Transcription
Zero commissions was an industry-changing innovation, mobile finance and fintech in general. I think it was aided by the rise of Robinhood.
I think that every company will become an AI company, but I think the humans will ultimately be calling the shots. As a young adult Latina, I've dreamed of becoming a mathematician. Entrepreneurship, let alone disrupting the fintech industry, wasn't part of the plan. I wanted to be a mathematician. I wanted to make exciting discoveries and figure things out. I had no idea what algorithmic trading was, but I knew that I was a little bit stagnant and that it sounded like a really fun opportunity.
Leaving graduate school at UCLA set him on a different path. In 2013, he co-founded Robinhood with a mission to democratize access to financial markets. For decades, when people traded stocks, they had to pay. Fixed commissions tend to have changed that, pioneering zero-commission trading, a move that forced every major brokerage to follow suit. Certainly, the industry moved to zero commissions as a result of Robinhood's impact.
Then in 2021, the GameStop short squeeze exploded. Retail investors, everyday people, not professionals, bought the stock in droves, encouraging peers to do the same. The frenzy got so intense that Robinhood shocked the market. It restricted trading on certain stocks. That decision eventually landed in front of Congress. "This was a technical and operational decision that we made. In this current unprecedented environment, it can be substantial. So to protect the firm and protect our customers, we temporarily disabled buying in these securities."
Even after the chaos, Robinhood endured and expanded into crypto, banking, derivatives, and now tokenization, which tends to cause the biggest capital market innovation in decades. My motivation is creating new things. If you create new things that are more useful, that's really what gets me excited. Today, Robinhood is valued at more than $90 billion and remains committed to pushing the frontier of finance, whether through blockchain, AI, or the next big platform shift. From the son of Bulgarian immigrants to the architect of a new financial model, Vlad is helping to shape how the next generation will own, invest, and build wealth.
"You know, when I started the company, I was worth nothing. But things haven't changed very much for me, as it might be a little bit surprising because I was never really doing it for the money."
When people traded stocks, historically they had fixed commissions, and then fixed commissions went away. But did you pioneer the idea of having no commissions, or did somebody else do that and you did it better than other people? I think that a lot of people talked about zero commissions being the future, and there were some startups that didn't really work out that tried zero commissions on a more promotional basis. So your first ten trades per month were free, that sort of thing. So, but certainly the industry moved to zero commissions as a result of Robinhood's impact.
So for people who are not that familiar with the business, they might say, if they're watching, how do you make money if you're not charging for the service you're providing? So how do people who offer no-commission brokerage trading make money? Right now, Robinhood's a highly diversified business. We have nine revenue streams that generate $100 million plus in annual revenue or more. When we started, obviously, it wasn't as diversified; it was just equities trading. And our idea at the time was, you have all these great companies in Silicon Valley around where we are today: Instagram, Uber, you know, Meta, formerly Facebook at that time, and the playbook was, why don't we just get customers? Have a retentive relationship where customers don't just use your product once, but they use it on a recurring basis, and you create this environment that's very, very sticky. And if you get to tens of millions or hundreds of millions of customers, then you've got such a valuable enterprise that monetizing it will be easy. So we didn't even think about it very much to begin with because we just said, we have a technology advantage. We're going to lower the cost of operating the service to like near social media internet costs. And then if we build a big franchise, revenue will be easy to come by.
And what was the original business they were going to do? Was it to be no-fee stock trading, or was that later? So we got in business together at first, right out of grad school, because we saw an opportunity to trade. So no customers, just proprietary trading. And that was a business that was structured as a hedge fund. It didn't ultimately succeed. It was sort of like a fairly quick failure. But then we pivoted that into algorithmic trading technology. So we saw that algorithmic trading was basically going to eat the institutional space. We built software for that. And that actually led us to discover the Robinhood opportunity because we said to ourselves, okay, we've got these customers using our completely automated systems to trade billions of dollars of volume a day. And, you know, the number of people that are needed to maintain the service is just a handful of software engineers. So what's preventing this technology from going to retail and giving the benefit of commission-free trading through this efficiency? So when we kind of put that together, we got very excited about the retail opportunity, and that's what ultimately led to Robinhood's creation.
So when you started, where did you get your capital? At first, it was angel investors. So we had to really just knock on a lot of doors. But you could invest in Robinhood as basically a retail investor, and we took all comers because we had just worked very, very hard to get our initial million dollars. So we had angel investors that would put in $5,000 checks. We would pitch them just like we would pitch the Sequoias in the entry sense. And some of those people ended up doing quite well. Yeah, still holding on.
And today, your market value is north of $90 billion. That's right. Yeah. It's pretty impressive. So the person who invested on day one has made, I don't know, 9,000% or something like that or more. You know, we've gone through a period where the stock price was kind of a negative distraction. We would get questions about why it's so low, what we're doing to increase it, you know, all that kind of stuff. And it can become a distraction from running the business, really. You have to contend with it. And so it's really nice for that to be gone so that we could focus on actually building real value and, you know, working very, very hard to not have it be a distraction in the opposite direction, where, you know, people think that we've won, we get complacent, we stop caring as much. I think that's always a self-reinforcing and self-correcting cycle.
You have started another company recently, is that right? Harmonic. Yeah. So I'm chairman and co-founder of an AI mathematics Lab. So this is getting back to my original passion to kind of understand how the world works and the laws of the universe. And that one actually just raised Series B financing led by Kleiner Perkins. So it's they've been cranking over, they're building mathematical superintelligence. So it used to be the case if you had a company like yours, a publicly traded company, $90 billion market cap, your shareholders would say, don't do anything else, don't get involved in any other business. Just focus on this. But today, in the era of Elon Musk and everything, people can do multiple companies at once. So if you're your shareholders and in Robinhood, don't care about your being involved in Harmonic or some other companies? I would say my situation's a little bit different. I'm not operating there, so I'm executive chairman. And while it's certainly more than a typical passive investment, I care much more than I would for that. There's a CEO who's running it and managing the team. So I do think it's a little bit different.
And so today, how many different businesses do you operate? You're in the stock trading business, and but you're in the tokenization business. You're in many other businesses. How many different lines of business do you have? Yeah, at the highest level, we have a couple of large businesses. So the brokerage business is where we have our FINRA registered broker-dealers. We have an introducing broker-dealer, a clearing broker-dealer, that's basically our brokerage business. Inside that, we also have a derivatives business where we operate a futures commission merchant. And that's where our prediction markets and futures outright properties live. We also have a cryptocurrency business, one of the largest in the world, and that's standalone and regulated differently. We have a business we call Money, which operates Robinhood Banking and the Robinhood Credit Card, and we have a few other acquisitions that we've folded in. We acquired a registered investment advisory platform called Trade PR. Recently. We acquired an exchange, Bitstamp, which has an institutional business as well. And there's a couple of other smaller things inside this. But yeah, it's a financial super app business, institutional, U.S., Global.
Let's talk about tokenization for those who aren't familiar. What actually is tokenization? Can you explain what that is and why that's a good business? So tokenization is a new technology. And basically the idea is you take any real-world asset, it could be a public stock, it could be a private company's stock, it could even be a piece of art or real estate, you know, a house. And you take that asset and you put it on the blockchain and you associate tokens with it. And then those tokens, leveraging blockchain technology, can be traded 24/7 in a global liquid market. So we've demonstrated it in two forms. Number one, tokenization of public and EMS equities. So we launched a product in Europe called Stock Tokens that basically allows that customer to get exposure to US equities. You can buy a Tesla and Nvidia token 24/5, soon to be 24/7. And the experience and the process is as simple as trading a stock, even more simple. But then the real power is taking assets that are not easily liquid and tradable 24/7 and putting them on the blockchain, making them trade easier as well. That's where private companies and in the future, real estate and things like art come in.
So since you started the company, AI has become a much bigger deal than it was at the time you started the company. And many of the AI companies sort of have very high market values and so forth. What is your view of the importance of AI to your business and to other businesses you might want to start? I think that AI is going to change everything. It's a huge platform shift, perhaps bigger than the shift to mobile and cloud. And every company, in the same way that every company became a technology company, I think that every company will become an AI company, but that will happen at an even more accelerated rate.
Most of the time, you're not doing it just because you want to make money. You also love trading and you're extremely passionate about it. I think there will always be a human element to it. I don't think there's going to be a future where AI just does all of your thinking, all of your financial planning, all the strategizing for you. It'll be a helpful assistant to a trader and also to your broader financial life. But I think the humans will ultimately be calling the shots.
So the United States economy is in reasonably good shape. We haven't had a recession for more than seven years. Normally, you have a recession every seven years or so. We haven't had one. Do you worry about a recession affecting your business, or do you think we're in pretty good shape economically? We've been through some cycles. You know, 2022, while maybe there's debate whether it was technically a recession, we got hit hard as a reason we IPO'd on diversified growth stock that was heavily dependent on retail trading. And I think since then, we've made investments to make the business more resilient to all market environments. We have Robinhood Gold, our subscription offering. We offer high interest, which allows customers and us to benefit from increased rates. We've done really, really well on the active trader side, growing market share. And active traders actually do tend to be more resilient because they're sophisticated enough to employ multi-leg option strategies and things that could do well even in sideways or down markets. So the business has gotten more diversified. Obviously, near-term, we have to be prepared for ups and downs like any company. But I think that we focus on our market share, we focus on customers, we continue to diversify the business. The same strategy we've been employing will continue to work. I don't think it'll require a change of strategy for us to continue to be successful. My motivation is creating new things. If you create new things that are more useful, that's really what gets me excited.
Let's talk about your background for a moment. Your parents are both from Bulgaria? Yes. And you were born in Bulgaria? I was born there as well. So how did they happen to pick the Washington, D.C. area to come to? First, my dad actually went to Delaware. So he was given an opportunity to study for a master's at the University of Delaware in Newark. And it was not clear whether we would stay in the country. You know, he knew he had this program, but afterwards was very uncertain. So he came by himself. My mom joined him a year later, and then I came six months after that. So I lived in Delaware for six months. And you spoke only Bulgarian then? That's right. So they put me in school right away. I mean, there were no babysitters back then. They needed school. So I got dropped into quite a year in school with everybody speaking English or speaking Bulgarian. Was it difficult? It was very difficult. Yeah, it was very difficult in kindergarten. But also, that's the fastest way to learn. You're highly motivated to learn when everyone else is speaking the language. So probably took me about six months. But yeah, I learned English very, very quickly. And I remember that. I remember like struggling to communicate with the teachers. And, you know, sometimes I look at my old kindergarten report cards. But yeah, there was a good upward trajectory.
She went to Stanford. You majored in math. I majored in math. And I found out pretty quickly that if you want to do theoretical physics, as I did, you spend a lot of time in the math department. So I ended up finishing as a math major. Physics, minor, pure math. All right. She did well there. And then you decided to do what? Then I actually went to UCLA. My dream was to study with this professor, Terence Tao, who, you know, some would say the greatest mathematician in the world when I was in college. I had no idea that I would be an entrepreneur, much less so starting a financial services company. I wanted to be a mathematician. I wanted to make exciting discoveries and figure things out.
And then what happened was 2008. I was first year in graduate school at UCLA studying pure mathematics. My co-founder, Biju, found a job at an algorithmic trading firm. And the first month that I was in graduate school, in his first month at this algorithmic trading firm, the 2008 financial crisis began. So Lehman Brothers went belly up, stock market crashed. And he convinced me at the time that it would be a good time to start an algorithmic trading company. And I actually didn't understand what that was. I had no idea what algorithmic trading was. I was very much in the theoretical graduate student frame of mind, but I knew that I was a little bit stagnant and that it sounded like a really fun opportunity and I could learn a lot of stuff.
When COVID came about, a lot of people stayed at home and they didn't have a lot of other activities to do. So sometimes they were trading stocks. And it was said by some people that that really helped your company because people were trading at home. They were often next-gen people and they were younger people. Is that true that you were helped by the younger generation, people staying at home buying stocks, or is that not really the way that your company grew? That certainly happened between the end of 2019 and 2020. Our user base and our revenues and generally everything about the platform grew between 3x and 5x. So we were big before COVID, but the acceleration due to the pandemic and all of those tailwinds certainly accelerated the company quite a bit.
Let's talk about the company now. Today, you are a major force in a financial services world. And I guess you've got a lot of people who want to give you money and they want to invest with you and so forth. What is the greatest thrill that you're getting out of doing this? I think my motivation is creating new things. Like, if you create new things that are more useful and become the standard, right, that's really what gets me excited. And I think in a business context, that's innovation. You know, we talked about tokenization earlier. I think tokenization is the biggest innovation in capital markets since the central limit order book, right? I think it could change everything. And to have the opportunity to not just like attack that innovation, but bring with it the scale and the resources of Robinhood so that it could actually get the highest chance of succeeding and taking hold, it gets me very excited. Of course, zero commissions was an industry-changing innovation, mobile finance and fintech in general. I think it was aided by Robinhood. But I always like to think about the new things and in the future. A big tragedy is that private markets are where the bulk of the interesting appreciation and exposure is nowadays. We're obviously working to solve that.
What is the best investment advice anybody ever gave you? I assume it was hold on to your stock that you have because it's done so well. But anything else? Well, the traditional investment advice is to make sure you're diversified and that, you know, you have a well-balanced, diversified portfolio. And I think that's interesting because nobody wants you to be diversified as a founder, right? So the shareholders don't want you to be diversified. They want you maximally exposed, in fact, to the one asset you're watching. So it's much more of put all of your eggs in one basket and watch that basket very, very carefully. So for me personally, I think the rules are probably a little bit different than the conventional advice. I've been highly concentrated, you know, and I think that's worked well.
Somebody came to you and said, I have $100,000. I'm reasonably young. I'm a person who uses an account at Robinhood, but I don't really know what to do with $100,000. Where would you recommend they put $100,000 today? I think one of the biggest opportunities, also a big tragedy, is that private markets are where the bulk of the interesting appreciation and exposure is nowadays. If you want early exposure or even medium to late-stage exposure as a retail investor, you're largely shut out. So in the days of a technology company going public at a valuation of hundreds of billions and then giving you a thousand or 10,000x return in the public markets are getting increasingly more and more rare. So I think private markets are a huge opportunity. It's a shame that it's so difficult to get exposure in the US. We're obviously working to solve that. But that's where I would point to as like the greatest remaining inequity and opportunity in our capital markets.
Obviously, when you get to be wealthy, people look at you differently, they laugh at your jokes more, they treat you with more respect. So now that you're a very wealthy man, how does your life change? You know, when I started the company, I was worth nothing. You know, it went from, I know, basically like having my parents do my taxes very, very quickly to, you know, having professional accountants and things of that nature. And I've gone through some swings, right? When the company went public in 2021, it was at a $32 billion valuation. So then my net worth, which mostly locked into company stock, got into the billions, then it went down precipitously. And then, you know, recently it's gone back up again. But things haven't changed very much for me, as might be a little bit surprising because I was never really doing it for the money. I was doing it because I wanted to create stuff and make new things.
How do you spend your free time? Do you exercise a lot? Are you a big fitness person? Any hobbies outside of working? My ideal model, and my wife actually really doesn't like this, is full work-life integration where the distinction between the two falls away. And I actually think if you really enjoy what you're doing as an occupation, there can't be another way. Having like a break between your work and your personal life becomes very, very odd. The two meld into one. I think she would probably prefer a more severance-like experience, but I think it's just unrealistic.