Robinhood CEO: Making Everyone An Owner

Tenev explains how Robinhood succeeded by executing three challenging strategies simultaneously: offering zero commissions when competitors charged $7-10 (maintaining this advantage for 3-4 years), betting on mobile as the primary financial device when it seemed contrarian, and creating a brand that resonated with post-financial crisis disillusionment. The name 'Robinhood' capitalized on Occupy Wall Street sentiment and offered a practical solution to make finance work for more people.

• •Zero commissions gave Robinhood 3-4 years of competitive advantage before incumbents replicated it
• •Mobile-first strategy was contrarian—people initially feared putting finances on phones like they once feared e-commerce
• •Brand timing was critical: launched during post-2008 financial crisis disillusionment when finance majors were losing jobs
• •The 'Robinhood' name itself became powerful marketing during Occupy Wall Street era
• •Technology infrastructure to support zero commissions wasn't trivial—required significant innovation

Before Robinhood, Tenev and co-founder Baiju Bhatt built high-frequency trading software for hedge funds and banks. They observed institutional traders moving billions daily while paying almost nothing, while retail investors paid $7-10 per trade. The insight: apply the same technological disruption that transformed institutional trading to retail. Moving from New York to San Francisco coincided with mobile's rise (Uber, Instagram), leading them to combine free trading with mobile-first design.

• •Previous company provided HFT software to institutions trading billions daily at near-zero cost
• •High-frequency trading disrupted institutional markets by replacing expensive operations with code
• •Couldn't hire engineers in New York (all working for HFT firms), so opened West Coast office at Stanford
• •San Francisco timing was perfect: Uber Black Car and Instagram just launched, mobile was emerging
• •Combined institutional trading efficiency insights with consumer mobile opportunity

On January 28, 2021, Robinhood was #1 in the App Store (ahead of Instagram and TikTok) when they had to restrict GameStop trading due to clearinghouse collateral requirements—not solvency issues. The antiquated T+2 settlement system (now T+1, should be T+0) required massive collateral as stock volatility spiked. While they averted liquidity risk, the brand damage was severe. A 'simple lie' (Robinhood colluding with hedge funds) proved more powerful than the 'complicated truth' about Dodd-Frank and clearing mechanics.

• •Problem was collateral requirements from clearinghouses, not solvency—success created the issue
• •Settlement still took 2 days (now 1 day) despite instant phone trading—absurd legacy system
• •All major brokerages paused trading, but Robinhood took the blame due to brand positioning
• •Brand recovery took 2+ years; NPS only recently exceeded pre-GameStop levels
• •Key lesson: 'A simple lie is much more powerful than a complicated truth'—should have found someone else to blame earlier

Tenev advocates for tokenizing stocks to eliminate antiquated clearing systems. Current settlement (T+1, previously T+5 in the 1970s) creates unnecessary collateral requirements. Tokenization enables instant settlement, 24/7 trading through holidays, self-custody (immunity to broker outages), and efficient securities lending through liquidity pools instead of opaque Bloomberg Messenger trades. GameStop crisis accelerated push for T+1, but T+0 should be the goal.

• •Settlement went from T+5 (1970s) to T+3 to T+2 to T+1—absurdly slow progress for digital age
• •Tokenization solves the specific collateral problem that caused GameStop restrictions
• •Enables 24/7 trading, self-custody, and easy broker switching without asset transfer delays
• •Securities lending market is opaque and inefficient—still happens over Bloomberg Messenger
• •Tokenized stocks could use liquidity pools (like Aave) for transparent, efficient lending

Robinhood is tokenizing private company shares in the EU and launching Robinhood Ventures (closed-end fund) in the US to give retail investors pre-IPO access. Initially, companies resisted retail IPO allocations (1-2%), but after seeing stocks with retail followings (Palantir, Robinhood) trade at higher multiples, demand shifted. Recent IPOs (Bullish, Gemini) now allocate 20% to retail. Tenev argues AI companies especially need retail ownership to avoid public backlash—people fear job loss but would support companies they own.

• •Robinhood's own IPO had 20-25% retail allocation—largest ever for a company that size
• •Initially had to 'strong-arm' companies for 1-2% retail allocations; now companies request 20%+
• •Stocks with retail followings (Palantir) trade at premium multiples—CEOs now want retail strategies
• •AI companies face fastest adoption but worst public perception—ownership could solve this
• •Massachusetts banned residents from Apple's IPO (1981) as 'too risky'—now worth $10,000+ more, highlighting access inequality

Since 1971 (decoupling from gold standard), wages stagnated while asset prices inflated massively. Bay Area homes are actually cheaper today when priced in tech stocks versus 2005. People paid in cash get left behind; asset owners benefit from innovation (iPhone, etc.). Robinhood's mission is making everyone an owner through products like the proposed $1,000 'Invest America' accounts for newborns. Social Security earns nothing (quasi-Ponzi scheme) versus S&P 500 compounding over 50 years.

• •Post-1971: wages flat, asset prices up—great if you own assets, devastating if paid only in cash
• •Bay Area homes cheaper in 2025 than 2005 when priced in basket of tech stocks (not nominal dollars)
• •Asset owners participate in 'ownership economy' and benefit from innovation; cash earners don't
• •Trump's proposed $1,000 investment accounts for newborns could compound dramatically over lifetime
• •Making people owners of capitalism prevents them from fighting against it—skin in the game matters

Robinhood runs 11 businesses doing $100M+ each, focusing on depth with active traders (the 'engine room') while expanding breadth to become customers' primary financial account. They prioritize features that immediately impact revenue (active trading improvements show up in bottom line within days) while systematically removing reasons to withdraw money. Despite rapid innovation, basic features like IRA accounts only launched in 2022; trust and custodial accounts still missing. Goal: enable family offices to run on Robinhood with tens of billions.

• •Active traders are the 'engine room'—half-percent improvement immediately visible in revenue
• •Strategy: make deposits easy, remove all withdrawal reasons, expand account types
• •Didn't have IRA accounts until 2022, still missing trust/custodial accounts for high-net-worth
• •Now regularly talking to customers moving hundreds of millions (vs. tens of millions previously)
• •Must balance 'gold bricks nearby' (product gaps) with unique offerings (24/7 trading, prediction markets, tokenization)

Prediction markets became Robinhood's fastest-growing business by letting traders express precise views (Trump election odds) instead of indirect proxies (buying crypto/equities). Tenev argues they're 'truth machines' that consolidate information better than polls or influencers—people with real skin in the game. Speculation isn't gambling; it's critical to every functioning market. DARPA pioneered prediction markets in 2002 for foreign election forecasting. Regulation is essential to contain negative externalities versus offshore alternatives.

• •Prediction markets let traders express exact views vs. imperfect proxies (Tesla deliveries → stock price)
• •Fastest-growing Robinhood business—solves inefficiency where stocks move opposite to fundamentals
• •Function as 'truth machines' in age of information overload—real money creates accurate forecasts
• •DARPA created prediction markets in 2002 as more efficient than CIA for foreign election intelligence
• •Speculation is essential market infrastructure, not gambling—can't have working markets without it