The Exchanges

Q How does that lead to starting this company? Like, I, I understand that, but, like, that's real institutional trading, and this, this is, this is abstract, it's new, essentially, like, the way that you're doing it. So how do you deal with not knowing the certainties around trading events and, like, dealing with, did you have any doubts?

A Yeah, I mean, I think, like, I mean, it was like a lot of, you know, I think we were young and sort of naive, and so a lot of it was like, you know, you just have to like, we reasoned a lot by sort of, I mean, actually it's a good thing, but like we reasoned by first principles, like, you know, and, and, and we reasoned, so, so reasoned by first principles, and it was kind of like very much like a mathematical proof. It's like, hey, like, prove to me that this doesn't work, otherwise this probably should work, right? And like, then you think about it, and it's like, well, if institutions care about events, then definitely retail cares about events, like, you know, If the institutions don't care as much as we thought about like all these complicated financial instruments, then retail definitely cares way less. So the overall, I think that the amount of interest or caring about events is actually pretty large. Um, and, and so, because yeah, people don't think like, hey, I think this, this option should be trading at, you know, four delta instead of five delta. Like they think, I think Brexit is going to happen, right? Like that's how people think naturally. Um, So from first principles, it felt like there should be a lot of demand given how much demand there is for traditional assets for, uh, these types of markets. Um, the second issue was regulatory. Maybe this is where we were…

AI assessment note: “we reasoned by first principles, and it was kind of like very much like a mathematical proof.”

Q Yeah. I get that. Um, we like talked about it a little bit, but before we're closed up, I know we have like a couple, a couple of minutes left, but how does the business model actually work? Is it trading flows, fees, like regulatory costs? How does this work?

A Yeah. So I think, uh, one is we, uh, really it was predominantly like we take trading fees. Uh, so like, you know, if you, if you put, like, if you trade a hundred dollars, we take a fee on top of that. And that's how exchanges usually make money. I think since the election we're learning actually there, there, there's a bunch of revenue sources that we can scale and focus on over time. Like I think, you know, one is we get interest on the float. So now we have a shit ton of deposits, uh, after the election, especially like it's, and someone is like, oh shit, like we can make shit, like a bunch of revenue out of that as well. So that's that. I think, um, uh, uh, and then last is over time. I think we can, uh, well, Then like market making, like we can just make money basically market making. So we have a separate fund that trades on the exchange. They make money as well. Um, and then last, like we don't charge right now for data, but I think data is, is always a good part. We can charge. Like there's a lot of people that want to pay for it. Now, now we're giving it for free, but over time we can charge. Yeah, I think exchanges are very profitable. The, the hard part is like actually just getting it up and running and like making it work. That's very, very difficult. But if, if, if it works, if the flywheel is working, it makes a lot of money.

AI assessment note: “predominantly like we take trading fees... one is we get interest on the float”

Q Yeah. I get that. Um, we like talked about it a little bit, but before we're closed up, I know we have like a couple, a couple of minutes left, but how does the business model actually work? Is it trading flows, fees, like regulatory costs? How does this work?

A Yeah. So I think, uh, one is we, uh, really it was predominantly like we take trading fees. Uh, so like, you know, if you, if you put, like, if you trade a hundred dollars, we take a fee on top of that. And that's how exchanges usually make money. I think since the election we're learning actually there, there, there's a bunch of revenue sources that we can scale and focus on over time. Like I think, you know, one is we get interest on the float. So now we have a shit ton of deposits, uh, after the election, especially like it's, and someone is like, oh shit, like we can make shit, like a bunch of revenue out of that as well. So that's that. I think, um, uh, uh, and then last is over time. I think we can, uh, well, Then like market making, like we can just make money basically market making. So we have a separate fund that trades on the exchange. They make money as well. Um, and then last, like we don't charge right now for data, but I think data is, is always a good part. We can charge. Like there's a lot of people that want to pay for it. Now, now we're giving it for free, but over time we can charge. Yeah, I think exchanges are very profitable. The, the hard part is like actually just getting it up and running and like making it work. That's very, very difficult. But if, if, if it works, if the flywheel is working, it makes a lot of money.

AI assessment note: “predominantly like we take trading fees... one is we get interest on the float”

Q Okay. And, uh, was that always the case or how did that?

A I think it's more recent because we've expanded our offering more recently. Like we didn't have enough, we didn't have much on that category before. Uh, but it's things like you can basically like, you know, trade on who's going to be like top of the Spotify charts on a daily basis. Like who's going to top the billboards, um, uh, um, you know, like how much, like who's going to drop an album and when, and like how successful it's going to be and, and, um, how successful is the movie going to be like, what's the Rotten Tomatoes score, et cetera. And what we're seeing is like, actually, it's extremely sticky. Like people are doing it religiously, like on a weekly basis. And two, it's, it's growing. It's growing really fast. And what we're realizing is actually, and this is the thing that I love about what we're building is, um, like, okay, there's a subset of America that cares about stocks and sure, they want to do their day trading, they can do that. That's fine. And there's a lot of people that do sports and okay, sure. But there's so many other interests. Like there's a lot of people that care about so many other things, uh, like culture, Uh, that don't really have any product that appeals to them today. Like, like most of America doesn't care about options. Like that's the, that's a very weird esoteric, like, you know, why would anyone do that? Uh, but, but, um, but you know…

AI assessment note: “I think it's more recent because we've expanded our offering more recently.”

Q Okay. And, uh, was that always the case or how did that?

A I think it's more recent because we've expanded our offering more recently. Like we didn't have enough, we didn't have much on that category before. Uh, but it's things like you can basically like, you know, trade on who's going to be like top of the Spotify charts on a daily basis. Like who's going to top the billboards, um, uh, um, you know, like how much, like who's going to drop an album and when, and like how successful it's going to be and, and, um, how successful is the movie going to be like, what's the Rotten Tomatoes score, et cetera. And what we're seeing is like, actually, it's extremely sticky. Like people are doing it religiously, like on a weekly basis. And two, it's, it's growing. It's growing really fast. And what we're realizing is actually, and this is the thing that I love about what we're building is, um, like, okay, there's a subset of America that cares about stocks and sure, they want to do their day trading, they can do that. That's fine. And there's a lot of people that do sports and okay, sure. But there's so many other interests. Like there's a lot of people that care about so many other things, uh, like culture, Uh, that don't really have any product that appeals to them today. Like, like most of America doesn't care about options. Like that's the, that's a very weird esoteric, like, you know, why would anyone do that? Uh, but, but, um, but you know…

AI assessment note: “I think it's more recent because we've expanded our offering more recently.”

Q How does that lead to starting this company? Like, I, I understand that, but, like, that's real institutional trading, and this, this is, this is abstract, it's new, essentially, like, the way that you're doing it. So how do you deal with not knowing the certainties around trading events and, like, dealing with, did you have any doubts?

A Yeah, I mean, I think, like, I mean, it was like a lot of, you know, I think we were young and sort of naive, and so a lot of it was like, you know, you just have to like, we reasoned a lot by sort of, I mean, actually it's a good thing, but like we reasoned by first principles, like, you know, and, and, and we reasoned, so, so reasoned by first principles, and it was kind of like very much like a mathematical proof. It's like, hey, like, prove to me that this doesn't work, otherwise this probably should work, right? And like, then you think about it, and it's like, well, if institutions care about events, then definitely retail cares about events, like, you know, If the institutions don't care as much as we thought about like all these complicated financial instruments, then retail definitely cares way less. So the overall, I think that the amount of interest or caring about events is actually pretty large. Um, and, and so, because yeah, people don't think like, hey, I think this, this option should be trading at, you know, four delta instead of five delta. Like they think, I think Brexit is going to happen, right? Like that's how people think naturally. Um, So from first principles, it felt like there should be a lot of demand given how much demand there is for traditional assets for, uh, these types of markets. Um, the second issue was regulatory. Maybe this is where we were…

AI assessment note: “prove to me that this doesn't work, otherwise this probably should work”

Q Well, so what is the line between gambling and investing and hedging?

A Yeah, I think for me it's actually been very simple and it's interesting because, um, here's what I would say. The line has always been debated forever. It's like amazing. It's like incredible. Like, like when in, in the South Sea bubble, um, which was the first form of bubble that, that happened in the, um, uh, uh, I don't know if you remember, there's this thing called the Dutch East India Company. Yeah. Yeah. So like they, you know, they, the first version of kind of like a really retail stock market, people speculate like crazy, a bunch of people lost money, and then people were saying like, well, maybe this whole retail speculation thing is actually gambling. And, and now we're, you know, Fast forward, very few people think that the stock market is actually, like, a gambling thing. Like, some people do. Like, there's some, some fraction of the Senate that still does, but, but like, the point here is like, speculation and gambling, yes, I understand why they like, they can have very sort of strong ties, and it was the same thing. Green futures used to be thought gambling, and then they got legalized in 19 oh five. It was Supreme Court decisions, very similar to our election. The, The difference is actually about whether the underlying thing, like the thing that you're actually engaging in, has actually some sort of economic, social, cultural relevance outside of the act of …

AI assessment note: “The difference is actually about whether the underlying thing... has actually some sort of economic”

Q Like, on the go-to-market standpoint, like, how do you, can you market to them? Yeah.

A Uh, to Calci. And it's, it's, when we see it, like, there is this kind of habit sometimes, like, you know, someone makes a crazy prediction, or says something dumb on Twitter, and then people go and check the odds, and then they Place a trade, and like, you know, there's this loop that happens, and I think we need to keep working on basically strengthening that loop, but that, that, that behavior is happening, and so as long as we create that behavior, it's a bit like, you know, how like, you know, during sports games, all the like sports bettors, they're like, are used to now, like opening up FanDuel and DraftKings, and like they, you know, engage with the game in it by placing a bet, and that's a used, like that's a habit they have, they're used to it. I think we can do the same thing, but for all the news, like all the categories, everything, and I think that's, you know, that could be very, very large.

AI assessment note: “we need to keep working on basically strengthening that loop”

Q Like, on the go-to-market standpoint, like, how do you, can you market to them? Yeah.

A Uh, to Calci. And it's, it's, when we see it, like, there is this kind of habit sometimes, like, you know, someone makes a crazy prediction, or says something dumb on Twitter, and then people go and check the odds, and then they Place a trade, and like, you know, there's this loop that happens, and I think we need to keep working on basically strengthening that loop, but that, that, that behavior is happening, and so as long as we create that behavior, it's a bit like, you know, how like, you know, during sports games, all the like sports bettors, they're like, are used to now, like opening up FanDuel and DraftKings, and like they, you know, engage with the game in it by placing a bet, and that's a used, like that's a habit they have, they're used to it. I think we can do the same thing, but for all the news, like all the categories, everything, and I think that's, you know, that could be very, very large.

AI assessment note: “someone makes a crazy prediction, or says something dumb on Twitter, and then people go and check the odds”

Q Well, so what is the line between gambling and investing and hedging?

A Yeah, I think for me it's actually been very simple and it's interesting because, um, here's what I would say. The line has always been debated forever. It's like amazing. It's like incredible. Like, like when in, in the South Sea bubble, um, which was the first form of bubble that, that happened in the, um, uh, uh, I don't know if you remember, there's this thing called the Dutch East India Company. Yeah. Yeah. So like they, you know, they, the first version of kind of like a really retail stock market, people speculate like crazy, a bunch of people lost money, and then people were saying like, well, maybe this whole retail speculation thing is actually gambling. And, and now we're, you know, Fast forward, very few people think that the stock market is actually, like, a gambling thing. Like, some people do. Like, there's some, some fraction of the Senate that still does, but, but like, the point here is like, speculation and gambling, yes, I understand why they like, they can have very sort of strong ties, and it was the same thing. Green futures used to be thought gambling, and then they got legalized in 19 oh five. It was Supreme Court decisions, very similar to our election. The, The difference is actually about whether the underlying thing, like the thing that you're actually engaging in, has actually some sort of economic, social, cultural relevance outside of the act of …

AI assessment note: “The difference is actually about whether the underlying thing... has actually some sort of economic, social, cultural relevance”

Q Did you ever imagine when you started the company that the son of the sitting president would be a part of it?

A I mean, there's a lot of things I didn't imagine would happen when I started the company, you know, I think both good and bad, I would say like, you know, I, I didn't, I didn't imagine how hard it would be. Uh, I would say that's the headline. Like, you know, the thing that I severely underestimated is like, like, I always thought we were gonna be successful and do interesting and meaningful things, but like, I did not realize how hard it would be, and, and it was just much harder than I expected. Um, but I mean, you know, I, I grew up in, I mean, I was born in California, I grew up in Lebanon, like, you know, the, the anecdote, like, two, two specific things that tell, I mean, maybe summarize how I grew up, like, one, I, I grew up till like, you know, literally I came to the US, I had never even thought that Google was a company. Like, that's the level of exposure I had. Like, I, I just had this one shitty computer that we had at home that, like, barely worked, and, like, I, there was this box I would type things into, but, like, I didn't realize there's actually a company making money out of this. Uh, and so, one, like, very non-entrepreneurial, like, I just knew nothing. I just knew math. And two, I actually learned most of my English studying for the SATs. So, like, I was totally not exposed to anything. That's kind of how I started, right? And, and, you know, fast forward,…

AI assessment note: “there's a lot of things I didn't imagine would happen when I started”

Q Did you ever imagine when you started the company that the son of the sitting president would be a part of it?

A I mean, there's a lot of things I didn't imagine would happen when I started the company, you know, I think both good and bad, I would say like, you know, I, I didn't, I didn't imagine how hard it would be. Uh, I would say that's the headline. Like, you know, the thing that I severely underestimated is like, like, I always thought we were gonna be successful and do interesting and meaningful things, but like, I did not realize how hard it would be, and, and it was just much harder than I expected. Um, but I mean, you know, I, I grew up in, I mean, I was born in California, I grew up in Lebanon, like, you know, the, the anecdote, like, two, two specific things that tell, I mean, maybe summarize how I grew up, like, one, I, I grew up till like, you know, literally I came to the US, I had never even thought that Google was a company. Like, that's the level of exposure I had. Like, I, I just had this one shitty computer that we had at home that, like, barely worked, and, like, I, there was this box I would type things into, but, like, I didn't realize there's actually a company making money out of this. Uh, and so, one, like, very non-entrepreneurial, like, I just knew nothing. I just knew math. And two, I actually learned most of my English studying for the SATs. So, like, I was totally not exposed to anything. That's kind of how I started, right? And, and, you know, fast forward,…

AI assessment note: “there's a lot of things I didn't imagine would happen when I started the company”