The Exchanges

Q change life for more than yours, right? Where people like in the zero interest rate environment are gonna be more active trading equities. And now like you might be more interested in putting your money in a money market that will give you that five You know, six percent. So what have you seen there and how has that changed like your mentality for the way that you do business?

A Yeah, I mean, what we've seen is, um, a lot of the casual first-time investors have sort of retreated from the market, and they're interested in, in other things, uh, like earning yield on their cash. And if you think about it again from the economics perspective, it's a economically rational change, because if you're earning five plus percent Risk free rate on your cash, and you look historically at what the market's been able to do, um, You know, getting that five percent risk free is a compelling value proposition. In a zero rate environment, you know, you, you, you basically get nothing risk free. And so you've seen kind of these macro flows away from, from equities into, you know, things like money market funds, high yield accounts, and, you know, more, more and more of sort of like the, the excess cash is going into these vehicles. Um, in terms of active trading, I'd say active traders tend to be more resilient because they engage in more sophisticated strategies. You know, they can, they have strategies that, um, they deploy to take advantage of falling markets or, or markets that tend to be like up and down. And so we have been continuing our focus on active traders. And in fact, um, We're much closer to active traders than we were in the early Robin Hood days. Active traders have always used our products, but, you know, before, before recent years, we kind of built for…

AI assessment note: “we have been continuing our focus on active traders.”

Q I mean, the money comes into Robinhood. It goes right into stocks. So you're passing it along into the equity and you match. Like, I mean, I think I put, you know, 20 dollars in yesterday and free money from Robinhood and like a free 20 cents came in from Robinhood. Um, where are you getting that money? Like, how is that? How is that even feasible for your business?

A I mean, the way we think about it is retirement relationships particularly are long-term relationships. Those accounts, um, Like we, we believe that if we serve those customers well over time, they're going to continue to contribute it, contribute to, to their accounts, they'll grow. And also they'll do more things with us, you know, and there is this thing where the more assets you have with one platform, the more services you use, the more likely you are for, uh, the next service that we offer for, for you to be a customer there. And, you know, we have been seeing it, the more, Customers use our services, the more assets they put on Robinhood, generally the, the happier they become, and they become product evangelists, and we think all of these things are going to coalesce into these being profitable relationships over the long run.

AI assessment note: “these things are going to coalesce into these being profitable relationships over the long run”

Q that. You made some comments about that in the past. I'm curious, like, that, that's been another place where people look when they look at Robinhood's business and they wonder what's up there, like, should Robinhood be, you know, making that much money on payment for order flow? So I'm curious, like, what your perspective is on that front, and if you have any plans to shift away from that.

A Yeah, I mean, my, my perspective on that is, I mean, I've, I remember a time where, you know, brokers were charging 10 dollars in, in trade commissions. It wasn't that long ago, right? If, if you look back, um, Let's say in the year of 2018 or 2019, and you look through, um, a publicly traded brokerage, retail brokerages, financials, um, for example, old TD Ameritrade, uh, financials, you can get a pretty good idea of what the revenue model and how the business of retail trading looks like. And if, if I remember correctly, these are rough numbers, but directional. You know, they, they would say they made, on average, 11 dollars of revenue per trade. Of that 11 dollars, 10 dollars was commissions, and around one dollar was, you know, order routing revenues or payment for order flow. And, of course, what happened when they had to replicate our business model is that 10 dollars went away, and they were generating some money from payment for order flow, and, you know, On the first day when they announced moving from removing the commissions, you see the, the stocks of these active trading platforms dropped by considerable amounts. I think TD Ameritrade was over 30% in one day. So I think you, you look at the markets don't lie. Um, what happened was the elimination of commissions just led to a lot more value coming back into the hands Of consumers, and it affected the financials of …

AI assessment note: “remind people that we're talking about that little bit that was like the remaining 10%”

Q was to challenge the existing financial system and B you're just, you could just buy a Bitcoin with Coinbase. Like why do you need an ETF there? Something that Robinhood gives service to. So yeah. So, so talk a little bit more about that. Oh yeah. You could also buy Bitcoin. I actually did buy some Bitcoin on Robinhood last night. So, um, why, why the need for an ETF?

A Yeah. And, and again, with our crypto offering, it's, um, it's also those same two things, the user experience, making sure that's world-class and the economics. And it, since you mentioned you transacted with Robinhood crypto, You can probably appreciate the effort and care we've put into, uh, not just the experience, but like making it clear to you what the economics of that transaction are and just how great of a deal you're getting on Robinhood relative to some of the other places. Um, Bitcoin ETF, um, I think I, I see both sides of that argument, and I have to be careful not to talk about individual securities on the platform, but what I'll tell you is the argument behind these ETFs is there's a lot of participants in the legacy financial system that maybe don't have the ability to offer, um, spot crypto products directly. They don't want to deal with, like, the Cybersecurity channel challenges of custodying these things appropriately, holding on to the private keys, doing all of that work, which is new work,

AI assessment note: “the argument behind these ETFs is there's a lot of participants in the legacy financial”

Q Right. All right. Let's end with this. 10 years, right at Robinhood. What is, what has surprised you and what do you think the next 10 will look like?

A Um, I think what surprised me is, uh, how adaptable, uh, even a large organization can be. You know, I think, um, I've, I've had the privilege of, um, You know, starting the company when we were a handful of people. I was a software engineer just writing a lot of code and seeing it evolve through the various stages and, you know, just particularly in the past couple of years, seeing how the company has evolved into one that predominantly served novice slash active traders into one that, um, You know, serves people in a wide spectrum of things in retirement and wealth building and earning more yield on their, on their uninvested cash. Um, and kind of the. Uh, the way that small groups of highly motivated people who are mission oriented, um, can, can actually have a huge impact. And I think I'm just continually amazed at what our people can do and, and how much resilience and kind of passion for the customer we have. And it, it makes me, um, And I'm just very proud to be, to be working here. And, uh, it's funny, like, um, I still feel like we're a small startup cause I've kind of have, have seen it, but looking back at the 10 years number, and it's really quite shocking. Uh, it's a long time at this and how much we've learned.

AI assessment note: “I think what surprised me is, uh, how adaptable, uh, even a large organization can be.”

Q comes from, and it just kind of goes to, like, the core of the way that Robinhood initially built momentum was with active traders, right? Like, it's popular to say that day traders tend to, like, 95% of day traders tend to lose money, where if you, like, park your money in passive ETFs, you're going to do well over time. I'm kind of curious what you think about that.

A Well, I think there's, there's two things. First of all, if you think about, uh, a Robinhood product and this goes to our active trading products, but, but really it's, uh, consistent with Robinhood gold and our high yield product and retirement as well. There's really two things that I think distinguish us and make the products interesting in the marketplace. One is the cost. Like, Any Robinhood product, we look into how we can use technology and good engineering to dramatically increase the automation and put more money back in customers' pockets. And of course that originated with zero commission trading with no account minimums. It used to cost seven to 10 dollars every time you place a transaction. And so we, we, we were able to do that, but that's not enough for a Robinhood product. The other thing is The user experience. It has to be extremely simple and easy to use, and you know, we became the first financial services company to win design awards for our work. You don't really think about good user-centered design and experience when you think about a financial product, and I think Robinhood really changed that. And so when you think about our trading products, Really the idea initially was by, by introducing these two things, low cost and exceptional, uh, quality and craftsmanship and design, we would actually make it more approachable to people that had historically b…

AI assessment note: “There's really two things that I think distinguish us and make the products interesting”