The Exchanges

Q That's pretty good. Ok, so what are these 11 business lines? Can you explain that a little bit more?

A Yeah, I mean, you can slice it a couple of different ways. One way to look at it is, um, How much of our business is generating revenue from transactions? So, you know, we have transaction revenue, which you can think of as trading commissions, rebates from market makers, payment for order flow. Um, we have a card product, so we earn, uh, interchange from swipes, and those are all, you know, money we make from every transaction. Then there's also net interest revenue, which You can kind of think of as money that we make from being the custodian of assets and also lending against those assets. And so we have, uh, a spread that we take on the cash that we hold on our platform. That's probably the simplest one. So we offer a great yield on cash, uh, right now, I think, 3.5% with some added incentives on top. Which still gives us 75 basis points, uh, for, for ourselves. And, you know, the cash sweep program, we call it the high yield offering has gone from basically nothing in 2022 to tens of billions of dollars under custody. So that's grown into a big business. The margin book You know, which is a tool margin is a tool that active traders use to, uh, to, to use leverage on their portfolios. We weren't really that competitive on margin to be fair up until 2024. And then we really started competing on rates, competing on user experience. And now the margin book is, I mean, it's, it…

AI assessment note: “One way to look at it is, um, How much of our business is generating revenue”

Q So we're maybe like a week or so after the yes no event. Can you share more about what you released?

A We released a few things. One is a big upgrade to prediction markets. So one of the things is you can see prediction markets now on web. Whereas in the past, you had to be logged into the app, which I think one of the big use cases of prediction markets is not just as a trading product, but almost as a news media product, the source of information. So that makes it a lot easier for, for people to engage and interact with our prediction markets. The second thing is combos for sports and, uh, and the ability to trade individual player actions. So the sports experience in Robinhood is just getting much deeper and much more dynamic. You can put together lots of trades into one big one.

AI assessment note: “We released a few things. One is a big upgrade to prediction markets.”

Q And that's a closed end fund. So is that just structurally incorrect for this? What do you think about that? Cause it's the same thing for privately listed companies in a public domain.

A Yeah. So that's a closed end publicly listed fund. Um, and we actually, we we've announced something called Robinhood ventures, which is the general umbrella underlying our efforts to sort of like facilitate access to private companies. Tokenization is a mechanism to do that, but, uh, we, we don't, it's not yet legal in the US to tokenize private companies. So we've, we've done some early steps along that outside the US in, in EU where we're tokenizing public stocks. And we also did a token giveaway of SpaceX and open AI. So in the U S we have Robinhood ventures and we filed Robinhood ventures fund one, which is a closed end listed fund, uh, that'll invest in private companies. The difference is the fund is by its nature, more diversified. So you're not able to trade, uh, an individual company, but you're trading basically a basket of companies. And, and I think it's good, but it's, it's, um, Obviously it's a, it's a different product. This is more of like, if I want to passively have exposure to private companies as a broader asset class, closed debt fund is a great solution. And I think it's, it's probably the best we can get in the U S until tokenization becomes legal. Um, and then outside the U S we, we've already demonstrated the mechanism to, to trade individual companies.

AI assessment note: “closed debt fund is a great solution. And I think it's, it's probably the best”

Q Okay, so what is a vision and the mission of Harmonic?

A Yeah. So harmonic is building what we call mathematical super intelligence, and it's an artificial intelligence that can solve math problems better than any human mathematician. And so, uh, the company has been around for a couple of years. I'm chairman of the board and co-founder, but I'm not like day-to-day operating. Well, the, the north star was, can we actually solve really, really important math problems like the Riemann hypothesis or You know, Hodge conjecture. You know, there's like, This, this group of math problems that have been open for hundreds of years that are called the millennium prize problems, and they're considered very big, difficult, and, and actually valuable. So that was kind of the north star. And the reason we wanted to do that was if we could solve those problems, well, maybe we could everything downstream of math, like theoretical physics becomes unlocked. So then you can imagine Solving really hard physics problems. Like, I don't know if you're interested in this, but I was very interested as a physics major. How can we unify, uh, the strong, the weak, and the electromagnetic force with gravity? So it's sort of like, there's these four forces. Three of them, we kind of have a theory for how they originated from one Single force in the early part of the universe, and then we have a hypothesis that we can unify these three. Gravity somehow fits into t…

AI assessment note: “harmonic is building what we call mathematical super intelligence”

Q S O U R C E R Y. On Jack Altman's podcast, and hello Jack, he was so helpful with some of the questions. Um, you guys talked a lot about the generational differences between, um, attitudes and behaviors in brokerages and financial services. So how do you, one, can you just reshare that? And then two, How do they fit into each of these different products that you have?

A Yeah, I think one of the things we spend a lot of time talking about is, um, we have to do two things that are simultaneously somewhat challenging, which is make sure we grow with our customers. Like we don't, we don't want someone to just be, um, 24 years old opening a per Robinhood account and then graduating to Schwab or something like that, which means we have to actually add more products and features. As those customers grow and their lives get a little bit more complicated so we could serve them there. While at the same time, as we do that, make sure the product is still attractive to someone that's starting out for the first time. So we, we don't want to lose the next generation because, you know, a lot, a lot of our predecessors get into this trap of being a generational company. And I think that's certain death, right? Because eventually like. Nobody's figured out how to live forever. So eventually their kids are going to inherit the money and, you know, their kids are probably less tied to the legacy brokers than their parents and grandparents. So yeah, I think it's simultaneously growing with our customers, making sure we add the products and services while also making sure we pay attention to the next generation and, and continue to be relevant for them and add all the new things that. You know, get the eighteen-year-olds and the twenty-four-year-olds into the mark…

AI assessment note: “we don't want someone to just be, um, 24 years old opening a per Robinhood account and then graduating to Schwab”

Q I don't follow stocks as closely as I used to. I want to know from him, he covers this every day. He covers the top stocks, really fun ones too. And this last year, we had a little bit of resurgence of this Wall Street bets energy. And so what's the difference between retail traders today versus retail traders in COVID? And I ask you that too.

A Yeah, I mean, my, my take on that is, Um, COVID was a little bit idiosyncratic. So there were, there were a couple of waves of activity that I remember. Okay. One, one of the waves was, you know, companies that had filed bankruptcy. Like there was a little bit of a spike of activity around Hertz, for instance, uh, which, which hit the news cycle. And then, um, and actually I think in hindsight, That, that was like a negative criticism of Robinhood. Oh, we're, you know, facilitating, making it easier for these people to invest in bankrupt stocks. And, and I think we've done a lot to make it clear, this, this company has filed bankruptcy because we actually, my, my general philosophy is We want to make it easy for people to do what they want to do. Uh, of course, so long as it's compliant and everything, but we should also give them the information so that they're aware of what they're doing. Now, it turns out, I think in the Hertz case that Those traders made money through like a interesting contortion of, uh, of bankruptcy proceedings. Um, but again, that was like a, a little bit of a trend. Then there were the companies that got hit hard by COVID and maybe in the past the government could have bailed them out, but this time, uh, they didn't. And so I kind of think of it as a retail bailout, you know, rather than the companies getting the money as they had in the past, Retail i…

AI assessment note: “COVID was a little bit idiosyncratic. So there were, there were a couple of waves”