From Wealthsimple Media in Toronto. This is The Trade Show, a monthly show about how markets are moving. I'm Swapnil Perreault, VP of product at Wealthsimple.
And I'm Matthew Carris, senior director of product. Before we get started, I want to remind everyone that our producers are going to be live tweeting at The Trade Show on X. So please send your questions, complaints, and compliments, and we'll respond to you as the show goes on.
We have such an exciting show today. Lots to talk about in the market, and as it happens, Wealthsimple's also launching a predictions app. And so we have our co-founder and chief product officer, Brett Hunniford, to tell us more about what we're launching.
It's true. It's going to be good. So Matt, before we get started on the predictions, what's been going on?
Well, I mean, there's a lot. I mean, obviously, you know, today, like, the Iran war started and ended and then restarted again, setting markets for a wobbly. But, you know, I think even looking back, the big thing that's been on my mind is just, you know, the sell-America trade and how wrong it's turned out to be.
Yeah. I remember like talking to you about this like last year and I was like, Matt, tariffs are coming. I got to sell everything, and you saved my life.
Well, yeah. There, you know, that was true. And then again in January this year, you had all of the banks coming out and being like, it's over. Like the era of American stock dominance that happened over the last couple years is finally going to end. Positioning is too stretched and, you know, you really got to diversify. And six months into the year, none of that's happened.
Yeah. Gold was soaring. Silver was soaring. Remember when silver and gold were like the trade late last year?
Yeah, the debasement trade.
The debasement trade. No one wants the dollar anymore.
Yeah, I love this chart. I mean, this is probably one of the best illustrations of it. Random Walk put out on Twitter, showing like net capital flows into and out of US markets. And you can see it, you know, if you actually, it's kind of hard given how big the line move has been, but at the beginning of the year, there was a little bit of negativity, people pulling their money out, and everyone's like, 'This is the end.' But it's, you know, as I said, it's even hard to see in light of the massive surge.
Yeah. And I think we've seen our clients do basically the same thing. They've been buying American stocks. Historically they bought a little bit more CAD than US equities. And suddenly that whole thing has reversed and now they're just buying American stocks again.
Yeah. The last couple months, the first time actually in our history that our clients have consistently bought more US stocks than Canadian stocks. Pretty wild. I mean, the thing that's probably going on, and I think this is probably the best description of what may be driving this, is this tweet. Marc Andreessen of a16z, the US venture capitalist, put out this chart, which shows the US share of global market cap. And, you know, even before you get to his editorialization, it is pretty wild that US companies represent about 60% of the value of global public companies.
And he's out there telling us that barring any catastrophic events, they can get to 90%.
Yeah. I mean, this is the classic VC thing of being the hyper-optimist, but, you know, when US companies are growing in value this much more than global companies, which is, you know, how the US market share has just risen so much, it's hard to really not want to get in on that party. And that's the big thing I think you've seen from, you know, global investors and from our clients over the last couple months.
Yeah. And it kind of like, you kind of look at this chart from Marc Andreessen and you see that like the last time it was this high was post-World War II when every other country except the US was blown up.
Yeah. It's pretty easy to have 60% global market cap share when there are no other markets left. It's a lot harder in today's day and age when, you know, there aren't any major wars wiping everything out.
Exactly. It's crazy. So maybe we can also talk about our other favorite thing to talk about.
Bottlenecks. We love bottlenecks. And the bottleneck of the month is memory.
Was memory. Was memory. Yeah.
Well, so take us through it.
So I think about bottlenecks a lot in terms of like what our customers are thinking about. And if you go back to 2021, 2022, it was all about the Mag 7. You had to have Mag 7 in your portfolio. You saw customers buying more and more Mag 7 on a daily basis. And then ChatGPT comes out in 2023 and suddenly everyone's like, 'Well, how are we going to power ChatGPT? We need chips, semiconductors.'
And this is when Jensen really came on the scene.
Came on the scene with his jacket. He became a celebrity.
Yeah. Signing people everywhere, and he sold his jacket a couple days ago for $45,000.
Yeah. But it's, you know, but you can see here it's been a, you know, it's been the game for, I don't know, two years at this point, people going to semiconductors.
And so we go back. So semiconductors was bottleneck number one, and then we had semiconductors, and then suddenly everyone was like, well, where are we going to put these chips? We need data centers. And then you see CoreWeave going nuts, and people were like, oh man, we don't have enough data centers, we're going to need data centers, and that's really the bottleneck. And that was like, I think like a six-month bottleneck that we all thought about, and then it sort of sped up, and it goes like one after the other. And then you got the utilities, the power companies. I mean, some of these were so amazing, you know, you got like Constellation Energy and Vistra, these guys are total cowboys, like sitting on their earnings talking about like the details of like utility power regulations.
They have no idea that they're in the AI trade. Like the reason their stock's up 3x in a matter of four months is because people think they need power.
Yeah. And then relative to the latest ones, like these memory companies, 3x looks small.
Yeah. And then so we get through power, and then we're sitting there and we're like, okay, so now we have the chips, we have the data centers. We're going to take some golf courses and make them into these data centers. We have the power, but we don't have any computers. And remember when Dell went crazy, and we'll have Brett here later.
Oh, yeah. He's been stockpiling Mac minis.
Mac minis. He has so many Mac minis. And so you suddenly like there are no Mac minis. There's no computers there. There's nothing available. And so these stocks like see a 2x, 3x increase over the course of a few weeks.
Yeah. And so, you know, you pulled this chart which basically shows the stock price moves of some of the major memory players. And these are pretty like wild numbers, like, you know, halfway through the year we're seeing stocks that are up, you know, 2, 3, 7x just, you know, from Jan 1. Obviously the elephant in the room, the big question is that last data point. You know, that's not a, if you got into this trade 3 months ago, pretty nice. If you got into this trade a month ago, not so nice.
Yeah. And you got to start thinking about like, is there a new bottleneck coming? I was on a vacation the other day and someone told me, if you're not in memory, what are you doing? And yeah, that's when it gets pretty scary.
When your friends get into the trade, that's when it gets pretty scary.
And suddenly like you see this drop and you got to start to wonder if this is the top in memory and we're going to move on to a new bottleneck.
I mean, that though is the real question. People have been calling the top in semis for, you know, two and a half years at this point, and you'd be pretty sad to sit out. Is it another one of those, or is it actually a top and, you know, people are going to move on to something else?
We'll talk about it again in our next show if there's a new bottleneck in July.
We should make this a recurring segment. Actually, it's a good idea.
Cool. All right. So let's welcome Brett. Brett Hunniford is Wealthsimple's co-founder and chief product officer, and he's going to come on to the show to talk about Wealthsimple Predict.
Thanks. It's a good day in our office.
It's fun to be up here with you guys.
So we've been working on this thing for six months. Well, Simple Predict. Let's walk through it. Let's tell everyone what we've built.
Yeah. So, Wealthsimple Predict, a standalone app built on top of Wealthsimple and Kalshi's infrastructure. It allows our clients to trade markets in economic indicators, financial indicators, and weather. Things like, is the Fed going to raise rates in July? Is July going to be the hottest month ever in recorded history? How many GPUs is Nvidia going to ship this quarter? You know, you log in with your Wealthsimple credentials, you find the market you want to trade, you pay the market's estimated probability as the current price per contract, and then you can either wait for the market to resolve or you can close out the position anytime. The other thing that we're going to do is we're going to show markets that we don't yet let customers trade. So things like politics, culture. We think prediction markets are an amazing way to actually follow the news. And so we think the view experience is going to be just as important as the trading experience.
I mean, I can attest, whenever I hear something in the news, my first instinct is to go and see, is there a market on that thing? Can I track the probability? And, you know, you guys have been on this for a while. You really have been pushing us to build and launch this product. But, you know, I was wondering, is it like just us that's interested in this, or is there, you know, a lot of other people? And so I pulled this chart of the growth in different markets historically to try to put the rise in prediction markets in perspective. And, you know, while there have been some financial markets that have grown really fast over the years, like, you know, futures and crypto, prediction markets so far has been the fastest growing one yet.
Yeah. I mean, it's absolutely insane growth. It's really clear to me that investors really want this. And so that's what's got me interested. I mean, I think, you know, as an entrepreneur, when you see things growing this fast, more often than not they really eventually turn into something really meaningful and powerful, even if they feel like a toy at the beginning. So, you know, think like personal computers in the 80s, or the internet in the 90s, or Facebook in the 2000s. Even stock trading when it first got big.
I felt like, I mean, I've always thought that like when computers came out, they were just a Tetris machine. Like you got a computer so you could play Tetris at home, and today like the world runs on computers.
Exactly. Yeah. So, I mean, you know, I think it remains to be seen if prediction markets will be a toy that people do for fun, or if it's going to turn into something ultimately very beneficial for human society. And our bet is on the latter.
Yeah. And I think about like, how do you go from that toy to something much bigger? And it's about access, right? It's like, how do you give people more access, more access to like the underlying product, and then they can start using it for different things. And I think that's basically what we're hoping to do.
Yeah. Yeah. So, I mean, up until now, Canadians have been either excluded from the market entirely, or they've had to log into their VPN and connect to Polymarket to trade, and we're changing that. So we were just recently approved by CIRO to offer prediction markets to our clients. You know, we're excited about offering prediction markets and really all of our financial products in a safe, regulated, compliant way. And we think that's the way to expand access.
Yeah, to all Canadians. All right. So, Brett, I know this because we sit next to each other, but back in the Stone Ages, you were into predictions before everyone else knew about predictions. Tell us more about that.
Yeah. Yeah. Well, believe it or not, I got interested in prediction markets in the early 2000s when I was an undergrad and then a graduate student in economics. And, you know, the thing that I was super interested in was using market-based incentives to predict the probabilities of uncertain future events. And this group of economists from the University of Iowa got together and started the Iowa Electronic Markets, most importantly to track US elections. So I remember following the Democratic primaries in 2004 really closely, and then, you know, those markets, for instance, were much better at predicting Obama's rise in 2008 over Hillary Clinton, like much faster than polling did. And so, you know, I think that they're like this amazing truth-telling device that is only becoming more important. You know, we live in this world of AI slop where, you know, everyone's social media feed is telling them something different. We need some indication of, you know, probabilities of future events. And I think prediction markets are an amazing tool.
Yeah. And if you think about it, like 2000's election, 2024's election, prediction markets actually predicted it and polling got it wrong on both situations. And so it's been an incredible run for predictions in terms of like helping the world understand what's going to happen. Maybe we can take a step back into the product that we're launching. Could you tell us about like the difficulties and what debates you had internally in terms of launching the product?
Yeah. I mean, there were a few. You know, one of the big debates we had internally was whether we should launch predictions as a standalone app versus integrated into the main Wealthsimple app. We decided to launch it standalone. You know, I think some of the trade-offs for us are, in general, we like to make our products be as fast and frictionless as possible, and, you know, making clients download another app does introduce some friction in the process. But, you know, not everyone wants to trade predictions, not everyone wants to see them. The viewing experience we think is sufficiently different to merit a standalone app. So that's the decision that we made. You know, I do want to give a major shout-out to our team, our design team at Wealthsimple who are involved, of course, in the project.
Don't give them too much credit.
Not too much. Not too much.
You know, I think we've shipped a really beautiful app, and I'm really excited to get it into the hands of our users.
Yeah, I think it's going to be incredible. There's so much demand globally, and I'm so excited to bring it to all of our users and to all of Canada. Well, thank you so much for joining us. We're now going to welcome the CEO of Kalshi.
Good.
Tarek, thank you so much for joining us. Our next guest is someone I've known for six months. He was the first person I reached out to when launching predictions at Wealthsimple. He was born in California, grew up in Lebanon, moved back to America, and studied math and computer science at MIT. He went on to be a trader at Goldman Sachs and Citadel before leaving to co-found a startup named Kalshi. A decade later, Kalshi is the largest prediction market on Earth. It averages $1.1 billion of trading volume in June and has changed the way we think about pricing everything. Tarek Mansour, welcome to The Trade Show.
Thanks so much for having me. I'm excited to do this.
So we were doing this a little differently. You guys, we had an issue yesterday where we had to reschedule it. Tell us more about the day-to-day life of Kalshi. What happens there?
Yeah, I mean, you know, we're a pretty small team. So, you know, I was looking at some of the, you know, there's like all these rankings that people like to do, but, you know, we have one of the, I think we have one of the leanest, if not the leanest team on the planet today. I mean, we're still a little bit over 150 people. And, you know, obviously, like, there's quite a bit of scale in the business now. So there's sort of like a single point of failure in every single person in the team, and including Luann and I, the founders. So we're always all hands on deck. You know, it's a little bit more chaotic than what you'd expect at other types of companies, but, you know, it works for us.
That 1 billion number that Swapnil cited in the intro, the first time he told me that, I thought it must have been wrong because it was just so much bigger than the last time we spoke, even a couple months ago. You know, what's it been like hitting such new highs every day, and, you know, volume, markets, downloads?
Yeah, remind me. So the billion number was in reference to...
June. I think Jackie told me that you guys had done 1.1 billion in daily volume in June.
Yeah, daily. Yeah, that's right, that's right. We did, yeah, a little bit over 30 billion, which is crazy. You know, when we, it's like every one of these milestones, I mean, it's really the exponential, basically. Like, you know, you start hitting milestones and then you're like, oh, you know, we're doing a million dollars of daily volume, that was like a huge deal. Then it's $10 million, you know, and then all of a sudden you're like, oh, we're doing $100 million of weekly volume, that's incredible. And then it's daily, and then a billion dollars is weekly, then it's daily. And so I think what's, I think people generally underestimate is just like the power of an exponential. And it's very, the problem with an exponential is that when it's small, it's sort of negligible. It's just not moving. Nothing's happening. But then all of a sudden the numbers start getting big, and then, you know, you see this sort of like extremely acute level of growth. And so it's amazing. I mean, I think the company is essentially reinventing itself every two to three weeks given the level of growth we're seeing. Like the scale at which we're operating is changing every two to three weeks, and that, you know, is a challenge because as a CEO of the company, you essentially have to change the core of what your role is on a monthly basis. It's like so dynamic and so fluctuating, and that's, I think that's non-trivial. That's kind of difficult. But other than that, I mean, you know, growth, as you know, Matt, is awesome. Growth is always great. It's always a lot of fun.
So given that you're doing all this, what keeps you up at night?
You know, I think that also always changes, right? I mean, maybe the analogy I like to think about. So I think any company, you can think of a company as like being on a boat. Like you're a captain and you have your crew and you're on this sort of boat and you're sailing these sort of treacherous waters. And at any point in time, and this is, you know, if you're a seed-stage company all the way to a Fortune 500, like there's like a hole in the boat, there's some problem that is, you know, difficult, that is, you know, potentially or probably existential. And, you know, and I think there's two types of companies. There's companies where the founder and the CEO is essentially staring at that hole all day, all night until it gets resolved, and companies where the founder is kind of busy steering the wheel and has like a bunch of sort of, you know, execs and managers and other things around, and who end up also delegating to people who end up delegating to some, you know, some random person in the team that's supposed to be fixing that hole. And really what happens is the hole ends up being covered, you know, they put like a, you know, I don't know, like a sheet over it, like they just cover it, they forget that the hole is there, and then, you know, a decade later, you know, the hole ends up swallowing the boat. And so I think consistently our frame is like, what is the hole in the company, and that's the one that I should be looking at all the time and fixing. And, you know, to your question, I mean, you know, right now I think that we have to get the public, like we have to educate the public, the general public on what prediction markets are and how they work. I think we, so we hit mainstream earlier this year, and I think, you know, with technologies you sort of get like, it's like exciting, exciting, everyone is excited about it, it's new, it's novel, it's interesting, and then you hit mainstream, and then people don't perceive it anymore as like a new underdog type thing, and then people get skeptical. It's happening with AI, you know, in America AI is polling at 90% disfavorable, it's like, it's like incredible, it's crazy. It happened with crypto, it's happening with prediction markets, and I think, I think my one of the core responsibilities we have right now is educating people how they work, why they're a force for good, why they're significantly better than any other financial market at doing the specific thing of, you know, expressing a view on something, and then what are the risks and how do you mitigate them, and why the risks themselves are not sort of dispositive. Like any financial technology, it comes with a set of risks, we have to figure out how to solve them or reduce them so that the technology can thrive, and I think that's the key role right now.
Why? Just one more follow-up on that. Like, you know, something that's been really shocking to me is like just how sort of into the popular imagination like prediction markets have gotten. Like, you know, people love them, people hate them, like nobody doesn't have a view, like everyone has a view on it. You know, any thought on why that might be? Like, why have prediction markets become such a big talking point?
I mean, there's two things. One, it's mainstream, right? Like very few technologies or whatever you want to call it go mainstream. That's like a rare thing, right? And in the last decade, I mean, there is like Uber, Airbnb, and both of which were very sort of like, you know, like conflictual, like highly sort of talked about companies, especially Uber. Social media is in that bucket, obviously, you know, some people love, some people hate, and then AI. And prediction markets fall under that bucket. So there is that sort of inherent, you know, it's mainstream, so society is going to want to grapple with it, and like with all things, there's going to be debates, and some people will, you know, like to be contrarian, and, you know, all of that. I think the second thing is there's something unique about prediction markets is that they're very amenable to being part of the news in a way that, like, right, like Uber, it's not like every time you want to cover something you think about Uber, right? You have to think about the company itself to think about Uber. Whereas Kalshi, like every day there's a set of events, like, you know, the Senate race in Maine right now in America, or what's happening with the Strait of Hormuz, or what's happening with AI, and how is it evolving, and how fast are jobs going to, numbers going to go up or down. Those questions are becoming, and it's partially by design, it's the goal, right, is for whenever people are thinking about the future or thinking about questions or debating them or trying to cover them, they should think about prediction markets, and so they're always thinking about prediction markets.
Okay, that's actually like an incredible point that I wanted to actually go deeper on. I used to work at Tumblr, and back in the day when Tumblr was like really cool, everyone would say, 'Oh, it's the front page of the internet.' Then Reddit became the front page of the internet.
Do you think that Kalshi is now the front page of the internet? Like, do you think people think of Kalshi as like the place to go when they want an answer to something on the internet?
