Building Robinhood, Surviving GameStop & A $500 Million Phone Call | Vlad Tenev
- Robinhood’s GameStop crisis exposed how explosive growth could outrun a broker’s available capital. More trading required more corporate cash behind the activity; Tenev recalls requirements shifting from about $3 billion to $1.8 billion, with another file showing $700 million. Restricting GME to “position closure only” meant customers could sell but could not buy, turning a funding problem into a customer revolt.
- The $500 million phone call rested on preparation and trust established before the emergency. In March 2020, Mickey Malka agreed to prepare terms that could deliver money the same day if trading volumes overwhelmed Robinhood’s capital. In January 2021, his immediate “I have it” commitment gave subsequent investors confidence; Tenev says demand on the initial terms probably reached $10 billion.
- Tenev’s attention was on the previous crisis while a different risk was building. After Robinhood’s March 2020 outage, the engineer-founder concentrated on keeping systems running: that was “the devil I knew.” Meanwhile, crypto revenue accelerated from almost nothing to what he thinks was roughly $500 million–$600 million in Q2 2021, alongside the meme-stock surge.
- Tenev’s concern for financial access comes from watching property rights and savings fail his family. He recalls confiscated land and housing, Bulgarian inflation in 1997—which Senra cites as 1,700% over one year—and a grandfather storing wealth in copper cookware. His parents’ move to America created opportunity, but their warnings about money and fragile immigration status made financial insecurity immediate.
- A small stock portfolio taught Tenev that investing meant owning something. His father promised investment money equal to his SAT score if he exceeded 1300; at 12, he scored 1370. Buying 3Com, receiving Palm shares through its spin-off, and opening shareholder materials produced the realization: “I own this company.”
- Profitability alone could not justify spending his life on a business. Tenev and Baiju built a profitable trading-software company with about $2 million in revenue and a path toward $10 million, but helping wealthy firms trade faster failed their long-term purpose test. Robinhood offered the combination he had wanted from mathematics: creating something new that could affect millions of people.
1. Malka earned the board seat Tenev initially resisted
Tenev says Robinhood’s seed round, which had a $10 million limit, was initially rejected. Ribbit later invested in the Series A alongside Index. During an early negotiation over investor protections, Malka predicted that Tenev would eventually want him more involved and on the board. Tenev initially assumed every investor probably said something similar.
What changed was repeated evidence of alignment. Malka challenges him directly and can present a hard exterior, but Tenev says, “I never worry about whether he has my best interests or the company’s interests at heart.” Trust accumulated through consequential decisions rather than an immediately agreeable personality.
Malka left his observer role when Robinhood went public. Six months later, Tenev invited him back as a full director because he valued his advice. The distinction matters to Tenev: private-company seats can belong to an investing firm, whereas public-company governance gave him greater freedom to select the people he wanted.
2. The pandemic revealed a capital constraint behind accelerating demand
On March 2, 2020, Robinhood suffered an all-day outage during a sharp market rebound. The company had just marked its office move with a poorly attended hackathon; a week later, employees went home for lockdown. For Tenev, infrastructure failure was personal: “I feel like I’m failing at my main skill.”
While peers such as Airbnb and DoorDash prepared for difficult conditions, Robinhood’s users, revenue and trading volumes surged. COVID initially looked like a risk to manage, then became “a great accelerator for the business.” Tenev nevertheless questioned durability: “Honestly, I’m not sure how sustainable it is,” with volume tripling from the previous month.
The mechanism behind the financing need was that, as a regulated broker, increased activity required Robinhood to set aside more corporate cash. Tenev asked Malka what would happen if volume suddenly increased tenfold and Robinhood needed hundreds of millions of dollars. Malka proposed preparing terms in advance so documents could be signed and money delivered the same day.
That contingency was never drawn upon in 2020. Robinhood subsequently raised money from Sequoia and D1, and conditions stabilized. Tenev emphasizes that Malka offered this arrangement while venture capitalists were largely waiting to understand COVID; the broader funding environment reopened later, preceding what Tenev calls a “speculative extravaganza.”
3. January’s trading boom outgrew the risk Tenev was watching
Tenev thinks the new year helped trigger January 2021’s activity: people close one chapter, reconsider their finances and open accounts. Stimulus checks, closed restaurants and sporting events, and zero interest rates formed the backdrop. Robinhood saw enormous interest in stocks and cryptocurrencies simultaneously.
Robinhood launched crypto in January 2018, entering a prolonged downturn with little established activity. Revenue remained almost negligible before increasing tenfold in Q3 2020 into tens of millions of dollars, then reaching hundreds of millions in Q4. By Q2 2021, Tenev thinks crypto revenue was roughly $500 million–$600 million, making it the largest or second-largest revenue source.
His preparation remained anchored to the March outage: keep systems running and serve customers through extreme demand. That was “the devil I knew.” The capital problem consequently caught him off guard when it resurfaced overnight, even though he and Malka had anticipated the general possibility months earlier.
The numbers themselves were confusing: an initial automated file showed about $3 billion, followed by $1.8 billion and another file showing $700 million. Robinhood did not have $3 billion available; $1.8 billion would have been difficult. GME became “position closure only,” and because Robinhood did not allow short selling, customers could sell existing shares but could not buy.
4. One immediate commitment changed the financing conversation
At 5:05 a.m. Pacific, Tenev’s wife woke him because colleagues were calling her. He had left his phone downstairs to manage anxiety and constant work; it was now overwhelmed with messages and calls. Director of operations Gretchen explained the restrictions. The team divided into customer communications, keeping systems operational and finding money: “Get as much as possible.”
His first financing call went to Malka. Asked how much he needed, Tenev answered, “250 million, 500 million, I’m not sure.” Malka replied, “I have it.” Tenev later learned that Malka called Silicon Valley Bank’s CEO, who was golfing in Hawaii, to request a line of credit Malka had opened for Robinhood. Tenev says Malka invested over $500 million in Robinhood in probably 30–45 minutes.
Tenev’s counterfactual explains the significance: had the first investors needed internal deliberations, later callers could have asked whether anyone else was participating—and received a discouraging answer. Malka’s commitment made subsequent calls easier. Incoming interest eventually reached probably $10 billion on the initial terms, prompting Robinhood to revise the deal.
Senra argues that the rescue really began with March 2020’s preparation. Tenev qualifies that: “I bet we would have made it anyway,” although thinking it through helped. He also had to reassure bank counterparties, including those supporting securities lending: withdrawn credit lines could have created a cascading failure. Raising equity was only part of preserving confidence.
5. Financial insecurity was a family experience before it became a business
Tenev emigrated from Bulgaria in 1992 at five. He says inflation had reached 170% in 1991 and that Bulgaria had the world’s highest inflation rate in 1997. Senra cites 1,700% and asks over what period; Tenev answers, “One year.” His grandparents had just retired, and his parents, who were settling in the U.S., had to support them. Tenev says the family’s big arguments were about money.
The losses predated inflation. His mother’s family had a house and land confiscated; he grew up in an apartment building built there. His father recounted how his great-great-grandfather lost roughly 100 acres and was dismissed when he and friends sought restitution. An early memory captures the response to unreliable money: copper kitchen utensils spilling from his grandfather’s cupboard. “Those were his investments.”
America looked radically different. Driving through Manhattan after landing at JFK felt like science fiction: buildings seemed to compete, people moved quickly, and abundance contrasted with Bulgaria’s scarcity. Senra frames that contrast as a search for autonomy and a future different from what Tenev’s grandparents experienced; Tenev agrees.
His parents treated him as a participant in the family’s finances: their visa position was fragile, money was scarce, and university would require a scholarship. Both eventually spent 25 years at the World Bank. Tenev sees the apparent contradiction clearly: they took the enormous risk of emigrating, then concentrated on stability once they arrived.
6. Stock ownership made finance tangible
Computers filled time that money and logistics prevented him spending on organized activities. He accompanied his father to university computer labs, received a home computer at seven, and later built a Yahoo Finance portfolio. When Senra asks whether escaping poverty drove this, Tenev also stresses curiosity, message boards and the surrounding dot-com excitement.
His father converted that interest into an incentive: exceed 1300 on the SAT and receive the score in dollars to invest. Tenev scored 1370 at 12 and moved from a simulated portfolio to real capital. The market crashed a few months later, but an investment in 3Com first gave him an unexpectedly concrete education.
When 3Com spun off Palm, one holding became two. Shareholder documents arriving by mail made ownership feel real: “They want me to vote. They care.” He learned corporate reorganizations through participation. Senra teases him about owning NVIDIA early; Tenev admits he sold at 25, having bought because he liked its graphics cards.
7. Mathematical achievement had become a ladder toward an unwanted life
Tenev describes mathematics as a reinforcing loop: demonstrate ability, receive encouragement, do more mathematics and advance again. It carried him to UCLA graduate study with Terence Tao. Yet the financial crisis began during his first month, and he saw few attractive job opportunities for someone from his mathematics-and-physics circle.
Graduate school exposed a mismatch in motivation. Other students devoted virtually every waking hour to mathematics, competing for a shrinking number of postdoctoral positions. He asked, “If I’m not like that, what am I doing?” The romantic promise of discovery collided with specialization, employment prospects and the practical demands of an academic career.
His sharpest illustration concerns audience: “There might be 20 people in the world who can understand an article by Terence Tao.” Tenev had been excited by discoveries that children might eventually learn in school. He began questioning whether this particular ladder would lead to the kind of contribution—or life—he actually wanted.
8. A safety net made the entrepreneurial leap possible
Baiju, working at a proprietary trading firm, saw an engineering opportunity in speed-dependent strategies such as arbitrage between Toronto and New York. Trades passed through roughly 30 machines using Windows and Java. Could a single Linux machine running C perhaps reduce latency from 30 milliseconds to 10 milliseconds?
Senra interrupts the technical explanation to ask about the larger leap: why abandon graduate school without experience running a company? Tenev’s alternative was an $18,000 graduate stipend. A summer building with friends produced little progress but considerable enjoyment; continuing did not feel like surrendering a lucrative, comfortable career.
He still wanted protection. Before requesting a year’s leave, Tenev thought he would probably stay if the department refused. UCLA’s Dima Shlyakhtenko encouraged him and offered a route back if business failed. “He said, ‘Go for it, and we’ll have a job for you if it doesn’t work out,’” Tenev recalls. He later told Shlyakhtenko that the conversation changed his life.
After moving equipment across the country, the founders spent a largely unsuccessful first year experimenting. His mother cried over his Brooklyn apartment, whose bathroom was in the kitchen. He nevertheless declined to return: “I’m having too much fun.” Entrepreneurship preserved mathematics’ attraction—making progress with his own mind—while giving him control over what he built.
9. A profitable company still had to pass the lifetime test
The initial trading business did not work as planned. Instead, the founders sold low-latency software to other firms and had a revenue-generating business six months later. They reached roughly $2 million in revenue, hired a small team, became profitable and saw a path toward $10 million.
That opened a second question beyond survival: looking back 50 years later, would they feel proud of their contribution? Helping already-wealthy trading firms operate faster looked like “a means to an end.” Senra sharpens the test: if this is not how you want to spend the next 30 or 40 years, stop.
Robinhood combined what Tenev wanted from discovery with a much wider potential audience: “an act of creation,” fundamentally different and capable of changing hundreds of millions of lives. Tenev says finance remains rooted in his upbringing and concern for customers. Senra closes by saying he believes money, investing and passive income will continue to matter despite AI’s rapid changes and the anxiety surrounding them.
Full transcript
You and I have a mutual friend, Mickey Malka. I’m a big fan of his. In fact, I called him this morning, and we were talking about you. Why is Mickey so special? Why do you think he has the reputation he does among founders? You know many founders who know him just like I do, and it’s very difficult to find someone with a better reputation among founders than Mickey Malka.
Yes, Mickey Malka and I have known each other for a long time. Ribbit started basically at the same time as Robinhood. I remember meeting those guys when they worked at the Social Capital office in downtown Palo Alto. They didn’t even have their own office yet.
I probably shouldn’t tell you this, but Robinhood was initially rejected. We were excited to meet them, so I introduced them to Mickey, Nick, and Nikolai. This was our seed round, with a limit of $10 million. It didn’t end up happening, even though I was very excited, because this was a company focused on financial technology. The term “financial technology” didn’t even exist when Robinhood started. You can look at Google Trends. It was at zero, and then a couple of years later, people started using the term.
He gives me excuses for why they didn’t close the deal on the seed round. “Oh, we weren’t prepared. It wasn’t in our mandate. It was too soon for us.” But we both know Mickey is the type of person who, when he wants something, will find a way to do it, right? He invested over $500 million in Robinhood in probably 30 to 45 minutes in 2021.
With Mickey especially, but also with all of our best investors, there was a period when we got to know each other and earned each other’s trust. I’d say the relationship grew stronger over time. They ended up investing in the Series A with Index and becoming board observers.
1. You're going to want me on your board
I remember having a particularly contentious discussion with Mickey around that time. I don’t remember exactly what we were talking about, but I think he wanted more protections than I was willing to give him. Did he want to be on the board, or did he want to be an observer? As a founder, especially in the early stages, you’re taught to be extremely protective of the board’s rights. So I was negotiating against him.
I remember walking past our office. There was a small park in South Palo Alto, and I was walking around it when he said to me, “Vlad, you’re going to learn this about me. I’m going to be the only investor you’ll say to me in 5 or 10 years, ‘I’d like you to get more involved, and I’d like you on my board of directors.’”
Of course, at that moment I thought, “Well, probably everyone says the same thing.” But time and again, in important moments, he showed that he personally supported us and looked out for the interests of the company.
Mickey has something very special. At first, when you meet him, he’s probably a peculiar person and probably not to everyone’s liking. He’s not someone you’ll like immediately. He has a hard exterior. He’s a giant of a man. He probably lifts quite a lot of weight in the weight room. He has an aggressive temperament. By the way, these are my favorite people. He and I connected from the very first moment.
The way he challenges me and the company is direct. That’s clear. I never worry about whether he has my best interests or the company’s interests at heart. I think our trust has grown over time, and on many occasions he’s been there to help the company in the most important moments.
He was an observer on the Robinhood board of directors before we went public. You probably know this, but generally, when you go public, all the observers leave. Most board members who are venture capitalists end up leaving public boards because that’s not the business they’re in. Mickey was the only one who got promoted on our board. He left when we went public, and then I spoke to him again six months later and said, “Hey, we’d like you to join this company as a full member of the board now that it’s public.”
Why did you do it?
Because I valued his advice a lot. When you’re a public company, you can choose your board members at large. When you’re private, it’s the investors. You choose them, but it’s a negotiated agreement whereby the investor owns the seat on the board. Sometimes you get along well with a certain board member, and then they leave the company, but it’s their position on the company’s board of directors. So they decide what happens to it.
2. The day-long trading outage of March 2020
In a public company, you choose the members of your board of directors. Now I have the luxury of being able to select the people who make up the board.
At the beginning of our conversation, you mentioned that he invested $500 million in Robinhood in 30 or 45 minutes. Can you tell us the story?
The story goes back to March 2020. He invested that money in January 2021, but eight months earlier, in March 2020, there was a major turning point in Robinhood’s story. It was the beginning of COVID. Let me explain the situation.
We’re in this office, or the one across the street, and we’re basically occupying Sunset Magazine’s headquarters right now. Sunset Magazine has 2 large buildings: one where we are and another big one across the street with a giant garden. There was a running joke because we first moved into the smaller one and then into the larger one. Our finance director had to keep answering questions about when we were moving into that building because the date kept getting pushed back. It’s an old building, and they had to make many renovations.
March 2020 was our moving date, so we celebrated with a big hackathon. We held it over the weekend, and it was a rather sad hackathon with low attendance.
Was that because of COVID, or were they unrelated?
I don’t know. I think there was a slight unease. I don’t know if it was related to COVID or if we were just doing things mechanically and didn’t give it enough publicity, but there weren’t many people hacking.
The next day, Monday, March 2, 2020, we had a massive operational disruption that lasted all day. That day was a huge market upturn. There had been some ups and downs. COVID had begun, the market had gone down, and that Monday it went up. Our infrastructure basically failed, and we had an operational disruption that lasted all day. It was very stressful because you’re a financial company, and people depend on you to operate.
For me personally, as an engineer, I take any infrastructure engineering problem very personally. I feel like I’m failing at my main skill, right? So that’s what happened. We overcame it, and a week later everyone went home because the lockdown began.
I remember it being a very confusing time because all the companies in our peer group at the time were taking precautions. They were planning to cut staff. Many of them were laying off employees.
What did you consider your peer group to be back then?
Airbnb, DoorDash, that kind of company. They were just tech startups, nothing to do with fintech.
Okay.
But it went beyond that. There was just pessimism. The market had crashed, and people assumed we were going to have tough times for the next 2 years.
We really didn’t know which way it would go because when you looked at our numbers, all we saw were crazy numbers. The user base was growing, revenue was growing, volumes were growing. At first, it seemed that COVID would be an obstacle, a risk we’d have to manage. Then it became quite clear that it was a great accelerator for the business.
3. A term sheet for a crisis that hadn't happened yet
As part of that drastic acceleration, we encountered capital requirements for the first time. The way it works is that, as a regulated broker, depending on the amount of activity on our platform, we have to set aside corporate cash, trading cash, to back up that activity. In March, we started noticing that volumes in stocks and options were skyrocketing, and our capital requirements were also increasing.
So I called Mickey and said, “Well, things are going really well right now. Revenue is growing, the business is growing.” Honestly, I wasn’t sure how sustainable it was, because we were tripling the volume we had a month earlier. But there was a possibility that we might need hundreds of millions of dollars very quickly. What if one day our volume multiplied by 10, and we had these capital requirements?
He said, “Well, let’s make a deal. We’ll have a term sheet ready so that if that happens, and you need it, we can simply set it up, sign the documents, and the money will be transferred to your account the same day.”
Intelligent. And nobody else was willing to do that kind of thing? It was an impromptu deal.
Correct. Remember that at the time venture capitalists weren’t actually investing. Everyone had prepared to see what would happen with COVID. A couple of months later, it became clear that some companies were doing well. Then the floodgates opened again, and it became one of the biggest bull markets in history and a sort of speculative extravaganza, from the second half of 2020 to the second half of 2021.
We closed this deal in March 2020, and we felt great. Then we ended up raising capital from Sequoia and D1, so we never had to withdraw that term sheet. We felt really good, things had stabilized, and we entered a more normal growth period.
Then came January 2021, and it was a major turning point in speculative trading activity.
Why?
I don’t remember. I think part of it was the new year. Every time we move from the end of December to the beginning of January, we see a turning point in activity, a radical change. I think it’s behavioral. People are at home. The end of the year is like closing one chapter and opening a new one, and people start thinking more about their finances. So they open accounts on Robinhood and start buying shares.
There were also stimulus checks landing in people’s accounts. There weren’t many other things to spend money on. A lot of restaurants and sporting events were closed.
So, in an environment of zero interest rates?
4. Crypto goes from zero to a top revenue stream
Yes. What we saw was an enormous amount of interest in cryptocurrencies and stocks at the same time. We launched our cryptocurrency business in January 2018, and for years it generated almost no income—almost zero—because January 2018 was the beginning of a prolonged crypto winter. We had just started, so we didn’t have an established base of activity.
People were buying, and there were times when we had more activity, but it was almost zero until 2020. Then, in the third quarter of 2020, it increased tenfold. We started seeing tens of millions of dollars in quarterly revenue. In the fourth quarter, there were hundreds of millions. By the second quarter of 2021, I think we had something like $500 or $600 million in cryptocurrency revenue.
5. The $3 billion deposit requirement
So it went from nothing to being our largest or second-largest source of income. This was happening in conjunction with the whole meme-stock phenomenon. We had to deal with both things. Remember, at that time my mind was on the market disruption in March 2020. That was the last major crisis we’d had. I thought, “I’m an engineer. I’ll keep the systems running and make sure we can serve our customers,” because that was the devil I knew. So we were caught off guard by the capital requirements problem that resurfaced overnight.
Did your capital requirements really change overnight?
Basically, it happened overnight. The day itself got a little confusing because the numbers kept changing, but the first figure that came through the automated files was something like $3 billion. Then it was $1.8 billion, and then we had a file that said $700 million.
When I woke up, it was 5:05 a.m. Pacific Time. It was a unique moment in my life. At the time, I was sleeping with my phone downstairs because I felt like I was in a bad mental state. I was on my phone all the time. At first, COVID produced a lot of euphoria in me because I thought, “I can be very efficient. I can do all this work, and my family is here. I can be connected and present with my family at the same time.”
But a couple of months passed, and I realized it wasn’t very good for me. I was distracted all the time, always on my phone, always working. So I tried sleeping with my phone in another room.
Describe your mental state specifically. You said it was a bad mental state. Was it anxiety, depression, or what?
Definitely anxiety, probably not depression yet. The best way to describe it is that no matter how good a meeting is, if it’s on Zoom, I want it to end so I can leave. It’s very different from having a meeting in real life, where I can interact with people.
During COVID, I realized that I’m not a remote worker. It just doesn’t make me happy. No matter how good or stimulating a meeting is, I don’t want to be looking at people on a computer screen.
6. Vlad, you have to call work right away
So you were sleeping downstairs with your phone?
Yes, and my wife woke me up because people from work were calling her. That’s not good. She doesn’t get calls from work very often, so she knew it was bad. She said, “Oh my God, Vlad, you need to get on the phone with work right now.”
I went downstairs and picked up my phone, but it was unusable. It was literally vibrating constantly. I picked it up, and texts and calls going to voicemail kept coming in. I think I saw this on Instagram once: Kim Kardashian turns off Do Not Disturb, and then her phone starts blowing up because people are commenting on her posts. That was probably the closest I’ve ever come to that.
There were hate tweets and voice messages saying, “How could you do that? Turn it back on.” I thought, “What’s going on? I thought you had to deactivate trading because you didn’t have any money to invest. What exactly is it?”
I still didn’t know what was going on, and I was waiting for a call from Gretchen, who was our director of operations. I picked up the phone and, between calls and text messages, figured out that I could go into settings and block unknown numbers. Then Gretchen got in touch and explained things to me.
The result was that we had to PCO GME. I had to mark GME, which is GameStop stock, as position-closing-only. Since we don’t allow short selling, that meant people could only sell it. If you didn’t own GME, you couldn’t buy it. If you did own it, you could only sell it.
She explained why. First, they asked for $3 billion, then it was $1.8 billion. We didn’t have that much money. Maybe we had a little more than that, but definitely not $3 billion. $1.8 billion would have been difficult. So what do we do? We didn’t know. Let’s make a call.
We brought the management team together on a Zoom call. Everyone was in different places, which made this kind of fire very difficult to put out. The first thing you do in that situation is get everyone together in one room, but there wasn’t any space. It was a Zoom call.
We decided to split into a couple of lines of work. One was figuring out how to communicate with customers, because they were obviously very angry. The marketing and communications people started working on that. Then there was engineering, keeping the systems running. Knock on wood, that was actually my biggest fear, but the systems held up well throughout all the crazy activity.
The third line of work was finding the money. We didn’t know how much we needed, but it was about getting as much as possible.
7. The first call: Micky Malka
When you know you need to find the money, who do you call first?
I called Mickey.
Was that the first call?
Yes. He got engaged right then and there. He asked me, “How much do you need?” I told him, “I don’t know—$250 million, $500 million. I’m not sure.” He told me, “I have it,” although he didn’t have it yet.
Later, I learned in a strange twist of fate that he called the CEO of SVB.
I was going to say Silicon Valley Bank. I’d heard that story before. I had coffee with—God, what was his name again? The CEO of SVB. A great guy. He went through his own problems, which unfortunately didn’t end well.
Yes. He was on the golf course in Hawaii, and Mickey called him. He told him, “I’m going to have to request the line of credit I opened for you.” I didn’t have any money, but I had a line of credit.
It ended up being an important first call because these were very uncertain times, as you can imagine. Nobody wants to give money to a business that’s about to go bankrupt. I think, legitimately, there were people who were afraid of that. When there’s a solvency problem in financial services, you don’t want to be the one who has to withdraw your money first. It takes a lot to actually move money and inject it at a time like that, as we’ve discovered in many failures since then.
I realized this when I told the story: depending on where we are in the world, people are much more understanding of what we went through. After the FTX collapse, people say, “Okay, I understand.” After the SVB banking crisis, I think people understood it better, too.
It’s curious that you mention FTX and SVB.
I’m thinking about Jay Gould and things that happened long before the SEC was invented. Throughout American financial history, it’s as if people did this on purpose. They did it for fun. Cornelius Vanderbilt, Daniel Drew—there were all these people who essentially caused bear runs and then profited.
Completely. And many financial regulations arose from this. If we look at the specific capital requirements that skyrocketed for us, many of them arose as a result of the Dodd-Frank Act. After the 2008 global financial crisis, they said, “We want to make sure everyone is super-capitalized to manage the trading activity they can handle.” So we have these onerous capital requirements. Of course, they never anticipated that people would be retail traders at home, trading meme stocks with stimulus checks and everything else.
8. Time kills all deals
Why did you say it was a momentous first call?
9. 10 billion of demand
I think it could have been different if the first call hadn’t been so well received. They might have said, “We’ll think about it. I need to talk to my team. I need to talk to my finance director.” And maybe the second caller would have said something similar. Then the third caller might have asked me, “Is anyone else doing it?” I would have had to tell them no, they were my first call. As you know, time kills all businesses. The fact that Mickey answered the phone and committed right then and there got us started.
Did it give you confidence? What did that do for you personally?
10. Number one app in the App Store, ahead of Instagram and TikTok
It was a really interesting time because we were trying to raise a lot of money and had a great financial need, which is not usually good for companies in that situation. But the reason we were in that situation was that we were growing too fast. It was a consequence of too much success, which is quite rare.
At that time, Robinhood was the number one app on the App Store—not just in finance, which is pretty good, but ahead of Instagram and TikTok. Number one overall, something extremely rare for a finance app. We had never seen anything like it. So we were in this position where we needed capital, but we were also growing tremendously fast. It was difficult to keep both things in mind at the same time because, as a leader, I’m obviously excited about growth, success, and revenue.
In January 2028, we reached a run rate of $1.8 billion, something like that. We had surpassed $200 million in revenue in 2019. Then we approached $1 billion, and then we ended up doing it in 12 months.
Okay.
Four times, yes. And then, in 2021, we reached $1.8 billion. Obviously, that growth excited me, and I applauded it, but along with that rapid growth came an increase in risk.
But let’s return to the momentous nature of the call and the fact that Mickey simply said, “Yes, you have the money. That’s it.” The fact that he committed on the spot and said he was in made all the subsequent conversations much easier for everyone else.
What were those conversations like?
On the second call, you say, “Hey, Mickey Mouse is giving me $500 million.” The second call is, “Mickey Mouse is in.” “Okay, I’m in too.” Then we started receiving calls: “How much longer?” And we said, “Wait, wait a minute. These guarantees—we have to change the deal because we probably had $10 billion in demand in the first term sheet.”
I love the story you just told, because you say, “Yes, this happened in January 2021.” But it didn’t actually happen then. It happened in March 2020, when they made this term sheet, didn’t sign it, and put it in a drawer, but they knew it was going to happen. That’s incredible, man.
Yes, more or less. I bet we would have made it anyway, but it certainly helped that we went through that exercise of thinking things through.
Another example of business planning and innovation at that level?
I can’t think of another example. I don’t want to give myself too much credit. I could give it to Mickey.
That’s incredible.
During that time, many of our counterparties—we have many counterparties to run the business as well—were involved. Securities lending, for example, involves large banks with credit-risk departments. So I had to go on a tour during all of this, speaking to all of our banks and assuring them that our financial situation was still solid. As you know, if they withdrew their lines of credit, it could also create a cascading bankruptcy.
So, do you know what we did?
I’ve been told it was a miracle. There are many ways the company could have gone bankrupt and become insolvent, but I think we just overcame it.
Let me bring things full circle with Mickey. How does he end his phone calls with you? What does he say? What’s the last thing he says to you?
I think they’re just fading away. I have to ask him why, but I think every time we hang up the phone, he tells me to behave myself.
Ah, yes. He doesn’t say goodbye. He tells you to behave.
Or no, he just tells her to behave and then ends the call.
So what do you think I’m going to do? Not just have him say something in Spanish?
No, because I would know. My father is Cuban.
So I’m saying, I have to ask him why. What does he think I’m going to do?
He never tells me to behave.
I know exactly. So I thought, okay, maybe he thinks I behave better than you.
Apparently.
11. Hyperinflation and copper cookware in Bulgaria
Okay, wait, this is very curious. When you were younger, as a child, were you always interested in financial markets? Did this interest arise later in life?
I’ve always been interested in financial markets.
How and why? Mickey told that crazy story on my podcast where I think he borrowed money from his grandfather to buy a share of Berkshire Hathaway. I think he was 13 or something. Did the same thing happen to you?
I emigrated from Bulgaria to the U.S. in 1992, and the year before I left, in 1991, Bulgaria began to suffer significant inflation. I believe the inflation rate in 1991 was 170%, very similar to what you experienced, Mickey, in Venezuela. In 1997, a couple of years after we had just escaped—or emigrated, or whatever—Bulgaria had the unfortunate distinction of having the highest inflation rate in the world.
Really? 1,700%. Over what period of time?
One year.
Ah, yes. Well, you know, they added zeros to the currency.
It went from two lev to one dollar and then to 2,000. I saw what happened to my grandparents. I went from being a keen observer to learning how the communist system affected my family, because my family was always telling these stories.
On my mother’s side, collectivization arrived, I think, in the 1960s, and it was very intense. I grew up in an apartment building. They showed me pictures of the land where there was now a brutalist, horrible Soviet-era apartment building. There had been a nice courtyard and a house that my great-grandfather owned. They came and confiscated it and built a large, ugly structure. Of course, they gave him one of the apartments there.
On my father’s side, he always tells the story of how his great-great-grandfather lost his land. They had about 100 acres or something like that. He and his friends from the village made the long, arduous journey to the capital to argue in court that they should get their land back, but they were laughed at and sent back to the village. In short, everyone lamented the loss of their property.
Then hyperinflation hit, and the entire financial system collapsed. I think my grandparents were very lucky because they had just retired. My parents, who were just starting to settle in the U.S., had to support them. So all our big arguments as a family were about money.
Which side stayed longer? How old were you when this happened?
I was five years old when I moved, and when the financial crisis hit in 1997, I was probably 10. I was born in ’87. I also remember my grandfather. One of my earliest memories is opening a cupboard in his apartment and seeing copper kitchen utensils falling out. Those were his investments. That was their store of wealth.
They were hoarding copper kitchen utensils?
They were hoarding copper kitchen utensils.
It was so bad. They couldn’t—it was horrible. I also remember that Cuban bananas were very delicious. When I arrived in the United States, one of the things that struck me was that when you entered the supermarket, there were bananas everywhere. Of course, I couldn’t touch the organic ones. My mother would hit me on the hand if I went near them. But in Bulgaria, Cuban bananas were something you bought once a year, and my grandfather used to pick up women at the shipyards. It was very, very different.
Wait, you arrived in the United States when you were about 5 years old?
Yes.
Okay. So when did you become so interested in and start listening to those crazy stories from your parents and grandparents? Did your grandparents also come to the United States?
No, no, they didn’t.
Did they stay there the whole time?
They stayed in Bulgaria, yes.
Okay.
The first time my grandparents came to the United States was on September 11, 2001. They had planned their first trip to visit us. They left Bulgaria on their way to the United States that day.
Did your plane get into U.S. airspace?
The plane was immediately diverted to Frankfurt, Germany, and they spent 2 weeks in the basement of Frankfurt Airport.
Oh.
Yes. They had rows of beds waiting for the next flight.
12. Manhattan just seemed like science fiction
Okay. So you’re, let’s say, 10 years old. When did you start paying attention to financial markets and money? When did you become interested in that?
When we landed in the United States, there was a big, immediate change. The atmosphere was completely different, and I noticed it when I was 5 years old. In Bulgaria, when you walk around, society is collapsing. All the old women look down, and everyone moves slowly.
The first time I came to the United States, I still remember landing at JFK. My parents were living in Delaware because my father was a graduate student at the University of Delaware. On the trip from JFK to Delaware, we went through Manhattan. For a Bulgarian boy who had just gotten off the plane, it must have been like another planet. Manhattan seemed like science fiction.
I was thinking, “Is the whole country like this?”
Yes.
The buildings were so tall that each one of them was the tallest building in Bulgaria. It was as if the buildings were competing against each other, right? There’s no competition in Bulgaria. People are competitive. People move fast. I was thinking, “Why is everyone in such a hurry?”
The other thing that happened was that I was an only child, and my parents were just starting out. They were always figuring out how to advance in their careers, and I felt like an equal partner in that. My parents would sit me down and say, “Look, Vladimir, you know that our situation as visa holders in this country is very fragile. They could deport us at any moment. By the way, your father doesn’t earn any money. You’ll need to get a scholarship if you want to go to university. Basically, you can’t count on us.”
From very early on, I thought, “Well, money is quite scarce here.” I was thinking about all those things.
You’re an only child. Did they never have another child after you?
No.
But they talk to you almost as if you were part of the family’s financial situation, which is devastating.
Yes. I’m sure that’s probably their biggest regret.
Are your parents still alive?
Yes.
God bless them. They’ve seen your success. That must be incredible for them. I bet if you talk to them, their biggest regret is probably not having been able to have more children.
I guess, yes.
But they talk to you like an adult, which I think is very smart, rather than hiding things from you and saying, “Hey, we’re in a desperate situation.” You obviously wanted a better life, and you’re in this country. Do you see the difference between Bulgaria and the United States? Basically, this ignites a fuel within you.
Yes. I was also a child who was left alone. My parents couldn’t afford a nanny, and they both had to work. I like the idea that we could simply walk the streets whenever we wanted.
Yes. I walked home from the bus stop, a mile to the apartment building.
At first, they said, “Knock on the neighbor’s door”—it was an Indonesian family—“and she’ll let you in. She’ll give you the key.” Then they realized our son was going through a complicated chain of events to get home. Why don’t we give him the key?
So, and then you discover computers and get interested in them. How old were you then?
Probably 5 or 6.
Really?
What happened was, instead of a babysitter, my dad would sometimes take me with him to graduate school. He was a graduate student at the University of Maryland.
What was he studying?
Economics.
Okay.
I would hang out in the computer lab while he went to class or whatever. My first experience with computers was just hanging around there.
But you had free rein to do whatever you wanted while you were at school, right?
Totally. He didn’t know how to use computers, and neither did I. He was more of a tinkerer, a self-taught type. I got into it pretty quickly. I started playing around and figuring out how to install games. There were other graduate students there, and they showed me. They’d say, “Hey, can I take the floppy disk?”
For some reason, we didn’t have any money, but they decided it would be a good idea to buy a computer ourselves. They gave us a computer when I was 7. I got really into it. I didn’t have the internet, of course, so I was learning how to use the terminal and do all that stuff.
I was a pretty good student. Another thing my parents nagged me about a bit at the time was that all my friends were always doing activities. They were playing baseball, tee-ball, basketball, or soccer. My parents would say, “First, we can’t afford any of this. Second, I don’t know who’s going to drive you. We only have one car, and we both work. So you have to figure it out yourself. You want to call your friends? Carpool.”
I was about 6 years old, so it never happened. I spent a lot of time at home with the computer. When we finally got the internet, I opened Yahoo Finance and built a portfolio. I don’t even know how I started, but I did, and I just got interested.
Were stocks your first fascination?
Yes, stocks, computers, and video games.
At that time, were you already interested in math?
Yes. I think I realized quite early on that I was good at math. I also found this interesting because I was dropped off at school in the United States, in kindergarten, without knowing a word of English. My first experience was a little daunting. It’s like going somewhere without speaking the language. I couldn’t even tell the teacher I wanted that toy, right?
A couple of months ago, I was reading through my old report cards. I found my kindergarten report cards, and the teachers had written about me. I read one that said, “Vladimir is adjusting well to kindergarten. He still doesn’t talk to the other kids.” It made me a little sad. Then I thought, man, he didn’t talk to anyone until he’d been there for 6 months, probably because he didn’t know English and was shy and quiet.
By the end of the first year, I guess I was in advanced English and advanced math. This was back when kids were still categorized. You’d have talented and gifted.
Yeah.
So by the end of the year, I’d gone from knowing nothing, from not talking to anyone, to being at the highest level in math and English. The teachers were saying, “Okay, well, maybe he should skip a year.” I could feel that trajectory, and I think at that point I realized, “Okay, I guess I’m good at math, at school, and learning.”
But if you go back to being a kid sitting alone in an apartment in front of your computer, building a portfolio on Yahoo Finance, was it just because you thought, “Hey, I’m sick of being poor. I don’t want to recreate what I saw in Bulgaria”? I wonder if you think you understood why you were interested in finance.
Generally, it’s seen as a path to becoming wealthy someday and having more control, because what you’re describing right now is your family. A lot of families, like Mickey Malka’s family, had to come from Venezuela. I think he was about 30. My father was obviously born in Cuba and came here. He lacked autonomy and control.
Some people just give in to that pressure. Other people, which is what I’m reading about you, think, “I need to find a way out and a path where I actually have control, can generate wealth, and can control the future and build a very different future than the one your grandparents lived,” for example.
Yes. I think at that time I was terrified by the possibility that the downside was: What if we don’t have a home? What if I don’t have a home? What if I can’t understand all those things? I thought the prospect of getting a job that paid me a lot of money would be impossible, because at that time I knew nothing about entrepreneurship. It wasn’t even in my vocabulary.
You don’t have any entrepreneurs in your family, do you?
Well, actually, my father had a business venture in Bulgaria that I was too young to realize at the time. He started a tourism business.
Were there many tourists when society was collapsing?
As soon as the Berlin Wall fell, there was an influx of tourists. Before, they couldn’t come from Western Europe, and my father spoke French. So they started this business called Contour, a great name, where they basically took French tourists around Bulgarian sights, which had many incredible historical sites. Tourism is still Bulgaria’s biggest industry.
I think it probably did well during the collapse because it relied on foreign money.
Yes, on a small scale, and it wasn’t a tech business. They would buy buses and take people around. But did you think you would make it when you said you were okay?
I didn’t even think about it. I didn’t even know entrepreneurship was a path available to me at the time.
Did you think you would get a job in finance? What would you think if you could go back and talk to that version of yourself? What did he think he was going to do?
I think my mom’s ideal image of what I’d end up doing was getting a job as an analyst at JPMorgan or something, or, God forbid, at Goldman Sachs.
That would have blown my mom away. Or advising McKinsey. My parents started working at the World Bank. In fact, my dad started working at the World Bank while he was a full-time graduate student at the University of Maryland. So he had two full-time jobs: he was a full-time graduate student and worked full-time at the World Bank. He earned enough to pay for my mom to get an MBA at Georgetown and join the World Bank. They were there for their entire careers—25 years each.
My parents took this huge risk of uprooting the whole family and moving to a new country. When they got here, I think they were very focused on stability. It was almost like we were done. It was such a crazy experience that we made sure that, now that we were here, we could stay and provide a good foundation for our son.
My interest in investing at first was curiosity. I’d heard about investing. I was on all the message boards and saw people talking about it. We were in the middle of the dot-com boom, so I was just there. Of course, I saw reports that some people were making a lot of money. That was appealing.
But at that time, you were probably what, 13 in 2000 or something? You were born in ’87.
13. His SAT score in dollars to invest
So, yeah, I was learning. I had a simulated portfolio that did pretty well during that period, probably because everything was going well. But then my dad gave me a challenge. He told me he was studying for this exam because he was in a program called CTY. I don’t know if you’re familiar with it. Basically, you take the SAT, and depending on how you do, they put you in a program where you do a year’s worth of math in two weeks.
I was doing this, and I think I was in seventh grade. I was in my first year of high school at the time, and I had skipped a year. So I was 12 years old, and he said, “Okay, if you score over 1,300 on the SAT, I’ll give you your score in dollars to invest.” That was very motivating for me. I think he did something very smart because I just went for it and ended up scoring a 1,370 on the SAT. So he gave me some money to invest.
You don’t have a simulated portfolio anymore. You have a real portfolio. Now I was investing real capital. Of course, a couple of months later, the market crashed, but not before I made a smart move. I bought 3Com, which made the PalmPilot, the first PDA, or personal digital assistant. I invested a lot of money in 3Com, and it spun off Palm. So I went from owning one stock to owning two stocks.
I remember getting the big shareholder information package in the mail and flipping through it. It gave me the feeling that I actually owned something. Even though it wasn’t a lot of money, there was a certain pride in that. I didn’t just buy this; I own this company. They want me to vote. They care. I learned what a corporate reorganization and a spinoff are. I learned a lot, and it was a real-life education for a kid.
All because of this idea your father had.
I got really passionate about it. I started trading quite a bit. I had NVIDIA pretty early on.
And you held onto it until the end, right?
No. I sold it at 25 because they made some great graphics cards. I loved playing games.
14. Studying under Terence Tao
Let me ask you a question. I’ve heard you say before that you find entrepreneurship intoxicating. I can’t tell if you’re more interested in finance, because you’ve created a business that makes it easier for people to trade, or if you’re more interested in entrepreneurship. Which is more important in your mind: entrepreneurship or investing?
I think that’s an interesting question. They’re the only kinds of ideas I have. It’s always difficult to figure out the flip side of what would have happened if Baiju, my cofounder at Robinhood, hadn’t called me and convinced me to start our first company together.
There were a lot of competing forces. Before I became an entrepreneur, I was a graduate student in mathematics. My relationship with math was long and somewhat circuitous. Ever since kindergarten, it was very clear to me that I was good at math. I was the top math student in my class, and I started getting all that positive reinforcement: Do more math. Do it in the summer. Do the equivalent of a year’s worth of math in two weeks. It became a self-referential loop where I was just trying to climb the ladder, until I became a PhD student in math at UCLA, where I studied with Terence Tao, whom many consider the greatest living mathematician.
So I was pretty high up in the hierarchy. I wasn’t a postdoc or a professor, but I was definitely in the 0.001% of math that a person would realistically try to learn. In my first month of graduate school, the global financial crisis hit. Even though I’d been to Stanford, computer science wasn’t the number one major. A lot of people wanted to go into finance, but Goldman Sachs and JPMorgan Chase weren’t in those circles. I was more in the math and physics research circles, and my math and physics friends weren’t very employable. This was before data science, before AI. Everyone was hiring computer scientists.
I was in a weird position, too, with not many attractive job options. I wasn’t getting many job interviews. I went to UCLA because it was the best option, the default. I kept doing math. I was getting paid $18,000 to be a graduate student and hang out in Los Angeles, which we both know is very nice. Although it’s not a very nice place if you’re very poor, just so you know.
At that point, I was kind of adrift. Then I got to graduate school and saw all these immigrants. There were people who, like my father, had fled their countries, and this was their time. They were doing math all the time. They weren’t going out. They just slept, ate, went to class, and did math. I remember thinking to myself, “Man, if I’m not like that, what am I doing?” There was no way I could compete with these people for the ever-shrinking number of postdoc positions. I asked myself a lot of questions: Do I really want that? Is that the life I want?
Terence Tao is the best mathematician in the world. There might be 20 people in the world who can understand an article by Terence Tao. It wasn’t like what you learn in school—Gauss, Riemann, all those great mathematicians that kids learn to work with. It had become so specialized that very few people read this stuff now.
At that point, I started wondering if this math ladder would lead me to a good place. I realized it wouldn’t. The romantic idea of learning for learning’s sake, progressing, and making discoveries collided with the practical reality that this was one of the worst degrees and jobs. I’m not even talking about dealing with university administration and all that red tape. I wasn’t very happy with what I was doing.
Then Lehman Brothers went bust, and the global financial crisis began. My cofounder, Baiju, was also a mathematician and physicist, and we hit it off because of that. He got a job at a hedge fund in Marin County on a whim. He called me and convinced me to start a company with him.
What was this company going to do?
They hired him at this hedge fund that did proprietary trading. It wasn’t really a hedge fund; it was a proprietary trading firm. They traded with the owners’ capital and deployed it using computerized algorithmic trading strategies. They had a couple of money-making trades. One of them was what’s called inter-exchange arbitrage. It’s the simplest strategy there is. Basically, you have a stock that’s listed in Canada, for example, Intel, and it’s also listed in New York. You have a fast link between them, so you buy it where it’s cheaper and sell it where it’s more expensive, trying to minimize the latency so there’s less slippage.
This company had a pretty fast link between Toronto and New York, so they were able to make a lot of money using this trade. There were a couple more, like this market-closing trade that literally just quoted and bought the imbalance heading into the close. It traded for five minutes at the end of the day. Again, it was a total speed game.
He called me and said, “Look, I was hired here to be the first quantitative analyst. I can see all the traders, I can see all the engineers.”
They were working on Windows machines. They had Java. A trade went through about 30 machines before it was sent to the exchange. The original idea we started with was: could we compress it? Could we do it on a single machine? Could we run Linux? Could we use C instead of Java? Maybe we could reduce that latency from 30 milliseconds to 10 milliseconds. If it’s a speed game, that should win.
But wait a minute. Before we get to that, putting the idea aside, think of the leap from a conservative family upbringing. Your parents took a huge risk coming to America, but once they got here, they basically said, “We’re going to stick to one career.” They might not have seen you as someone who would just get a regular job. You just said your mom’s goal would simply be for you to go work at Goldman Sachs or JPMorgan, which is great. You’d have a middle-class life, maybe upper-middle-class. Maybe you’d save a lot of money and become a single-digit millionaire in a few years, whatever. But it’s a huge leap to go from being a math graduate student to being an entrepreneur when you’ve never run a company before.
Totally.
You did it. Tell me how you came to that decision. It was a tough decision to make, clearly.
I struggled with it a little. I thought, “Do I really want to do this?” I was in a fortunate position. I passed my quals in my freshman year. Usually, the summer after your freshman year, you’re studying for your quals. The math department paid you to study, prepare for exams, and so on. But I passed at the end of my freshman year, so basically, I was getting paid to do nothing. That was an opportunity to get together and work on things.
We rented a little place in South of Market. Baiju, this other guy from the math department at Stanford, Andrew Jarmola, and I were there together. We got a place in South Mission. It wasn’t a great neighborhood, but it was fun, and we were building the trading system. That was the goal for the summer.
My plan was always to take stock of how things were at the end of the summer and see how much progress we’d made. Essentially, we’d made very little progress, but we were having a lot of fun, and I wanted to keep going. The idea was that we’d build things, then go to New York and figure out how to implement and trade them.
15. You want to be businessman, huh?
If you’d said you weren’t happy with what you were doing, and now you’re having fun, even if you didn’t make much money over the summer, it’d be like, “That’s enough already.” So it didn’t seem like having more fun was enough of a reason. It didn’t seem like you were taking a big risk.
To be honest with you, the alternative wasn’t that I was doing great, making a ton of money working a comfortable job at Google that paid millions of dollars a year.
You were making $18,000 a year.
$18,000 a year. If this didn’t work out, I could probably find another job that paid $18,000 a year.
That was what worried me.
So I went to see the vice president of the department to ask for a leave of absence.
Yeah.
I said, “Okay, I want a safety net. I’m not going to be stupid. I’m going to ask the vice president for a one-year leave of absence.” I was biting my nails over this conversation, and I still remember it vividly because I mapped out my decision tree and thought, “If he tells me he’s not going to approve it, I’ll probably stay.”
Wow.
I’d still be doing grad school. The vice president was this Russian guy, Dima Shlyakhtenko. A couple of years ago, I was invited to give the commencement address at UCLA Math, and Dima Shlyakhtenko was the head of the department at the time. We had dinner, and I asked him, “Do you remember that conversation? It changed the trajectory of my life.”
And he said, “That conversation changed my life.”
It was very memorable.
I’m very proud of you.
I went into his office and he said, “Do you want to be an entrepreneur? When I was your age, I wanted to go into business too. I wish you good luck. Go for it, and we’ll have a job for you if it doesn’t work out.”
Oh, that’s great.
Have you ever read any of Elon’s biographies?
Some of them, yeah.
I think all the ones I’ve read about him say he was in graduate school. I forgot what kind of school he was in, and he said, “I’m going to take a leave of absence.” The guy said to him, “You’re never coming back.” And he said, “Turns out I was right.” I think he went off to do Zip2, if I remember correctly.
I took a leave of absence. We put all our servers and all our stuff in the back of my 1998 Infiniti Q45, a boat of a car, and drove across the country from Los Angeles to New York City. For the first year, we were just messing around, honestly. We tried some things. They didn’t really work.
Then the year came to an end, and I remember having this conversation with my mother. I was living in Brooklyn at the time, in a horrible apartment we were subletting. The bathroom was in the kitchen. Very hygienic.
Yeah, yeah, yeah.
My mother would visit and cry. She’d say, “My son is a math genius. My son went to Stanford.” He went to Stanford first, and then, much to my embarrassment, I had to tell people that he went to UCLA afterward because Stanford is something everyone knows about, and you have to explain the nuances—that UCLA has a very good pure math department. But on the surface, it seemed to my parents like I was degrading myself. Now I was on the verge of homelessness and living in Bushwick, in an apartment whose bathroom was in the kitchen.
16. The best parts of math without the bullshit
They were asking me if I was going back to UCLA. They knew about my year. I was saying, “No, I’m having too much fun. This is great. Who cares if we don’t succeed?”
Is this what you said when you started? Did you find entrepreneurship intoxicating even before you were successful?
Yes. I think my first experience with entrepreneurship was almost the best part of doing math, but without any of the nonsense. The best thing about doing math is that it’s just you, your mind, and maybe a blackboard. Now it’s a computer, but before it was just you, your mind, and a couch, and you could make progress without having to depend on anyone else.
Of course, when you make math a career, it stops being that because you have to go to class, teach, be a teaching assistant, deal with department administration, and all that stuff. This was kind of like that in a way: just you and the computer, writing code. Maybe you have a business. That business makes money. People want the code you write, but it’s all under your control and there are no bosses. No one to deal with. It was the first time I’d experienced anything like that, and I found it exhilarating.
With time, I think it became important for us to make a living. The entrepreneurial spirit for entrepreneurship’s sake endured and brought me to where I am today. Then it became a question of whether we could actually create a business that generated enough revenue to support ourselves. We hadn’t reached that point when I had to make the decision, but I was optimistic that we were going to make it.
17. Would I be proud of this in 50 years?
Six months later, we had a business that was generating revenue. It wasn’t the original business we’d envisioned. We weren’t trading, but we were selling low-latency trading software to other companies. We improvised until we became a business. We reached about $2 million in revenue, hired a small team, and were profitable and growing. We had a path to about $10 million in revenue. Then I entered my second evolution as an entrepreneur.
The first was simply enjoying entrepreneurship for its own sake, then having a sustainable business that could feed me, my co-founder, and our employees. The second door was: I could grow this business from $1 million to $10 million, maybe even $100 million. But if I looked back on my life 50 years from now, would I be proud of what I was doing? Would I feel like I’d made a positive contribution to the world and society, and that I’d had an impact? We were selling software to hedge funds that were already wealthy and making it possible for them to trade a little faster and more efficiently. My co-founder and I realized that, if anything, this was a means to an end. We didn’t see ourselves doing this business alone in the long run.
The idea is to imagine yourself as an older person looking back on your life.
Yes.
I think I’ve heard you say this is like a legacy test. Do you really want to spend the next 30 or 40 years of your life doing this? Do you get to the end and feel like you wasted your life? It reminds me of the famous conversation Steve Jobs had when he was recruiting John Sculley from Pepsi. He said to him, “Do you want to keep selling sugared water, or do you want to come with me and change the world?”
It’s fascinating. I love this idea, and I might be wrong, but when you’re looking at the career choice you’re making and the business you can create as an entrepreneur—you can create any business you want—it’s like asking, “Am I going to spend the next 30 or 40 years of my life doing this?” If the answer is no, you should stop.
I think another reason I liked math as something to do was this idea of making a fundamental discovery. Maybe if you make a really important fundamental discovery, eventually all kids will learn it. It won’t just be in the history books; all kids will learn the techniques in school.
That really excited me, because you have the act of creating something new in the world, which I find inherently interesting, but also something that has an impact and could affect millions of people.
And I think that's what excited me about the idea that became Robinhood. It's both an act of creation, something new and fundamentally different, and something that could reach massive scale and change the lives of hundreds of millions of people.
So we're back to where this tree of our discussion started: you see yourself much more as an entrepreneur, and you get much more satisfaction from your success as an entrepreneur than from your success as an investor.
As an investor or founder of a financial company?
Yes. You also invest, but clearly, from the discussion we've had—and especially from how beautifully you just concluded it—it's as if you see yourself much more as an entrepreneur. Have you ever read Michael Bloomberg's autobiography?
No, no.
Okay. He worked in finance, and when he was laid off from Salomon Brothers—I think it was in 1980 or something like that—he had a golden parachute of $15 million, which was a lot of money back then. Everyone from his time in finance was thinking, “Okay, you'll take that money and live off your investment.” And he said, “No, I want to create something. I want to create a business that improves other people's lives.” He talks about it again and again in his autobiography. It's exactly the story you just told us.
Yes. I think the financial aspect is deeply ingrained in my upbringing and my identity, which is why I care about it and why I care about our customers.
Things are changing very quickly in this world. We have AI, and it's changing things in positive ways, although it's also making people very nervous. But one thing that isn't going to change, I'm pretty sure, is the importance of having money, investing, and generating passive income. I think that's never been more important than it is now.
I'm glad you've taken this conversation to topics I had no idea we were going to cover. I haven't even gotten halfway through the things I wanted to talk to you about. So I'll be back in a few months, and then we'll do the episode on how Vlad works. It's been great, man. Thanks for your time.
Let's do this.