ROBINHOOD'S VLAD TENEV INTERVIEW THE FUTURE Part 2

Yeah, I think margin rates were very big. I'll talk about, I mean, the useful for the customer is if you can borrow capital at rates south of 6%, which are very competitive rates, much lower than typical credit card APRs or even mortgage rates, then that opens up a lot of possibilities for you as a trader and an investor. You could take on leverage in your position, you can even take a portfolio line of credit so that you can withdraw money collateralized by your portfolio at the very low margin rate for spending off-platform. So for a customer, it's very useful, and the lower the rate, the more it makes sense to actually utilize these types of loans. Now for our business, frankly, we weren't that competitive on our margin product before we lowered these rates. And what we saw was since we started getting more larger balance customers over the past year after we rolled out retirement and started offering incentives to move portfolios over, big accounts have started to come in. And when we look at big accounts, the revenue and the contribution from those accounts to our business is driven more and more by margin. So if you think about it, as an account scales from hundreds of thousands to millions to tens of millions of dollars, their active trading activity doesn't scale linearly, but their margin usage tends to follow that trend. So an account with $10 million is borrowing typically a similar ratio of their portfolio as margin as a much smaller account. And so for the revenue as a revenue stream for our business, it scales a lot better for active traders. And so once we noticed that, we realized it's very important for us to actually compete and be industry-leading. Our market share has been really strong and growing for options and equities, but if you look at margin, up until we made this change, we weren't doing very well in market share. We were much, much smaller. Big incumbent competitors have tens of billions in margin books and we were kind of at sub-five billion. So that to us signaled that we've got a huge opportunity if we could close the market share gap and actually become the leader in margin market share, then that's huge for our business.

Yeah, and it's unclear to me why it's necessary to become slow. I think that, I mean, it's something that I try to fight as much as possible. I like to move fast while making sure customer funds and money are safe. But I actually don't see, if you do it right, there's not a trade-off there. I don't think. I think that if you build good systems that are safe and reliable and your foundation is good, you can move very, very fast. But I think it requires a continual investment in having the best technology and infrastructure. And one thing that I think distinguishes Robinhood is we're a technology company through and through. We hire the best Silicon Valley engineers, really engineers globally, but we're headquartered in Silicon Valley. And a lot of our competitors are focused on offshoring and outsourcing, sort of like how can we lower our costs to the greatest degree possible and get engineers in India or other places. Whereas our approach is, I don't mind paying more. I would rather my cost per engineer to be higher than my peers, but we expect a lot out of our great people. And I'd also prefer to have a relatively small number of amazing people working together than just a large portion of huge teams of mediocre people.

Yeah, Robinhood Legend is, we've had some of our best people on this for about a year. It was, I think, a year ago that we originally started designing this. And we rolled out a web product initially in 2018. So for a while, Robinhood was only available on mobile. It was iOS only first and then Android, but no web. And then I think when we launched our web product, we kind of miscalculated a little bit in the sense that the thesis behind the web product was you get all this extra real estate on web and that gives us an opportunity to provide education tools and discovery features for first-time investors. And again, we were focused on first-time investors, so this made a lot of sense to us at the time. But what we didn't realize was really the benefit of web and having all that extra screen real estate is you can fit powerful tools and you can trade and look at data on the same screen. And that was something that appeals very strongly to traders. So with Robinhood Legend, we actually sat down, we asked ourselves what are the capabilities that you can only do on web that traders really care about, and can we highlight those capabilities and surface them and bring them to the center and really make it a powerful tool that traders can only access on a desktop machine because of the real estate and the performance and the computational power that's available on that system.