Jan 2, 2019 · 34m · a16z
a16z Podcast | Market Shifts
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of the a16z podcast, Andreessen Horowitz general partner Jeff Jordan interviews NASDAQ CEO Adina Friedman about NASDAQ's evolution into a global technology infrastructure provider. They discuss macro shifts in public versus private markets, regulatory advocacy for public companies, and how emerging technologies like blockchain and machine intelligence are transforming financial markets.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
The host as informed peer 4.8 Guest teaching 4.0 Guest disagreement 0.4 The host pushing back 1.4
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 8:57 Adina rejects host premise on quarterly earnings mandatory predictability
Adina explicitly counters Jeff's rule of thumb that companies must have four quarters in the bag before going public, pointing out that biotech and other non-linear business models operate under fundamentally different investor expectations.
Hardest push from the host ▶ 24:45 Jeff challenges NASDAQ using Christensen's Innovator's DilemmaJeff refuses an optimistic framing of NASDAQ's adoption of blockchain, directly challenging Adina with Clay Christensen's framework on how incumbent companies optimizing existing legacy architecture get disrupted by scrappy innovators.
Biggest teaching moment ▶ 12:44 Adina explains Reg NMS and venue liquidity fragmentationAdina provides a comprehensive regulatory masterclass on Regulation NMS, explaining price-time priority rules, mandatory exchange routing, and the resulting fragmentation across 40 distinct execution venues.
The host holds their own ▶ 30:16 Jeff demonstrates expert operational insight through OpenTable crisis dataJeff illustrates proprietary signal value by sharing how OpenTable's real-time consumer reservation metrics instantly accurately presaged the 2008 recession during their IPO filing window.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The host as informed peer | Guest teaching | Guest disagreement | The host pushing back | Why |
|---|---|---|---|---|---|---|
| Redefining NASDAQ as a Technology Company | 3 | 5 | 0 | 0 | Jeff introduces macro statistics on the declining number of public companies over the past two decades. Adina expands on this by outlining key driver factors including private capital abundance, JOBS Act regulatory shifts, and public market compliance burdens. | |
| Trends in IPOs and Later-Stage Private Capital | 5 | 3 | 0 | 2 | Jeff demonstrates solid market knowledge by pointing to non-traditional late-stage capital sources like SoftBank and sovereign wealth funds delaying IPOs. Adina agrees while detailing the balancing act between private growth phase predictability and public market liquidity needs. | |
| Managing Long-Term Goals vs. Quarterly Public Expectations | 6 | 5 | 2 | 3 | Jeff shares personal experience and asserts a strict rule that companies must have four quarters guaranteed before IPOing. Adina directly counters his assumption, noting that biotech and other non-traditional sectors do not require quarterly predictability because public investors understand portfolio risk. | |
| NASDAQ Initiatives for Public Companies and Short Sale Transparency | 5 | 3 | 0 | 0 | Jeff draws on his experience as a CEO leading OpenTable through a grueling 46-meeting IPO roadshow to ask about technological modernization. Adina outlines short-sale transparency reform initiatives and pre-recorded roadshow solutions. | |
| Market Structure Fragmentation and Proposed Regulations | 4 | 6 | 0 | 2 | Jeff probes into market fragmentation caused by high-frequency trading and dark pools. Adina delivers an authoritative explanation of Regulation NMS, price-time priority, and mandatory venue routing, presenting NASDAQ's blueprint for issuer choice. | |
| NASDAQ's Competitive Positioning in Global Market Tech | 5 | 4 | 0 | 2 | Jeff discloses his early investment in Wealthfront and introduces a key theoretical point that passive investing relies on active price discovery. Adina elaborates on NASDAQ's smart beta indices and the cyclical nature of active versus passive capital management. | |
| Diversification History and Acquisition Strategy | 4 | 3 | 0 | 0 | Jeff accurately identifies NASDAQ's acquisition strategy as shifting the business toward a enterprise software model. Adina explains the historical evolution from cost-synergy exchange acquisitions to revenue-synergy SaaS platforms like eVestment. | |
| Expanding Exchange Tech to Non-Financial Marketplaces | 7 | 5 | 2 | 4 | Jeff leverages his background as an eBay executive to compare e-commerce and exchange volume models, and invokes Clay Christensen's Innovator's Dilemma to challenge NASDAQ's incumbent vulnerability to blockchain. Adina pushes back gently, defending the necessity of centralized regulatory ecosystems. | |
| Impact of Machine Intelligence and Quantum Computing on Capital Markets | 3 | 4 | 0 | 0 | Jeff asks focused questions regarding machine learning and artificial intelligence applications in capital markets. Adina details the convergence of quantum computing, cloud data, and automated trade surveillance. | |
| Monetizing Financial Data vs. Broad Public Access | 6 | 4 | 0 | 3 | Jeff frames the core tension between proprietary data monetization and broad public access, backing it up with a detailed account of OpenTable's 2008 diner reservation crash data. Adina outlines SIP utility pricing and SEC equal-access regulations. | |
| Leadership Transition, Career Development, and Management Philosophy | 5 | 2 | 0 | 0 | Jeff shares his central management philosophy to be the boss you want to work for and emphasizes transparent feedback. Adina agrees and describes her self-identity as a truth teller in corporate leadership. |
Statements from this episode (24)
Friedman: NASDAQ provides technology to 90 global exchanges
“We also provide that technology to 90 other exchanges around the world.”
Friedman: US public companies dropped by 1,000 in a decade
“Even in the last 10 years, the number of public companies has dropped by a thousand.”
Friedman: Six investors generated 33% of all US proxy proposals
“It's a terrible fact, but it's a fact, is that six small investors generated 33% of all proxy proposals in the United States last year.”
Friedman: Abundant late-stage private capital is delaying tech IPOs
“Personally, I think, yes, the answer is yes, that is definitely having an impact.”
Friedman: Mutual and hedge funds won't hold private companies 10 years
“Investors, particularly mutual funds, hedge funds, who are getting into late-stage companies, they're not in them for 10 years. I mean, they want to have, you know, liquidity”
Jordan: 80% of CFOs admit sacrificing long-term goals for quarterly targets
“I think there was a survey done about 10 years ago that said something like 80% of CFOs said to make their quarter they would do something that might not be in the long-term interest of the company.”
Friedman: Missing the first post-IPO quarter destroys investor confidence
“That first quarter after your IPO is an incredibly critical quarter. So I know I'm sitting there saying have the long term and everything else, but when you are preparing for your IPO, you're giving analysts essentially a forecast of your business for the next…”
Jordan: Companies shouldn't IPO without four quarters of performance secured
“If you don't, for my perspective, you don't have the next four quarters in the bag, you know, Don't even think about it because it's so interesting. The long-term performance of the company in terms of value is so predicted by the first quarter performance.”
Friedman: Public companies face heavy shareholder turnover in first two post-IPO years
“Most notably, you get a lot of shareholder turnover in those first two years.”
Friedman: Lack of short sale disclosure is totally wrong
“Ignorance is not bliss here, you know, and it's really, it's just that information disparity to me is just totally wrong.”
Jordan: OpenTable's 2009 IPO roadshow required 46 consecutive flip-board meetings
“So my experience of the process in 2009 was we had 46 meetings in rapid succession where we had a flip board presentation and you had to give the presentation the same way every time, you know, so it became one of the most nerve wracking things. Was also one o…”
Friedman: Vested financial interests preserve manual face-to-face IPO roadshows
“I think that there are, to be honest, a lot of vested interests in the people who control the process to make it so that they manage the relationships with the investors, and they put you in front of those investors, and that the investors do have a chance to …”
Friedman: IPO candidates can now pre-record roadshow presentations
“We do pre-record now. You're allowed to Pre-record your roadshow presentation and put that up.”
Nasdaq executes roughly 20% of NYSE-listed stock trading volume
“So we trade in the range of 20% of the trading in New York listed securities.”
Nasdaq proposes allowing stock issuers to opt out of National Market System
“One of the things that we are preparing, and we've wrote in our blueprint, is to create, give an issuer a choice. They should be allowed to choose which market structure they want to embrace, so they can choose to be in the national market system, or they coul…”
Friedman: NASDAQ Indexes Represent $150 Billion in Assets
“We're a significant indexer ourselves. So we provide indexes that now have a hundred and fifty billion dollars of assets tied to them. So about 60% of that AUM, assets under management, is tied to our benchmark indexes, like the Nasdaq 100, the biotech, the se…”
Friedman: Global Investable AUM Will Reach $100 Trillion
“There are 77 trillion dollars in assets under management today that are investable. It's probably going to grow to a hundred trillion in the next five to seven to 10 years.”
Friedman: Non-financial sectors use NASDAQ technology to trade ad futures and loyalty points
“We have clients now that use our market infrastructure technology to trade ad futures, to trade reinsurance credits, to trade loyalty points, so we can look at that marketplace.”
NASDAQ integrates blockchain into next-generation market infrastructure
“We've integrated the blockchain now into our next generation market infrastructure technology, so we can basically support any market from pre-trade risk management through to settlement on the blockchain in any market, so including non-financial markets.”
NASDAQ partners on Swedish mutual fund and South African proxy voting blockchain pilots
“I have a JV kind of a partnership with a bank in Sweden To prove out the blockchain for mutual fund formation and mutual fund management. And then we have actually a specific use case in South Africa to implement the blockchain for proxy voting in South Africa…”
Friedman: Machine intelligence will drive the most change in financial markets
“People ask me, what's the one technology that's going to drive the most change in the industry? And I have to say, I think machine intelligence.”
Friedman: Nasdaq data scientists are applying AI to compliance and surveillance
“We have a team of data scientists that are working on machine intelligence in two areas. One is in compliance and surveillance.”
Friedman: Nasdaq proprietary data pricing undercuts the SIP
“And we also make our best bid and offer and last sale available cheaper than the SIP.”
Jordan: OpenTable reservations dropped 15% the weekend Lehman Brothers collapsed
“Well, we started the process of going public at Open Table in fall, in late summer, 2008. And between the time when we had our bake off and awarded the business and the org meeting between Thursday and Monday Lehman went bankrupt. Merrill, our lead bank traded…”