Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3: I'm Jill Wisenthal, and I'm Tracy all the way Tracy.
Speaker 2: I think I've mentioned it before, but an idea that
Speaker 2: I've had for podcasts in general, maybe this one one day,
Speaker 2: other podcasts, I want to do everything in two parts.
Speaker 2: So yes, yeah, interview the guests because sometimes it's like
Speaker 2: all of the questions I want to ask are only
Speaker 2: after I've talked to a guest for an hour and
Speaker 2: have some better understanding of the situation. So I want
Speaker 2: to interview the guests, think about it for a few days,
Speaker 2: let the listeners listen to it and have their questions,
Speaker 2: and then it's like, Okay, you know, we've thought about
Speaker 2: it for a few days. Come back. Also, our listeners
Speaker 2: want to know about this and then have the second
Speaker 2: part of the conversation, just like a follow up. I
Speaker 2: want to form a lot. I want to do that one.
Speaker 3: I think it's a good idea. It's also just a
Speaker 3: flywheel of content. It will be never ending that way.
Speaker 2: Yeah, I think that's a good job.
Speaker 3: Security.
Speaker 2: Anyway, we did an episode last year that was great,
Speaker 2: but it also provoked a lot of questions. I'd just
Speaker 2: like jump right into it. So we did an episode
Speaker 2: last year with Lautenant, the co founder and CEO of Robinhood,
Speaker 2: and that was about the company's tokenization efforts, so basically
Speaker 2: his ability to create instruments that would allow users to
Speaker 2: actually trade shares not shares, I guess, but you know,
Speaker 2: quasi equity or equity linked instruments in private companies like
Speaker 2: an open AI or something like that. And then after
Speaker 2: that came out a bunch of people, including the companies,
Speaker 2: a lot of reaction either like what the heck we did?
Speaker 2: Since when did these private companies they are like, since
Speaker 2: when the heck did like we authorize our equity to
Speaker 2: be traded like this or all kinds of stuff. I
Speaker 2: didn't even like really think about that aspect of the time.
Speaker 2: So it's like I wanted to know more.
Speaker 3: I think there's a lot to talk about here. So
Speaker 3: I mean, it does feel like the I guess the
Speaker 3: trajectory history right now is marching towards tokenizing everything and
Speaker 3: just allowing markets in everything and every format, from like
Speaker 3: kind of quasi derivatives to one off event bets like
Speaker 3: that just feels like the trend at the moment, but
Speaker 3: at the same time, there are so many interesting questions
Speaker 3: that this actually raises, not least of which is the
Speaker 3: safety aspect of how much of our lives are just
Speaker 3: going to be watching lines going up or down and
Speaker 3: making bets on.
Speaker 2: Them, absolutely right, you know, like with the prediction markets.
Speaker 2: And you know something I've been thinking about with prediction
Speaker 2: markets is you can replicate equity through that, right, because
Speaker 2: you could just have like prediction markets on will Tesla
Speaker 2: go up one percent today, we'll go up two percent.
Speaker 2: You could just go up or down. Yeah, you can
Speaker 2: recreate all of these instruments in all these different formats.
Speaker 2: So it definitely feels like a jump ball, especially with
Speaker 2: a very sort of liberal regulatory environment. Anyway, very excited
Speaker 2: to say we're going to get a chance to do
Speaker 2: the second half of that conversation that came out last July.
Speaker 2: So we are rejoined once again by ten of, co
Speaker 2: founder and CEO of Robin Hoods of Lot. Thanks for
Speaker 2: coming back on a lot.
Speaker 4: I'm happy to be here again. And I think from
Speaker 4: the guest perspective, i'd also like this if there was
Speaker 4: an opportunity to replace any of my answers from part
Speaker 4: one with better.
Speaker 2: Necessary now that I know the question to replace them,
Speaker 2: that's going to the first one is going to live
Speaker 2: out forever, but.
Speaker 4: A very interviewer friendly formats that we've created. That's right,
Speaker 4: of course we did.
Speaker 2: Well, let's talk about that, because like we did that
Speaker 2: episode where you talk about these tokenization efforts, and I was,
Speaker 2: I don't know. I didn't even think, like, the companies
Speaker 2: whose private shares are being tokenized, are they cool with this?
Speaker 2: But apparently they weren't. What's going on with that? What
Speaker 2: happened with that? Because it does seem weird to be
Speaker 2: able to offer instruments of privately traded companies when the
Speaker 2: companies themselves like, just to be clear, this is not us.
Speaker 4: I think there was various degrees of disavowal. I think
Speaker 4: a lot of these companies are very concerned about their reputations,
Speaker 4: and if they don't understand something, they don't have time
Speaker 4: to dig into it. They'll just say we had nothing
Speaker 4: to do with this, which I think is fair. I
Speaker 4: think you talk to these AI companies and they all
Speaker 4: kind of say the same thing, which is, yeah, we'd
Speaker 4: love our company to allow retail investors exposure right, and
Speaker 4: we think that would be better for the world. Everyone
Speaker 4: generally agrees with us, but when you get down to
Speaker 4: the details of what that entails, and it is a
Speaker 4: new thing, not a lot of companies are doing it.
Speaker 4: Nobody really wants to be the first, and no one
Speaker 4: wants to mess with the status quo, and from their perspective,
Speaker 4: they want to focus on running their business, increasing their revenues,
Speaker 4: and this is sort of ancillary, but for us, it
Speaker 4: is our business. Our business is all about helping the
Speaker 4: retail investor making sure they have all the advantages that
Speaker 4: institutions have, and so it's very, very important. We've continued
Speaker 4: on this journey. Obviously, the open AI and SpaceX stock
Speaker 4: token giveaways in Europe were kind of step one, but
Speaker 4: it's evolved like we're continuing to pursue that over but
Speaker 4: of course we want to find a US solution for
Speaker 4: US customers as well. And actually this week we are
Speaker 4: taking public Robinhood Ventures Fund one RVII on the NICY,
Speaker 4: which is a closed end fund, so you can think
Speaker 4: of it as a venture capital firm that we're taking public.
Speaker 4: We raise capital from retail investors in some institutional as well,
Speaker 4: and we use that capital to invest in private companies,
Speaker 4: which we've already invested in quite a few.
Speaker 3: These are things that traditionally would be limited to a
Speaker 3: credit investors.
Speaker 4: But it's not a credited vehicle and also no carry.
Speaker 4: So actually, one of the things we've been hearing is
Speaker 4: from a perspective of an LP that invests in venture
Speaker 4: capital firms and has to give up that performance fee
Speaker 4: to the manager. This is a disruptive vehicle. And for
Speaker 4: all of the Robinhood Ventures portfolio companies, and these are
Speaker 4: companies like Data Breaks or a Revolute, I think I
Speaker 4: have to go through all of them because I don't
Speaker 4: want to pick out a particular Boom Hypersonic.
Speaker 2: Oh yeah, we had their CEE you on.
Speaker 4: Yeah, Mercore and Stripe which we've signed and not closed,
Speaker 4: and I'm probably forgetting some, but yeah, these are all
Speaker 4: companies that are excited to have Robinhood and retail be
Speaker 4: a part of the picture. And they filmed videos explaining
Speaker 4: why they chose to be part of this. So there
Speaker 4: are people that want to be the first And of
Speaker 4: course this is a different product than tokenization of an
Speaker 4: individual name, and so it's like a little bit more
Speaker 4: palatable to most of these companies, But I think it
Speaker 4: ends up in the same place. I think there's going
Speaker 4: to be a gradual acclimatization to retail access to these companies,
Speaker 4: and you know, Robinhood is going to be leading the
Speaker 4: way across all aspects of this journey. But you know,
Speaker 4: our approach to it has evolved a little bit. You know,
Speaker 4: now we're at the point where we're actually surprised how
Speaker 4: many companies are interested in it and are engaging and
Speaker 4: view it as a differentiator. So I think, at least
Speaker 4: for a bit, we're going to be less aggressive than
Speaker 4: we've been in the past and just get into these
Speaker 4: companies and make sure they want to be part of
Speaker 4: what we're doing willingly and openly.
Speaker 3: I definitely have a lot of questions on the venture
Speaker 3: fund in particular, and you promised to answer all of
Speaker 3: our geekiest questions about like the technical structure of how
Speaker 3: it works. But before we go any further, I have
Speaker 3: one conceptual question, which is, when you think about the
Speaker 3: difference between I guess investing, trading, and gambling, how would
Speaker 3: you differentiate those three activities, Because I think a lot
Speaker 3: of the tension that arises from something like tokenizing stocks.
Speaker 3: Is this idea that like, well, you know, when you
Speaker 3: buy a stock, you're buying equity. The clues in the name, right,
Speaker 3: You're buying equity in the company that's supposed to come
Speaker 3: with certain rights. It's supposed to lead to a virtuous
Speaker 3: circle of you know, the investors putting capital in the
Speaker 3: company and the company talking back to its investors. And
Speaker 3: so I think if we just step back for a
Speaker 3: second and talk about how you see the differences between
Speaker 3: those three activities, that would be really helpful.
Speaker 4: Yeah. I think that the difference between investing and trading
Speaker 4: is really one of velocity. I think the mindset of someone.
Speaker 4: And by the way, it's not always different people. It
Speaker 4: could also be different activities within one person. So in fact,
Speaker 4: we have a lot of customers who have multiple accounts
Speaker 4: that they have for different purposes. So investing, to me
Speaker 4: is the mental model is I'm buying something and I
Speaker 4: never intend to sell it, right, So it's sort of
Speaker 4: like accumulating assets and you intend to have them only grow,
Speaker 4: and of course maybe you'll sell it if you actually
Speaker 4: need the money, but the intent is always I'm holding
Speaker 4: onto this and I'm building like a monotonically increasing portfolio
Speaker 4: trading is I'm going to move in and out because
Speaker 4: I see an opportunity, and that opportunity might not exist
Speaker 4: in one day or three months. But there's like a
Speaker 4: very particular thesis that I have that's time bound and systematic.
Speaker 4: And I think gambling is like mostly emotional driven, Like
Speaker 4: maybe I really like this team, right and they're my
Speaker 4: local team, so I'll just you know, put some for
Speaker 4: entertainment purpose behind it.
Speaker 2: On tokenization specifically, just to go back to this question,
Speaker 2: you mentioned that you're through the regulatory environment or you're
Speaker 2: able to move a little bit more aggressively in Europe
Speaker 2: in the US. But setting aside Europe or US, if
Speaker 2: someone buys something that on the robin Hood platform is
Speaker 2: called an open Aye token, Yeah, what are they getting?
Speaker 2: Do you have equity that has been like backing it?
Speaker 2: Is it a sort of swap where the only thing
Speaker 2: backing it is your promise to like redeem the token
Speaker 2: at some price, Like what is the token?
Speaker 4: Yeah? So all of the tokens that we have offered
Speaker 4: in Europe, including the SpaceX and open Ai giveaway, so
Speaker 4: those haven't been unlocked for trading. It's basically just we
Speaker 4: gave our customers a gift that they hold in their accounts,
Speaker 4: and that's because or actually private markets even in Europe
Speaker 4: for tokenization or sort of like working through Since we're
Speaker 4: the first to do this at least that I'm aware of,
Speaker 4: we're working with the regulators to make sure that when
Speaker 4: we unlock those for trading, the product is safe and
Speaker 4: is sort of like answers all the questions and meets
Speaker 4: all of the requirements for making sure customers are clear
Speaker 4: on how it works. So the intent is for that
Speaker 4: to happen later this year. So we're working on it.
Speaker 4: But as of now, private stock tokens aren't tradable, they're
Speaker 4: just gifts, and all stock tokens are backed by underlying
Speaker 4: equity or like equity equivalent position in for example, open
Speaker 4: ai doesn't have traditional equity because.
Speaker 2: Okay, but there is just to be clear, someone acquired
Speaker 2: some equity at some point in a VC round or
Speaker 2: whatever it is, and when someone buys an open ai token,
Speaker 2: that link exists to an actual asset that someone has.
Speaker 4: With the caveat that nobody's buying the open ai token
Speaker 4: through robinhood. Currently it's just been gifted.
Speaker 2: So someone holds those they've been gifted, but those are the.
Speaker 3: Token holder doesn't have the equity. It's in the like
Speaker 3: special purpose vehicle, I assume.
Speaker 4: So yeah, technically, the way this works is it's kind
Speaker 4: of similar to a stable coin. So you have your
Speaker 4: bag of traditional assets that are governed by traditional rules
Speaker 4: and legal covenants and whatnot here, and then you mint
Speaker 4: and burn tokens against that. But yeah, as of now
Speaker 4: in Europe, it's a derivative product, and that's also subject
Speaker 4: to change. You can think of this as kind of
Speaker 4: the paperwork around the technology. The technology is the same,
Speaker 4: but we have been hearing from customers that they're a
Speaker 4: little bit concerned, you know, with traditional stocks. In the
Speaker 4: event of bankruptcy of Robinhood or something, it's very clear
Speaker 4: what happens. Yeah, and so in V one, I think
Speaker 4: a lot of those questions were ambiguous. But since then
Speaker 4: we've continued working and we're going to have a V
Speaker 4: two and eventually a phase three of this offering where
Speaker 4: we believe we'll have a path to actually addressing all
Speaker 4: those concerns. So now you're at the point where if
Speaker 4: you buy something that's tokenized, maybe it's a little clunky,
Speaker 4: and it is slightly worse as a product than if
Speaker 4: you have the traditional equity right, if you have access
Speaker 4: to that, some people don't have access to it, so
Speaker 4: it's actually much better for them. But I think you're
Speaker 4: going to get to the point within the next year
Speaker 4: where it's superior in all practical ways, and I think
Speaker 4: that's where things really start to get interesting.
Speaker 3: And just on the ventures fund, I know you said
Speaker 3: it was a closed end fund, but is that like
Speaker 3: a forty act thing or a act? Okay, Yeah, I
Speaker 3: find financial engineering interesting and it certainly gives us a
Speaker 3: lot to talk about. But on the other hand, it
Speaker 3: seems like so much work. Would it not just be
Speaker 3: simpler to try to lobby for the accredited investor rules
Speaker 3: to actually be changed, Like, how are you making the
Speaker 3: decisions too? We're going to create all these new products,
Speaker 3: which I assume are a lot of work for you guys,
Speaker 3: take a lot of discussion with the regulators versus just
Speaker 3: lobbying for these old rules to actually get overhauled.
Speaker 4: Yeah, I think we're doing that as well. I think
Speaker 4: the accredited investor rule needs to go. Frankly, it doesn't
Speaker 4: make any sense, But I don't think that answers all
Speaker 4: of the problems that people have with private market investing.
Speaker 4: The other problem is just liquidity, Like I don't even myself,
Speaker 4: right who has access to these things. I don't want
Speaker 4: to have my capital locked up for ten years possibly
Speaker 4: more for these companies to go public, and some of
Speaker 4: them might never go public, right, So there's a liquidity,
Speaker 4: there's also just access and I mean, Robinhood. Part of
Speaker 4: what we're doing here is we're out there hustling getting
Speaker 4: into these deals because I'm in Silicon Valley, our team
Speaker 4: is there, unlike most of these financial companies that are
Speaker 4: here in New York. So we happen to kind of
Speaker 4: be in the epicenter where the deals are getting done,
Speaker 4: where the companies are based. The no carry obviously, and
Speaker 4: the accreditation. You know, if we could solve that through
Speaker 4: other ways, that will become interesting. But Chairman Atkins of
Speaker 4: the SEC actually specifically called out close down funds as
Speaker 4: the preferred vehicle for having access to privates. So you know,
Speaker 4: we're we're doing our part working with the regulators to
Speaker 4: try to open this up. I think they agree that
Speaker 4: it's a problem, and you know, I don't think that
Speaker 4: it's going to be the end state necessarily. I think
Speaker 4: this thing will evolve, but we want to serve customers
Speaker 4: and work with regulators at all stages of it. So
Speaker 4: and you know, you do this once. The fact that
Speaker 4: it's hard is also kind of attractive because it makes
Speaker 4: it so that we're unique, Like we figure it out.
Speaker 4: We have qualities that we can bring to bear that
Speaker 4: not all of our competitors can. For example, you really
Speaker 4: need to have both sides. You need retail to actually
Speaker 4: be on the platform and to be serving customers who
Speaker 4: are interesting in these products. You also need to get
Speaker 4: the supply, and I think Robinhood is somewhat unique in
Speaker 4: being able to actually do both of these things simultaneously.
Speaker 4: And then we figure it out once and then we
Speaker 4: turned the crank. So you know, you notice we named
Speaker 4: it our VII Robinhood Fund one. We do anticipate there
Speaker 4: will be other funds. We already have lots of ideas
Speaker 4: of unique products we can offer, so it's really just
Speaker 4: the first step.
Speaker 3: So you mentioned being in Silicon Valley and being able
Speaker 3: to source these deals, and this is the other thing
Speaker 3: I wanted to ask you, because getting into a hot
Speaker 3: price tech company at the moment seems incredibly competitive. And
Speaker 3: Joe and I we go out when we talk to
Speaker 3: a lot of venture capital funds and they always give
Speaker 3: us the same pitch, which is, well, we're different. We
Speaker 3: build long term relationships with our investments. How is Robinhood
Speaker 3: actually competing in that space? And what I guess differentiates
Speaker 3: you from a sort of classic VC.
Speaker 4: Yeah. I mean a big one is we can say
Speaker 4: that there's no carry on these funds, and what that
Speaker 4: means is it's just the more we believe a more
Speaker 4: investor friendly vehicle. Right, typical venture capital firm will charge
Speaker 4: the management fee. There's also a carry on top, which
Speaker 4: means every dollar past a hurdle rate, twenty percent of
Speaker 4: that goes back to the fund manager. So it's more
Speaker 4: investor friendly product. The other thing is, I think a
Speaker 4: lot of these companies are interested in retail, and no
Speaker 4: other venture capital firm can say, hey, actually urlp's de
Speaker 4: facto not technically LPs, but the people investing in your
Speaker 4: company and who will get the underlying exposure through this
Speaker 4: fund are normal people, mom and pop, and I think
Speaker 4: that's something that nobody else is offering. So that's a
Speaker 4: unique differentiator, and some people don't like that, to be fair,
Speaker 4: but other people really really like it and for those people,
Speaker 4: and I think in the future less people will not
Speaker 4: like it because of the uncertainty, and that'll just make
Speaker 4: it more attractive. So the headwinds are receding headwinds. Right,
Speaker 4: It's never going to be as difficult as it is
Speaker 4: right now to get companies interested in it, and I
Speaker 4: think it'll actually get substantially easier. We kind of went
Speaker 4: through this with IPO access actually, so we have the
Speaker 4: largest retail platform for access to IPOs where we function
Speaker 4: as a selling group member. And you know, we first
Speaker 4: rolled this out slightly before our IPO. The intent was
Speaker 4: Robinood's IPO would be a big retail offering and I
Speaker 4: think at the time it was the largest for its size.
Speaker 4: It was a north of twenty percent retail allocation. And
Speaker 4: the other companies that allowed us access to their IPOs
Speaker 4: that year, I mean they were early adopters. They saw
Speaker 4: the vision. We also just had to like scratch and
Speaker 4: claw and bang on a lot of doors and ask
Speaker 4: a lot of favors. Right, there was some skepticism. Then
Speaker 4: the IPO market shut in twenty twenty two, and then
Speaker 4: when we reopened, an interesting thing happened. Now everyone's coming
Speaker 4: to us and asking us about retail strategy. Pretty much
Speaker 4: all of the ipoing names are coming to us to
Speaker 4: talk about retail, and so we saw that shift in
Speaker 4: just a few years. I think this will be even
Speaker 4: faster for privates.
Speaker 2: I want to ask, so, okay, you mentioned the advantages,
Speaker 2: is okay, there's no carry, there's things like that that
Speaker 2: all sounds nice. I first see a potential conflict of
Speaker 2: interest that I'd like you to talk to me about.
Speaker 2: In a traditional VC fund, it's pretty obvious, like the
Speaker 2: goal is to make a lot of money, right, You
Speaker 2: make investments and you want them to go up. It
Speaker 2: strikes me and especially when hearing the names of the
Speaker 2: companies in RVII, it's like they're very sexy names, right.
Speaker 2: They're the kind of household names to the extent that
Speaker 2: that exists within private companies and boom and data bricks,
Speaker 2: et cetera. It seems to me like the traditional VC fund,
Speaker 2: like you're going to optimize for making the most money
Speaker 2: the best returns, including names that no one has ever
Speaker 2: heard of. Why should I not think that Robin Hood's
Speaker 2: portfolio has been optimized for retail awareness, not for the
Speaker 2: best returns, but for the collection of companies that will
Speaker 2: spark the most triggers in people's heads to get them
Speaker 2: invests because they've heard of them and they're sexy and
Speaker 2: not necessarily the best options out there in terms of investing.
Speaker 4: Well, I mean, first of all, we are incentive to
Speaker 4: make this firm perform well. Right, everyone will see it.
Speaker 4: It's going to be highly public. The returns will just
Speaker 4: be out there, and you know, we have a fiduciary obligation.
Speaker 4: We've got a great fund manager that we've hired, and
Speaker 4: we're underwriting all of these deals extremely rigorously.
Speaker 2: Think Think.
Speaker 4: The biggest worry that you have with things like this
Speaker 4: is actually adverse selection, right, is are you just going
Speaker 4: to get into the deals of the companies that need
Speaker 4: the money and are desperate for it. This is what
Speaker 4: you run into with like new things. Typically, it's like,
Speaker 4: when am I going to start?
Speaker 2: This seems like what I think because I've got Like
Speaker 2: I mentioned this another episode, someone was like, Joe, someone
Speaker 2: is selling some anthropic shares with this. Interesting. I'm not
Speaker 2: investing in companies I cover in the private market, so
Speaker 2: I'm not gonna do it. But like I always have
Speaker 2: the thought, like, you know, if someone's offering to sell
Speaker 2: it to me, they must really want to.
Speaker 3: When they're asking us.
Speaker 2: When they're like offering the equity to Joe, like that's
Speaker 2: like a bad sign. Not necessarily a bad sign, but
Speaker 2: that adverse selection of like by the time it's getting
Speaker 2: allocated to retail, like a bunch of people have decided
Speaker 2: to part with it.
Speaker 4: We have to flip that on its head. And actually
Speaker 4: all of the deals that we've gotten into have been
Speaker 4: competitive deals, Like we've had to work for these allocations.
Speaker 4: You know, I've had I have a lot of friends
Speaker 4: that are venture capitalists, and I think some of them
Speaker 4: like I've been talking about this for a while, this
Speaker 4: general idea of we want to get in and actually
Speaker 4: start competing with you guys, you know, and they never
Speaker 4: took me seriously. But then we started, you know, getting
Speaker 4: allocations and deals that they wanted allocations in, and I've
Speaker 4: started getting calls and they've been telling me, Hey, this
Speaker 4: Robinhood venture is real thing. I have to contend with
Speaker 4: you now. So I think we're very proud of the
Speaker 4: companies that we've gotten thus far. I think you made.
Speaker 2: The point that one of the drawbacks is liquidity, which
Speaker 2: is always going to be a phenomenon in private markets.
Speaker 2: Another drawback to this is that the investor doesn't know anything.
Speaker 2: There's no ten queues, there's no earnings calls or anything
Speaker 2: like that, and you know, you don't know, Okay, you
Speaker 2: own some tiny slice of a private company, whether via
Speaker 2: a token or whether via RVII, you don't really know
Speaker 2: what the share count is. You don't know like how
Speaker 2: much have they like allocated to employees this quarter? Because
Speaker 2: they're there no obligation to think that are we heading
Speaker 2: towards the world do you think in which the rade
Speaker 2: off It's like, okay, investors can get access to almost
Speaker 2: everything via some instrument. What are we heading to a
Speaker 2: world where the flip side is and they're going to
Speaker 2: know a lot less about the companies that they've invested in.
Speaker 4: I don't think so. I don't worry about that. And
Speaker 4: in fact, one of the innovations that we've were putting
Speaker 4: out there with the launch of this offering is private
Speaker 4: company detail pages, so you'll actually be able to search
Speaker 4: for the private companies themselves in robinhood and see all
Speaker 4: of the information.
Speaker 2: But they're not going to like they're like revenues like earning,
Speaker 2: like all the traditional met like they're not.
Speaker 4: It's publicly available information what they've chosen to share, but
Speaker 4: it's all in one place, and you get a lot
Speaker 4: of useful stuff in there. You see the valuation history,
Speaker 4: so you can see like you know, the chart of
Speaker 4: companies like data breaks for example. Yeah, and I think
Speaker 4: there's just a lot of information out there. I mean,
Speaker 4: if you think about investing in a private company today
Speaker 4: versus a retail investor investing in a public company, say
Speaker 4: in the eighties, I venture to say, there's more information
Speaker 4: you have like app store, analytics data for consumer products.
Speaker 4: They're out there. A lot of these late stage privates
Speaker 4: are doing public company like disclosures and audits on a
Speaker 4: regular basis, because this isn't you know, these aren't hundred
Speaker 4: million dollar companies. These are you know, some of them
Speaker 4: are in the hundreds of billions of valuations, tens of
Speaker 4: billions probably fifteen years ago. These would have gone public
Speaker 4: a while ago. So I mean we've generally started with
Speaker 4: household names with some exceptions that are already established at
Speaker 4: the frontiers of the industries. And these are like the
Speaker 4: companies that would be closest to being public. So if
Speaker 4: you think about you know, public company IPO access candidate,
Speaker 4: robinhood Ventures, Robinhood Ventures is filling. It's like gradually extending backward. Actually,
Speaker 4: the thing I'm most excited about, if I had to
Speaker 4: point to something, it's eventually getting to the earliest possible stages.
Speaker 4: Like I think retail should be funding seed rounds, Like
Speaker 4: the first capital in a company should have a retail participation.
Speaker 4: And I think we hear from the customers. One of
Speaker 4: the concerns is, well, these companies are fairly late stage.
Speaker 4: How do I get exposure to something that's earlier so
Speaker 4: I can get in on the ground floor. And I
Speaker 4: think that's something we're excited to dig into and work on.
Speaker 3: Would that be like a GoFundMe competitor or something, because
Speaker 3: there are some good at starters.
Speaker 4: Well, the difference is with those products you don't actually
Speaker 4: get any ownership. You're giving you're making a get.
Speaker 3: Early products, I guess, but that's about it.
Speaker 4: Yeah, But what they want is ownership. They want to
Speaker 4: invest in something when it's at a valuation of say
Speaker 4: ten million, and if it gets to ten billion, that's.
Speaker 2: A and then they'll learn that ninety nine percent of
Speaker 2: those companies go to zero, but they have to learn
Speaker 2: that lesson for themselves.
Speaker 4: It sounds like, well, you know, that's where we come in, right,
Speaker 4: and we think that we can, like we can figure
Speaker 4: out what what the right deals are and what what
Speaker 4: we intend to do is offer great companies to customers.
Speaker 3: Well, on this note, and just going back to the
Speaker 3: Ventures fund as well. I mean, one other issue I
Speaker 3: foresee is that you see a lot of flow and
Speaker 3: information in the market, and you can imagine some of
Speaker 3: your competitors potentially thinking that, you know, maybe some of
Speaker 3: that flow would inform how the fund is actually managed.
Speaker 3: I mean in some respects like you're starting to get
Speaker 3: a little bit investment banky where you have this huge
Speaker 3: flow business that you can glean market insights from, and
Speaker 3: then you also have managed funds. How are you sort
Speaker 3: of hiving off those two activities or how are you
Speaker 3: thinking about how like the data and the flow data
Speaker 3: that you see, how will that actually inform management?
Speaker 4: Yeah, I mean certainly one of the advantages is we
Speaker 4: know what retail investors are interested in.
Speaker 2: Yeah, And by and.
Speaker 4: Large, what we try to do is give people things
Speaker 4: they're interested in. You know, if they're not interested in it,
Speaker 4: it's not going to be a successful product. So I
Speaker 4: think that's a big differentiator as we think about this
Speaker 4: product in terms of how the fund is managed. It
Speaker 4: has a separate board with great board members, separate you know,
Speaker 4: everything auditing, compliance, So it's like a company within robin Hood,
Speaker 4: the management company.
Speaker 3: Yeah, so there's a Chinese wall effectively.
Speaker 4: Well, you know, you get into legal questions that I
Speaker 4: don't even know if that word is appropriate.
Speaker 3: I was going to say, I don't think we're supposed
Speaker 3: to use that anymore, so I'm sorry.
Speaker 4: But yeah, of course you can imagine everything that we
Speaker 4: do is highly regulated and scrutinized by armies of professionals.
Speaker 4: So yeah, that's that's the one thing. We were so
Speaker 4: established at this point that we have to play everything
Speaker 4: by the books.
Speaker 2: Can we talk about prediction mark, Yeah for a little bit,
Speaker 2: have a lot, we have a lot of questions about this.
Speaker 2: You have a relationship with Kelshy, so people can actually
Speaker 2: access Kelshi's markets through the robin Hood platform. When trying
Speaker 2: to understand who is going to make money in prediction markets,
Speaker 2: which is more valuable the liquidity pool and activity that's
Speaker 2: emerged on Kelshi or the distribution that you have through
Speaker 2: Robinhood and like, which is the harder thing to replicate here.
Speaker 4: Yeah, I mean it's fundamentally too different businesses. Right. You
Speaker 4: can think of Calshi in this case playing a role
Speaker 4: similar to an exchange in the equities and options markets. Yeah,
Speaker 4: so it's like institutional business predominantly, although in CFTC Land
Speaker 4: it's interesting that the exchanges also have the ability to
Speaker 4: go direct to consumer, which you don't see in in
Speaker 4: traditional equities. And it's a business where you're matching orders,
Speaker 4: so you're working with market makers, you're working with professional traders.
Speaker 4: You have retail as well, and to win there you
Speaker 4: have to have great technology, low latency, you have to
Speaker 4: be good about listing products, maintaining market integrity. And it's
Speaker 4: like a complex business, right, And that's why the businesses
Speaker 4: that have gotten scale and traditional assets are worth tens
Speaker 4: of billions of dollars sometimes more. We have a slightly
Speaker 4: different business model. The way to think about Robinhood is
Speaker 4: where a financial super app we should be the best
Speaker 4: place to keep your money and your assets, and we're
Speaker 4: building products to make sure more and more of your
Speaker 4: financial life. Ideally, all of it is on Robinhood. So
Speaker 4: if you want to trade prediction markets, options futures, you're
Speaker 4: an active trader, we should get one hundred percent of
Speaker 4: your active trading activity, and we compete for that. We
Speaker 4: also want your retirement account, your kids, custodial accounts, your trusts,
Speaker 4: all of your mutual fund. Eventually, you're spending activity through
Speaker 4: our card product, you're banking through checking and savings. So
Speaker 4: it's really about how do we own the entire financial
Speaker 4: relationship and we vertically integrate where it makes sense, where
Speaker 4: we think we have a unique advantage. But it's not
Speaker 4: like a focused exchange business, although you know, I should
Speaker 4: say we entered into an agreement. We've acquired a stake
Speaker 4: in rather Era, which is formerly ledger x, which is
Speaker 4: a DCM, So we do intend to actually vertically integrate
Speaker 4: the prediction market side of the business.
Speaker 3: So one of the things we often hear in defense
Speaker 3: of prediction markets is this idea that like, well, actually,
Speaker 3: if you're an institutional investor, this could be a way
Speaker 3: to hedge some exposure that you have. So I don't know,
Speaker 3: if you're an airline and a huge part of your
Speaker 3: expense account is oil, maybe you would take a position
Speaker 3: on what's happening in Iran or something like that. Yeah,
Speaker 3: I know that. Or if you're a retail investor, well,
Speaker 3: this was going to be my next question. I know
Speaker 3: that you see mostly how retail investors are behaving, But
Speaker 3: do you see any evidence that people are like thinking
Speaker 3: through it that systemically versus just like placing a bet
Speaker 3: on whatever particular contract kind of catches their eye.
Speaker 4: Yeah, I mean, I think there's lots of stories out
Speaker 4: there that have been covered about people being incredibly scientific
Speaker 4: about all their trading and prediction. Markets gives you a
Speaker 4: wide surface area to do that under. I mean you
Speaker 4: have obviously the sports contracts, which everyone likes to talk about,
Speaker 4: but economics, you've got a contract on alien disclosure, which
Speaker 4: I really that's one of my favorite ones. Last I
Speaker 4: tracked twenty two percent chance that there will be alien
Speaker 4: disclosure by the US government this year.
Speaker 3: At rising I think rising recently after all the WHI.
Speaker 4: Well, there's been some chatter about it for sure, But yeah,
Speaker 4: I mean I think that, like there's people out there
Speaker 4: that are studying these things in detail. They're building models,
Speaker 4: and what you find is with any nascent market, before
Speaker 4: you get like full institutional participation, there's more opportunities, and
Speaker 4: I think now we're before the point where these opportunities
Speaker 4: are arbitraged by the big players.
Speaker 2: I asked this question recently to CFTC Chairman Michael Seelig,
Speaker 2: and I think we kind of got a no answer,
Speaker 2: if I'm being honest, So maybe I'll try it with
Speaker 2: you as you understand it today. Would there be any
Speaker 2: limitation legally on Robin Hood setting up a live stream
Speaker 2: of a giant roulette wheel and having people make futures
Speaker 2: event contracts on whether it's red or black?
Speaker 4: Yeah, I mean currently our policy has been to have
Speaker 4: them be backed by real events, So we don't want
Speaker 4: to do like derivative. We haven't done any derivative prediction markets.
Speaker 4: And there's different forms of that as well, Like you
Speaker 4: have like prediction markets, and then you have a prediction
Speaker 4: market on how this prediction market is to go.
Speaker 2: So like, for example, polymarket had a market where it
Speaker 2: was the coin toss at the Super Bowl you could
Speaker 2: bet on heads or tails and was trading a fifty
Speaker 2: percent yeah for the toss. Then it went to it.
Speaker 3: Yeah, it seems very much like gambling, right.
Speaker 2: Well, like why even bother having the Super Bowl. At
Speaker 2: that point, if people are willing to like bet money
Speaker 2: on a coin toss why not just have a continuous
Speaker 2: coin tok Well, I just forget the Super Bowl. Just
Speaker 2: have a coin tossing machine and let people trade on it.
Speaker 2: Is there, like, is there anything actually like stopping you
Speaker 2: from doing that?
Speaker 4: I'm not sure. Yeah, I mean I'd have to look
Speaker 4: into that. We don't offer any of those contracts. I personally,
Speaker 4: you know, I'm a former trader, probably wouldn't trade those.
Speaker 4: I think the purposes for people trading them is probably
Speaker 4: more entertainment. But yeah, that's not to say that all
Speaker 4: prediction markets are like that. And I'm not against people
Speaker 4: innovating because that's how we discover things. Right Like, generally speaking,
Speaker 4: I'm in favor of people trying new things and seeing
Speaker 4: what happens, as long as nobody is getting heart and
Speaker 4: you know, market integrity and investor protection, all of that
Speaker 4: is being upheld.
Speaker 2: Just on the relationship with kel, she like, you want
Speaker 2: to be this one stop shop for all money. Presumably
Speaker 2: they're polymarket is going to build out its US version.
Speaker 2: I don't know exactly what's dated that. There's my other competitors.
Speaker 2: Is that going to be an exclusive thing or will
Speaker 2: you will is the goal, so that a user of
Speaker 2: Robinhood can trade predictions on any platform.
Speaker 4: Yeah, so even currently our relationship, we connect to multiple
Speaker 4: prediction market back end exchanges. Calshie obviously is the larger
Speaker 4: because they have the vibrant sports contracts and they've been
Speaker 4: moving fast. We also have forecast Decks, which is the
Speaker 4: prediction markets subsidiary of Interactive Brokers, and as I mentioned before,
Speaker 4: we've got rother Thera, which is which is ours. And
Speaker 4: also we're continuing to talk to these guys. Everyone's interested in,
Speaker 4: you know, having access to Robinhood customers sending our or there.
Speaker 4: And I think the way this plays out is similar
Speaker 4: to our other asset classes, where we prioritize for where
Speaker 4: the customer is going to get the best execution and
Speaker 4: also contract variety, and we'll send our orders there. And
Speaker 4: I think where this ends up is you'll have lots
Speaker 4: and lots of destinations, you'll have smart order routing, and
Speaker 4: the contracts I think will be increasingly fungible. So at
Speaker 4: some point there's going to be a way to cross
Speaker 4: books and actually offload risk. And you know, you'll have
Speaker 4: the election contract here an election contract there and there
Speaker 4: will be a layer where you can actually like even
Speaker 4: though there's technically on different exchanges, exchange one for the other.
Speaker 3: I'd say more about this because this was actually going
Speaker 3: to be my next question. But when you think about
Speaker 3: what makes a good prediction market, the complaint that we
Speaker 3: often hear is, well, there's just not enough size, there's
Speaker 3: not enough liquidity in the contract. So I imagine a
Speaker 3: big component of who you're partnering with is just like
Speaker 3: the law largest platform that's out there, like a CALCI.
Speaker 3: But can you describe, like actually what you think makes
Speaker 3: a good prediction market for investors, Like what are the
Speaker 3: pros and cons of each one?
Speaker 4: Yeah? I mean I think volume and liquidity and contract
Speaker 4: selection are the big things. Contract selection. Customers want selection,
Speaker 4: they want variety, they want to be able to explore,
Speaker 4: and both traders value this because they can trade more things,
Speaker 4: but also the casual use case of just looking at
Speaker 4: the markets and figuring out what the odds of events are.
Speaker 4: Liquidity obviously improves things. It improves the prices and also
Speaker 4: improves the odds of getting filled if you bring in
Speaker 4: an order with size and costs transaction costs. Yeah, yeah,
Speaker 4: I mean, I think those are basically the main things.
Speaker 2: It's very easy with prediction markets to replicate things that
Speaker 2: we don't think of his event contracts. So you can
Speaker 2: recreate a line that like equity or futures on a
Speaker 2: prediction market, you could you know, you could have and
Speaker 2: I'm curious, like.
Speaker 4: And I think some of those products are very useful.
Speaker 2: Yeah, that's exactly what, guest. Do you see era a
Speaker 2: point where, particularly from the perspective of a trader, where
Speaker 2: essentially the exchange itself can be disrupted or sort of
Speaker 2: napsterized or something like that because they have the instruments
Speaker 2: to get the price exposure that they want without having
Speaker 2: to interact with the traditional equity layer.
Speaker 4: I think it's different. You know, I think that obviously
Speaker 4: equity exposure is extremely low cost right now, Yeah, in
Speaker 4: large part due to our efforts in the space. But
Speaker 4: if you want to buy an equity, I mean, it's
Speaker 4: just never been cheaper. Are all in monetization on equities
Speaker 4: business is like two basis points, So I don't really
Speaker 4: think it's competitive with that product. The other thing is
Speaker 4: you have leverage, which again Robinhood for our active traders
Speaker 4: great margin rates. I mean I think the most competitive
Speaker 4: margin rates in the industry, at least that I'm aware of.
Speaker 2: Will you provide leverage to prediction market traders?
Speaker 4: Right now, leverage is not permissible at prediction markets, but
Speaker 4: that's something a lot of people are talking about and
Speaker 4: that you're about, Well, it's I guess we're working on
Speaker 4: it to some degree, which is just driving towards clarity.
Speaker 4: But since that would have to be an exchange product,
Speaker 4: the exchanges would actually have to have to get clarity.
Speaker 4: But I think it's coming. Look, I mean, I don't
Speaker 4: think you could. You can imagine the market's still in
Speaker 4: its infancy, so you'll get all of these things introduced.
Speaker 4: And when you look at the options markets for traders,
Speaker 4: the leverage is actually a very attractive element of it,
Speaker 4: being able to put in a relatively small amount of
Speaker 4: money and get large exposure. So I think there's a
Speaker 4: lot that prediction markets. There's a lot of growth and
Speaker 4: a lot of evolution that's needed before it becomes like
Speaker 4: a full institutional grade asset. But it's underway, and we
Speaker 4: should assume that it's going to happen, and it's going
Speaker 4: to happen quickly. And I think there's all sorts of
Speaker 4: we view this and we have early insight because we're actually,
Speaker 4: I think one of the only places where you can
Speaker 4: have all these assets in one place. We don't see
Speaker 4: any cannibalization. Traders love it, and I think we see
Speaker 4: an opportunity in combining all of these assets into one
Speaker 4: cohesive picture. For example, you can imagine you have a
Speaker 4: particular equity. In that equity detail page, say it's a
Speaker 4: Tesla or another company, you see prediction markets related to
Speaker 4: that company, and then that gives you a comprehensive view
Speaker 4: and you can trade very specific things. We think there's
Speaker 4: a big opportunity in earnings as well. A lot of
Speaker 4: people have thoughts on how companies are going to do
Speaker 4: with earnings. They have models. Stock price is an imperfect
Speaker 4: proxy for that. So the EPs and revenue contract directly
Speaker 4: would be would be very attractive. And right now, that's
Speaker 4: in a little bit of a limbo because it meets
Speaker 4: the criteria of a securities based swap, which would be
Speaker 4: an sec product. Right so harmonization is needed to clear
Speaker 4: the path for listing products like that, which we're working
Speaker 4: with the regulators and collaborating to try to figure out.
Speaker 4: But yeah, it's it's it's exciting from like a market
Speaker 4: node standpoint because we're in the early innings and you
Speaker 4: can kind of see the future of how it's going
Speaker 4: to evolve. It's going to be a much bigger asset class,
Speaker 4: much more institutional. It's evolved similar I think it'll evolve
Speaker 4: similarly but more quickly to other asset classes that have
Speaker 4: come in in the past.
Speaker 3: Just going back to token nice stocks for a second,
Speaker 3: does consent matter at all? That sounded more like epsteinish
Speaker 3: than intended it to sound like. But like, if an
Speaker 3: open aye comes out and says like, we have some
Speaker 3: reservations about this, we have some concerns, would that give
Speaker 3: you pause for providing token in that particular company? And
Speaker 3: then you know, your role in the market is expanding
Speaker 3: as you start these new venture funds and things like that.
Speaker 3: You might not want to annoy a bunch of private
Speaker 3: companies at this stage. So how are you balancing those considerations?
Speaker 4: Yeah, these are all considerations that we're thinking through. Obviously
Speaker 4: right now. The policy that we have is we'd like
Speaker 4: to get the consent of the companies. We want them
Speaker 4: to be on board. I think that if you think
Speaker 4: about it from now now here's the nuance. Let's say
Speaker 4: you're an accredited high net worth individual. There are ways
Speaker 4: to get exposure to these companies without the company consenting. Right,
Speaker 4: they just don't care. But legally you have a mechan
Speaker 4: you could become LP and an SPV that exists. There's
Speaker 4: these ways where companies have already lost control of who
Speaker 4: their shareholder base is, and not to mention, when they
Speaker 4: go public, you've completely lost control of your shareholder base.
Speaker 4: So I think, since it's early, obviously our approaches we
Speaker 4: want to make sure everything is. We don't want anyone
Speaker 4: saying they don't want Robin Hood Ventures invest in their
Speaker 4: company and throwing ice water over it. Not to say
Speaker 4: that that's going to be the policy forever, but that's
Speaker 4: kind of the that's the approach where we're taking.
Speaker 2: Now, do you want to just drop your new card
Speaker 2: on the table? I know, my god, so you have.
Speaker 2: We could just we don't need to do a big
Speaker 2: like ad for like all the great people can look
Speaker 2: that up. But you have this new platinum card.
Speaker 3: It is really bad, op seck. If he's like dropping
Speaker 3: his credit no, just want to hear how it sounds.
Speaker 4: This is the most secure credit card on the market.
Speaker 4: Your number is not on it.
Speaker 2: Oh, oh that is legit.
Speaker 4: Would you like to hold it?
Speaker 3: I would yes, So this is nice. This is really nice.
Speaker 4: I got the heaviest card on the market, beats out
Speaker 4: the Robin Hood Gold. Yeah.
Speaker 2: Wait, actually drop the gold card. Now, let's hear the difference.
Speaker 4: Very different.
Speaker 2: No one watched that puny gold.
Speaker 3: Here, here's the pointing.
Speaker 2: Here's the platinum. Let me drop the platinum.
Speaker 4: So let me tell you. I can tell you the
Speaker 4: thesis behind this card, if it makes sense. We want
Speaker 4: this to be like the James Bond card. If you
Speaker 4: are James Bond, this is the card for you. If
Speaker 4: James Bond, Sean Connery himself were to have a credit card,
Speaker 4: he would have this card. And I think we tried
Speaker 4: to evoke that feeling, not just in the design of
Speaker 4: the card, but if you look at the website, we
Speaker 4: have a scuba diver, we have like these nice planes.
Speaker 4: So yeah, we we.
Speaker 2: Really tried to say if I pulled that out, my
Speaker 2: friends won't make fun of me.
Speaker 4: You'rey, Actually I really like it. Well, actually it's got
Speaker 4: five percent dining credit. That's probably that's nobody offers that
Speaker 4: with the high limit. So it's actually intended for you
Speaker 4: to treat your friends, okay, and take it out.
Speaker 2: I'm not going to complain. They're not going to make
Speaker 2: fun of me when I'm paying for dinner.
Speaker 4: And what we found was with the Gold card, a
Speaker 4: lot of people, a lot of people don't really use
Speaker 4: physical cards. It's Apple pay, but the moments when you
Speaker 4: use your physical card, it's less of a payment instrument.
Speaker 4: It's more like a state Let me show you my watch, right,
Speaker 4: it's a it's a fashion accessory. It's a luxury good.
Speaker 4: And I don't know if the credit card industry is
Speaker 4: really has really evolved. I think to the same degree iPhone.
Speaker 4: You know you have the orange iPhones. Now it's it's
Speaker 4: a fashion accessory, less of a utilitarian good. And I
Speaker 4: think physical cards the same way It used to be
Speaker 4: that people wanted physical cards that were as light as
Speaker 4: possible because it's served a utilitarian purpose. You want to
Speaker 4: keep it in your wallet, and you want your wallet
Speaker 4: to be light so that you're not hunched over. Now
Speaker 4: I think it's a little bit different. It's an extension
Speaker 4: of your personality.
Speaker 3: So I'm a big fan of physicality in everyday products
Speaker 3: like remember the queue the tungsten cue. Yeah, like that
Speaker 3: was a direct response to like the ephemerality ephemerals crypto
Speaker 3: of crypto, right, Like you want something that's tangible and
Speaker 3: like feels heavy in your head.
Speaker 4: I keep telling Deepak that a tungsten card of crypto
Speaker 4: people would be cool.
Speaker 2: Yeah, get on that.
Speaker 3: You should do that.
Speaker 4: It's not a bad idea Blood.
Speaker 2: Tendant, thank you so much for coming back on oblock.
Speaker 4: Great adding Yeah, always a pleasure. Thank you.
Speaker 2: Gad to me, Trichy. I love catching up with Flood.
Speaker 2: I mean, robin Hood is a company that is like
Speaker 2: so far ahead of the curve in basically everything that's
Speaker 2: happened with like the retailization of every market, the complete
Speaker 2: breaking down of every distinction between what's a stock, what's
Speaker 2: the future, what's a token, et cetera. Like they're right
Speaker 2: in the middle of all of it.
Speaker 3: Absolutely, And also there's a reflexivity here, right, because the
Speaker 3: bigger Robinhood gets, the more its offerings kind of matter
Speaker 3: for the way the market itself behaves. So I think
Speaker 3: it's definitely a worthwhile discussion. I gotta say, though, like
Speaker 3: the financialization of everything, do you find a little bit dystopian?
Speaker 3: I remember like, I went to Macaw once and I've
Speaker 3: been there. I was really looking forward to it because
Speaker 3: I was thinking, you know, the Las Vegas of the East.
Speaker 3: But a lot of the gambling I found like pretty
Speaker 3: depressing because some of it was as basic as like
Speaker 3: let's roll the dice and if it's a high number,
Speaker 3: you win, and if it's a low number, you lose,
Speaker 3: and taking like those kind of very simplistic binary bets. Yeah,
Speaker 3: and I feel like I feel like a lot of
Speaker 3: that is sort of creeping into the financial system.
Speaker 1: Yeah.
Speaker 3: I mean, look our daily lives.
Speaker 2: People bet on the coin flip of the super Bowl. Yeah,
Speaker 2: I know, why even have the super Bowl at that
Speaker 2: point if people are they're just betting out a coin flip.
Speaker 2: The super Bowl is kind of an irrelevancy where if
Speaker 2: people are inclined to bet on the coin flip, I
Speaker 2: don't know if like people will bet on a coin flip,
Speaker 2: but it's not like that much. It's basically like betting
Speaker 2: on red or black, which people do, which people do online,
Speaker 2: which is really depressing. Actually, the most depressing thing I've
Speaker 2: ever seen on the gambling front was I was in
Speaker 2: Iceland and I think.
Speaker 3: They have this do you think of Iceland as like
Speaker 3: a hub of gambling.
Speaker 2: But go on, like I was looking for stuff to
Speaker 2: watch on TV in my hotel room, and they had
Speaker 2: a stream or they had a video of like this
Speaker 2: like video casino where they had like an attractive woman
Speaker 2: dealer dealing cards and that people could phone in their bets,
Speaker 2: so like recreate kind of this casino ish thing. But
Speaker 2: like it seems like that's we're going. And then the
Speaker 2: other thing too, is that, as I mentioned, like whether
Speaker 2: it's like technological arbitrage or regulatory arbitrage, every type of
Speaker 2: bet can be turned into done with any type of instrument.
Speaker 2: You can replicate stock and options with futures. You can
Speaker 2: do sports betting in the form of prediction markets. You
Speaker 2: can then take prediction markets who've already seen this. You
Speaker 2: could take prediction markets and bundle them into ETFs, and
Speaker 2: so you could have buy an ETF that is a
Speaker 2: series of long democrat in the senate markets, et cetera.
Speaker 2: And so everything could be wrapped in every other sort
Speaker 2: of wrapper, and every thing is just sort of seemingly
Speaker 2: once you find the right rapper kind of allowed within
Speaker 2: our current sort of like regulatory framework and honestly, even
Speaker 2: if it's not allowed, you do it offshore with crypto
Speaker 2: et cetera. And so there's almost no way to sort
Speaker 2: of stop this, stop this progression.
Speaker 3: But the other thing I've been thinking of is, you know,
Speaker 3: we used to hear markets described as you know, there
Speaker 3: were upsides to capitalism, right, like you're supposed to be
Speaker 3: efficiently allocating money. I don't think there's some pretty good
Speaker 3: epete of course, of course, but like that used to
Speaker 3: be the thing, right, And now you see more and
Speaker 3: more money that's kind of being diverted away from like well,
Speaker 3: this is just going to fund company. Yeah, well we're
Speaker 3: just going to bet on the line in the company
Speaker 3: going up, or you know, some other real world outcome
Speaker 3: or whatever. Here's what it is. We were talking about
Speaker 3: this the other day. But like it actually feels like
Speaker 3: if you think about the nineteen eighties, you had that
Speaker 3: greed as good shift, right, right, and even that was controversial,
Speaker 3: And now you fast forward to twenty twenty six, and
Speaker 3: it feels like morality doesn't even like necesscessarily enter into it.
Speaker 3: Everyone is just like so resigned to this idea that like, well,
Speaker 3: of course people are going to try to make money
Speaker 3: of course we're going to just bet on random things
Speaker 3: to try to win.
Speaker 2: Everyone just accepts that, like securing the bag is the thing.
Speaker 2: One other thing I do worry about is like I
Speaker 2: think American capital markets are good in part because we
Speaker 2: really do have excellent disclosure, and you know, from time
Speaker 2: to time you hear about it's like an accounting scandal. Yeah,
Speaker 2: but they're rare, like and they're a lot rare. I
Speaker 2: think anyone who looks in any other market around the
Speaker 2: world would find them way more frequent, and market manipulation
Speaker 2: would find it way more frequent in other markets outside
Speaker 2: the US, because we have this very good regulatory regime
Speaker 2: and expectations and the SEC mostly does this job very well,
Speaker 2: and it's going to increasingly sort of like be taken
Speaker 2: over by tradable instruments for which investors really do not
Speaker 2: have the same level of information at all. And the
Speaker 2: expectation that an investor would like to be able to
Speaker 2: know the share count of a thing they're buying, be
Speaker 2: able to know the earnings of the margins of the
Speaker 2: thing they're buying, like that's going away, and we might
Speaker 2: regret like having so much traded without as much transparency
Speaker 2: at some point down the line.
Speaker 3: No. Absolutely, Actually, this is a good reminder. I wanted
Speaker 3: to call back to two episodes. So on that note,
Speaker 3: we did that really good episode about private credit in
Speaker 3: particular kind of turning the economy into a black hole. Yeah,
Speaker 3: I think that's really good. You know, obviously it's focused
Speaker 3: on credit, but you can extrapolate to more and more
Speaker 3: companies just going private in general. And then secondly, Vlad
Speaker 3: mentioned he's really into aliens. We got to get Paul
Speaker 3: Krugman back on to talk about aliens.
Speaker 2: Let's do it.
Speaker 3: But in the meantime, there is an existing episode that
Speaker 3: people should check out anyway. Shall we leave it there?
Speaker 2: Let's leave it there.
Speaker 3: This has been another episode of the Odd Lots podcast.
Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2: And I'm Jill Wisenthal. You can follow me at the Stalwart.
Speaker 2: Follow our guest Blood Teneve at Vlood Teneve, follow our
Speaker 2: producers Kermen Rodriguez at Carmen Arman, dash Ol Bennett at Dashbot,
Speaker 2: and kill Brooks at Kile Brooks. And for more odd
Speaker 2: law content, go to Bloomberg dot com slash odd Lots
Speaker 2: with a daily newsletter and all of our episodes and
Speaker 2: you can shout about all these topics twenty four to
Speaker 2: seven in our discord Discord dot gg slash odd Lots And.
Speaker 3: If you enjoy odd Lots, if you want us to
Speaker 3: bring back Flat on a quarterly basis to follow up
Speaker 3: on our previous questions, then please leave us a positive
Speaker 3: review on your favorite podcast platform. And remember, if you
Speaker 3: are a Bloomberg subscriber, you can listen to all of
Speaker 3: our episodes absolutely add free. All you need to do
Speaker 3: is find the Bloomberg channel on Apple Podcasts and follow
Speaker 3: the instructions there. Thanks for listening