The New American Dream: Democratising Investing

**Vlad Tenev** (0:00)
And really Robinhood, the idea was a very powerful idea, because what it stands for is ownership. A future owned by the few is a very fragile future. We want to make everyone an owner, and we believe that ownership, broad ownership is essential to a free, stable, and prosperous society. I think that message really resonated and made us at the time, certainly, the fastest growing brokerage. I think unlike 2020 and 2021, so you had retailers like GameStop, movie chains, the airlines, rental car companies, which is very different from today, where our customers are by and large investing in these disruptor companies that are at the frontiers of their industries, and I think you can debate the price to earnings and all of those indicators, but I don't think you can debate that they're changing the world. I think there will always be humans making trades. I mean, if every retail trader used the same AI agent, then I think the opportunity and the incremental value of using that AI agent would probably decrease.
Which I think then would open up an opportunity to be a human trader.

**Wilfred Frost** (1:32)
Welcome to The Master Investor Podcast with me, Wilfred Frost, where we celebrate and learn from the success of the greatest investors, business leaders, and politicians in the world, giving you, our listeners, an edge. The Master Investor Podcast is sponsored by Elsec, Interactive Brokers, The World Gold Council, and BNY Investments. Please do remember the views expressed in this podcast are for general information purposes only. Nothing in the podcast constitutes a financial promotion, investment advice, or a personal recommendation. More on that in the show notes.
My guest today is the co-founder, chairman, and CEO of Robinhood, the financial trading app that really popularized commission-free trading, amongst many other things. Robinhood was founded in 2013 It IPO-ed in July 2021 with a market cap of $32 billion.
Nearly a year later, during the 2022 market pullback, share price had fallen 80% of the market cap, down to $6 billion. Well today, the market cap is close to $100 billion, just over $90 billion. And the company has $380 billion of platform assets. They are back. They're bigger than ever. And I'm delighted to welcome their CEO, Vlad Tenev. Vlad, welcome to The Master Investor Podcast.

**Vlad Tenev** (2:54)
Love. I love that trip down memory lane.

**Wilfred Frost** (2:56)
Yeah. Which part of it did you enjoy more than the other part? The rise, rather than...

**Vlad Tenev** (3:00)
Probably right now. Right now is the most fun.

**Wilfred Frost** (3:04)
Let's jump into before the pullback, before the IPO, because I think it's a really interesting bit to get into, not so much on Robinhood's history, but the market history. So, 2022, you have such a great insight into what all traders are doing, but particularly retail traders are doing, obviously.
Did you see bubble behavior in what your clients were doing before we saw that market pullback that you guys, your own share price got caught up in?

**Vlad Tenev** (3:36)
Yeah, during COVID.
I personally did have a suspicion about, I wouldn't say bubble behavior, but if you remember, in 2020, the government, the US government started printing a lot of money. I mean, we were sending checks to people, to people's homes directly. And of course, at that point, if you looked at various instruments that would predict the rate of inflation, nobody thought inflation would increase. The estimates on the 10-year treasury were still roughly around 2%.
And, you know, I was thinking to myself, like, how could this be? Keep printing money, but inflation doesn't go up. The government hasn't created some kind of perpetual motion machine. They can't violate the law of physics here. So at some point, some assumption has to break. And so it wasn't a surprise to me personally, even though, I think, to the market writ large, when we got into late 2021, inflation ticked up and eventually got to the highest level in decades, in over 30 years. And I think then, once you start seeing the trajectory, you know, it going from zero to 9%, 10%, there's a policy response, increasing rates, tightening that I think was very inevitable and predictable.

**Wilfred Frost** (5:33)
And is it as simple as it being that inflation and the rate increases that we saw that followed, or is there an additional point that there were signs even before that of excess valuation in the marketplace? I think, you know, the meme stock aspect in particular, I guess, is what I'm getting at. Could we have all stepping back with hindsight and observed, yeah, these stocks aren't making money and they're doubling in short space of time?