3 billion bill in the automated Clearing House system, causing a significant crisis that required immediate attention (49m49s).
• During the crisis, the CEO did not sleep for 72 hours and instead focused on resolving the issue, but managed to get back to their workout routine after the immediate crisis was resolved (49m58s).
• The CEO believes that people should not care about who others vote for, as it is a personal decision and individuals should think for themselves, just like they should make their own investment decisions (50m53s).
• The whole point of Robinhood as a product is to provide a tool for individuals to make their own decisions and take control of their own money, with the help of technology (51m21s).
• The CEO has changed their mind on the importance of individual decision-making and the role of technology in empowering people to make their own choices, particularly in the last 12 months (51m36s).
• The company culture had to be reverted after announcing a remote-first policy during the COVID-19 pandemic, as productivity was negatively impacted and the decision was later regretted (51m53s).
• The decision to go remote-first was made hastily, similar to flipping a coin, and the feeling that it was a mistake was immediate (52m36s).
• The value of in-person relationships and work is still relevant, despite the rise of remote work, as humans have been building relationships and working together in person for thousands of years (52m59s).
• The dominant working style is unlikely to change instantaneously through technology, and a high bar needs to be set to declare a new working style (53m11s).
• In the UK, many companies have reverted to in-person work, and this trend may continue (53m17s).
• A key lesson learned is to think less about what others think and focus on having a point of view and changing things, which has led to greater happiness and potentially being a better leader (53m41s).
• Not everyone will agree with or like one's existence, and that's a natural part of doing something interesting and making a change (54m6s).
• The goal is not to be interesting to others but to have a point of view and make a difference (54m20s).