Vlad Tenev

thousands of stocks, just like the big guys. But taking on Wall Street has led to test after tests, from outages to a sixty five million dollar fine from the SEC, and then the perfect storm on January. This is unbelievable. We're looking at anywhere from forty to eight hundred percent gains. Traders drove the price of game Stop and several other so called meme stocks up so high, so fast that robin Hood faced a demand for billions of dollars to

offset risk. The company restricted buying on thirteen stock, including game Stopped. Customers were furious, meme stocks plunged, and CEO of lad ten Of had to answer to lawmakers. At that moment, we would not have been able to post the three billion in collateral. Robin Hood now faces even more questions about its model and whether it's exposing largely novice investors to undo risk. Here to answer those questions

on this special edition of Bloomberg Studio. At one point, Oh robin Hood CEO lad ten of you and your co founder by Jubat started robin Hood in part in response to the Occupy Wall Street movement, which was filled with angst against the financial system and then amplified on social media. Do you see the game stop frenzy as an echo of that? I think you're seeing a continuation

of a few things. Uh. I think if you look at a lot of the anst after the last financial crisis, people were very, very frustrated that the recovery went to the wealthy. Uh, it went to institutions. And we we built robin Hood to enable economic opportunity for everyone. We wanted everyone to have access to the capital markets, which has been one of the greatest wealth creation engines in human history. So I think, um, what you're seeing now is a movement by individuals to participate and become a

bigger and bigger force in the financial markets. Now both of you are immigrants. You grew up in Bulgaria, your parents worked at the World Bank. How has that shaped your perspective. Yeah, so I immigrated from Bulgaria when I was five years old. Obviously, when my my family and I came to the US in the early nineties, we were starting from nothing, so um. My dad was a graduate student, my mom worked as a waitress and also in one of the few remaining textile plants in the

US at the time. So I had the experience of starting from from basically nothing. Also, in Bulgaria in the mid nineties, the financial system effectively collapsed. There was a period in n where the Bulgarian currency was going through hyperinflation and you were seeing around two thousand percent annualized inflation. So I think we have we we sort of assumed in the US that we have the US dollar and it's stable and it's this baseline that we can rely on.

But I think seeing my grandparents go through that experience in Bulgaria where their pensions became essentially worthless, um, really led me to appreciate that you have to be diversified and being plugged into a global financial system where you can diversify your wealth and spread your savings around and not rely too much on any one tool or asset. I think I got to experience that very very directly. Now.

You became Soul CEO in November, and in the first three months in that role, you've navigated one of the biggest crises in the company's history. You've testified before Congress. What have you learned in those three months. There's the phrase that there's some decades where nothing happens, and then some weeks when decades happen, which I think, uh, I think is representative of what we've been through at Robin Hood.

I think that uh now, not just Robin Hood, the entire industry has seen investing go from something that's very niche I mean it's something that you know, you'd hear about on on TV, but a relatively small number of people were actually interested in it. And uh now you're seeing investing very much be a part of the cultural zeitgeist. I mean, people are talking about it on social media,

we are having Congressional hearings about it. And I think anything entering the cultural zeitgeist, anything new like that, there's bound to be uh, some confusion. There's there's bound to be some stress, and I think I just have to keep it in perspective for myself that, um, this is kind of what I signed up for. And any time you're causing change in society and um and and kind of up ending the status quo, it's it's probably not

gonna be the most comfortable process. But I'm curious how testifying before Congress ranks on the nerves scale of the hard things that CEOs have to do. Yeah, I mean I hadn't done anything like that before. Um. The way that I thought about it was, this is just a great opportunity to tell the story of Robin hood, and not just the events of January, but the broader story of you know, retail investor participation in our financial system.

One of kind of the unsung untold stories is that if you look at the recovery, UM, people that are getting into the stock market are more diverse. There's a lot more women entering the space than than ever before. And generally, UM, we we've been a positive force and

people on Robin would have done quite well. I announced the stat at the congressional hearing actually that if you look at our aggregate customer activity, uh, the unrealized and realized gains including crypto and stocks were over thirty five billion dollars. So that's UM. That's you know, of February billion dollars of value that is in customers pockets UH, literally their smartphone. UM. And without Robin Hood that may not have been possible, especially during such difficult times as

the pandemic. Now you said you got that call from your clearing house at three thirty in the morning January asking you to put up an extra three billion dollars. Take me back to that moment and describe how that felt, UM, knowing that you were going to have to make a hard call. I think the team played it by the books and I'm proud of how they handled it. And of course, you know, we look back and we say, UM,

what are the things we could have done better? And I'm sure there's there's many many things that we could have done better, specifically with UM sort of how we communicated with the decision and the days leading up to

it when we were seeing increased volatility UM. But I think as far as the operations team and how they were acting in a moment of UM very high stress, I'm very proud of that team and their professionalism and the way that they had to juggle, you know, making the customers that wanted to buy Meme stocks happy, but also protecting the financial system and are are much broader,

larger customer base. You decided to allow selling but not buying, of thirteen securities, including game Stop, and you and I spoke on that day, and I've never seen so much anger in response to an interview on social media. Customers were livid. They thought you were lying, They thought you were in cahoots with Hedge Funds, They thought you were just trying to protect yourself or the company. Did you

understand that anger or where that was coming from. I think a lot of it was based on the false premise of Robin Hood colluding with Hedge Funds or Melvin Capital. There was even a rumor that the White House had called us UH told us to shut down trading of this stock. So I think there's a lot of misinformation.

What I wanted to do was dispel the misinformation. So when I came to UM, when I came on your show that day, and by the way, it was obviously I was kind of running on fumes, trying to navigate through the day to day of the issue raising the several billion dollars, and obviously it was a very very tricky situation. But I would say, as as angry as people were that we um we prevented them from buying, have we prevented customers from selling and capturing their gains

on the stock um? People would have been much more angry. There would have been riots on the streets had we stopped selling. So this idea that you know things would have been better, I think it's just categorically falls. This is my conversation with Robin Hood CEO Lad ten of Up Next is robin Hood gamifying, investing, glorifying, gambling. President Biden's pick to run the SEC says investigating that will be one of his top priorities. What will that mean

for robin Hood? The CEO responds to his harshest critics, I'm Emily Chang. This is Bloomberg Studio. At one point out free trading is the industry standard. Now robin Hood is then under scrutiny for gamifying that trading, and the controversy has reopened this broader question of your role in society. What do you say to critics who say you're democratizing addiction, you're glorifying gambling. I reject the idea that investing in

the US capital markets is UH is gambling. UM. I think we have a problem in this country, which is that UM. Since the end of World War two, UM, more and more of the stock the corporate stocks in America have been UM have been owned by advisors or other institutions or intermediaries. So at the end of World War two, the majority of stocks were actually hold held by households and UM. That's been going down over time.

And I think at the same time, you've seen really really high concerns about income inequality and wealth inequality, and these concerns threatened the fabric of our society. And I think people agree that that's a problem, and we've got a product here that UM has real potential to curb that. So I think any attempt to prevent individuals from accessing the markets directly is just UM it's just poorly directed.

I think, if anything, we should be looking at how to encourage individuals from to invest in in the markets directly and make it even easier and remove the remaining barriers that that are in the way. That's said Gary Gensler, President Biden's pick to run the SEC, has said he's going to address the gamification of investing as one of

his top priorities. What will that mean for Robin Hood? Well, I think, um, first of all, we're excited to work with the incoming administration to um to clarify some of these things. And uh, we we welcome people looking into it. I think what they'll find is uh uh gamification is uh is poorly defined. Um, It's not happening on robin Hood. UM. I think people just want to invest in stocks, and regardless of whether they do it on robin Hood or any of the other brokers with zero commissions and low

account minimums, that that's now possible. So on the point of gamification, your confetti animation, that confetti that pops when users make certain trades, this is something that you've defended, but now Bloomberg has reported it's something you're you're thinking about potentially getting rid of. What is the status of that, Well, I should say, UM, I'm a bit surprised by by how much attention that the confetti animation has gotten. Um. It's literally uh, an animation that comes up after you

make your first trade. You think by from reading from reading some of the commentary that confetti's flying the flying through the app all over the place. But um, the way we thought about it is, um, the first time someone becomes an investor, and we do have a lot of first time investors on our product. Um, that first moment of buying a stock and becoming an owner in a company is a milestone moment that people should celebrate. And so you'll see you know, confetti animation on your

first trade. You'll see us adding snowflakes if the markets are closed on December or January one, you know, snowflakes will will follow in the app. And there's a lot of these delightful, uh graphical moments where um it's just reflective of almost an artist signing their work. So does that mean you're not getting rid of it anytimes soon? Well, I don't want to talk about specific decisions. We we don't want to make decisions um governed by sort of

what what the media says about robin Hood. But we're always looking to improve the experience, and um, you know, sometimes we might replace things with things that we feel make customers happier and meet their needs. So we're we're always looking looking to do that UM. And you know it might mean certain changes to the the customer interface, UM, and it might mean other things, but I guess just be on the lookout for them. Now we're seeing a prolonged sell off in the markets. I've seen a bunch

of people tweeting screenshots of their robin Hood notifications. It was a blood bath for a lot of people, including many of your customers who are only used to things going up. If there's a correction, How worried are you about your customers hurting? And if your customers are hurting on a large scale, does that hurt robin Hood? We we definitely uh. I want to make sure we align ourselves with long term customer outcomes UM. And we've been saying the entire time that investing is a habit, it's

a skill. UM. We encourage people to get started early, but also build up these habits over a long period of time. And I'm personally a huge believer in long term investing, So I think a lot of the shorter term trading makes its way into the public discourse because it's it's more interesting and there's more to talk about than someone just building up a diversified portfolio over time. But that's how most of our customers use our products. Most of our customers aren't buying and selling on a

daily basis. They're building up portfolio in and largely doing buy and hold activities. That said, got a little bit of a taste of how people react to a market crash and in a correction, and we found that our customers, because they were younger, looked at it as a buying opportunity and as an opportunity to buy into the market at historically low multiples. So we saw more deposits and

more purchasing of stocks than than ever before. You're listening to my conversation with lad ten Of, CEO of robin Hood coming up. Ten of paints his picture of the future investor, not just in the US, but around the world. He thinks investing should be as ubiquitous as online shopping, but he's now got dozens of lawsuits to fight along the way. I'm Emily Chang, this is Bloomberg Studio. At

one point, Oh, stay with us. Robin Hood has gotten a lot of criticism for not having enough customer support, and of course, you know, I'm reminded of the story of twenty year old Alex Currns, who committed suicide in June after seeing a negative balance of seven dollars on his robin Hood account that turned out to be a mistake. He emailed customer support, He got an automated response, and by the time robin Hood had replied UM with the actual situation, which was not as dire as he had thought,

it was too late. How much responsibility do you think robin Hood bears in that situation. I think we bear a responsibility for learning from it and making sure that we respond and improve our products and our customer service model to uh prevent cases like that from from from

being repeated UM, and certainly that's what we did. We announced very shortly after UM Mr Karns is passing that we are taking a series of extremely aggressive measures, including product changes, UI changes, changes how we communicate buying power and particularly negative buying power, and adding live phone support, which we started out offering for high severity options trading cases, but have since expanded to other cases like account security,

UM stock trading, and the response has been really awesome and we're looking to expand it to all cases at robin Hood. So let's get to your ip O. Bloomberg has reported you're considering selling some shares directly to your customers. Can you give us the status of that. UM. Clearly, this is a business that requires capital, and I think we've we've shown that we have a variety of means to capitalize the business UM, and we see a huge growth opportunity ahead of us, and I think it's a

seminal moment for the individual investor. UM. It's an opportunity for us to to serve them and to continue to elevate the individual investor in the eyes of the American public. So that that's my focus, just squarely on customers and delivering for them, and I think, UM, I think all all the other things are just in support of that core mission. You are facing dozens of lawsuits. What is your intention on how to fight these and do you

have any concern that could impact your IPO trajectory. We're gonna defend the firm vigorously because we we actually disagree with the fundamental premise, and I think the facts will come out and it'll bear It'll bear out that robin Hood is a customer focused company that is operating with the highest standards of integrity and UM and will continue to do so. And if payment for order flow gets taken away, do you have another option? I mean, I think a lot of the payment for order flow concern

is more or less baseless. People don't understand the details behind it, UM and so they're they're throwing up they're throwing out a lot of these accusations UM, and it's complicated. I understand that it's hard to sort of grasp how payment for order flow works. We're doing our best to try to demystify it. UM. We're doing a lot of We're putting out a lot of content on our blog and on social media that actually shows demonstrates that. UH.

We believe it's it's better for customers. People get price improvement they wouldn't be able to get if we routed their marketable orders to exchanges. UM. They get they get a higher degree of certainty of execution. UM and UH and our our model basically aligns incentives and makes it so that all of our all of our market makers pay the same rate, thereby removing conflicts of interest from

from the relationship. So UM I not only think it's a good model, I think it's it's an innovative model, and it's an example and probably a big part of why the American financial markets have their world leading position. It's it's that we've allowed UH innovative models to flourish and not try to regulate them out of existence. You know, I know you have big plans, a big vision beyond the basic brokerage and the features you have. Now, what

are the biggest milestones ahead? What are your priorities. I think you can look at our our vision broadly and say that right now, about half of US households invests. We'd like to get that number up to plus percent. Investing should be as ubiquitous as shopping online. It should just be something that people do. UM And Moreover, I think there's an opportunity to expand that beyond the US.

There's no reason why the greatest financial system UH the world has ever seen should be only available to Americans. We can, we can, we can, we can make that available UH globally, and not just to high net worth individuals and the wealthiest one percent globally, but to the mass market. UM and so I think that's a huge opportunity. All right, Glad, thank you so much for joining us A lad Ten of their Robin Hood CEO. Appreciate you taking a time today. Bloomberg Studio one point I was

produced and edited by Kevin Hines. Our executive producer is Alison Weiss. Our managing editor is Daniel Culberson, with production assistants from Lauren Ellis and Mallory Abelhausen. I'm Emily Chang, your host and executive producer. This is Bloomberg