The Citadel Alum Reshaping The World Of Trading

I read that you were personally recruited by Ken Griffin to work at Citadel. What was that experience like?

Guest

Like, my first week, Ken brought me these track records of other funds, and Ken said, “Oh, today we’re interviewing boy genius Vlad.”

1. Harvard At 16 & The Olympiad Network Behind Anthropic

Vlad, thank you so much for joining us today. It’s a pleasure to have you here at the 1000x studio at the Seleni conference. This is going to be a fun one.

Guest

Thanks for having me.

We were talking a little bit before the pod, and one thing that struck me is that you’ve had a very interesting life, man. You’ve crossed paths with some very interesting people, and I think you’ve lived a life that a lot of other people have no conception of.

It’s kind of interesting because it starts in Northern Virginia. You went to high school at a magnet school called Thomas Jefferson High School for Science and Technology, and I heard that you were actually there with the other Vlad, Robinhood’s Vlad Tenev.

Guest

That’s right.

That’s right. It’s like I’m Forest Gump if he had been a math person, in terms of encountering different people who ended up shaping the world.

And while you were there, you were very active in the Physics Olympiad and the Informatics Olympiad as well.

Guest

Yes.

What drove you to do this? Did you always have an innate interest in math and science?

Guest

Yeah, for sure. I think I always liked numbers, structures, and things like that, and I got into programming when I was 8. But, as it turned out, I’m a very competitive person. I didn’t really know that I was until I discovered these competitions when I was around 12.

Before that, I thought, “Okay, this math and science stuff is kind of interesting. I’m kind of good at it, but I don’t know exactly what I’ll do. Maybe I’ll become a scientist or something, but I don’t know exactly how that works.” With competitions, you have a very clear feedback loop, and you can practice and get better. It all clicked for me and accelerated the progress.

You said you were programming. What could you possibly have been programming at 8?

Guest

Well, back then I played card games with my family, and I wrote some programs to basically program the computer to play the card games, so I could practice in my spare time, get better, and beat my family at the card games.

What was this Durak that you were programming?

Guest

Initially, QBasic and then Pascal.

Oh, I was talking about the card game.

Guest

I don’t know if you’ve ever played Durak.

I haven’t.

Guest

Okay, so it’s a very Russian game, but—

Oh, actually, that was one of the games. You’re right.

Guest

Yeah. There were 3 different card games.

That’s cool. So, you end up going to the Math Olympiads. You said you started competing at 12. What was that experience like, and what were the other people like as well? Was there a community?

Guest

There absolutely was. I don’t know how it was for the other kids—probably similar—but for me, it was the first time I felt like I was part of something. Before that, I was mostly interacting with adults. It was hard to find common ground with the other kids.

When I started doing these competitions, I was part of the community. Maybe someone who joins a sports team feels the same way, but it was competitive and much more collaborative, with everyone learning together. Especially for the team competitions, where we represented our school, our state, or our country, that brought us together closely as well.

Then you graduated from high school at 16 and ended up at Harvard, where you chose to study economics, which is kind of orthogonal to everything that you were doing in high school. Thomas Jefferson is a science school, and you were doing physics and informatics. Why economics?

Guest

When I got to Harvard, I was thinking about what to concentrate in. Actually, most people don’t know this about Harvard, but a lot of the curriculum is more general. If you pick a concentration, that doesn’t mean 95% of your classes are in that concentration. You’re still learning a lot of other areas, but you do need to pick a concentration.

For me, the way I looked at it was, “I’m pretty good at building stuff in terms of programming. That’s probably not an area—I probably already hit diminishing returns when it comes to that.” What I really wanted to take out of the college experience was what to build and learning more about the world as far as what to build.

The 3 areas I considered were physics, biology, and economics. Physics at that time, in the early 2000s, was kind of after a lot of funding had gone into physics, and it wasn’t necessarily growing very fast.

Economics, on the other hand, had a lot of exciting stuff going on with things like option pricing and portfolio theory. A lot of my math and programming background could actually be applied there to work on some interesting stuff. Biology wasn’t for me simply because I wasn’t somebody who loved being in a physical lab environment. So, I picked economics based on that frame of thinking.

While you were at Harvard, what were you doing? Just the normal economics course load? Were you doing specific types of research while you were there?

Guest

Yeah. Funny story: I took this microeconomics course in the first semester. We had this midterm, and I got the grade back. It was a 94. At Thomas Jefferson, and probably at most high schools, 94 is the minimum for an A. So, 90 to 93 is a B+, and so on. I thought, “Okay, this is kind of close. I almost didn’t get an A on this.”

Then I got an email from the professor asking me to come see him. I went to see him, and he said, “I was looking at your scores.” I thought, “Maybe I didn’t know how well I did.” He said, “Actually, did you know how well you did?” I said, “No. It was a 94.” He said, “The class average was 37.”

He said that, historically, since they had run the class, it was one of the highest standard deviations they had seen. So, he asked me to come do research with him. That was actually my first job.

Oh, that’s cool. And what kind of research was that?

Guest

It was microeconomics research.

And then you started working with other faculty the following year on more financial economics. But that’s how you got into research—just from that one exam, right? And that was the first exam?

Guest

That was the first.

What was it like being a 16-year-old boy genius in college?

Guest

I thought I had just barely gotten an A, because I didn’t know that they graded on a curve. In high school, it was just based on the absolute value.

No, for sure. I’m sure the professor was blown away by that, which is kind of fun. Did you do research with him all 3 years?

Guest

No. I did research with that professor the first year. I finished in 2.5 years.

It was 2.5 years. Did you find that you got the classic college experience in any way? You were quite young at the time. What was being at Harvard as a 16-year-old like? Were you the youngest on campus?

Guest

No. There was one girl who was 15, and there were 2 other 16-year-olds. So, there were 3 of us in our age range.

Was the experience—

Guest

I think people say that skipping grades means you didn’t get a proper college experience. The reality is that if you’re somebody who’s really into math and all these things, and you’re doing competitions, then if you go to college at 18, you’re hanging out with the same kinds of people anyway.

It’s not like if you’re 16, you’re hanging out with the math nerds, and if you’re 18, you’re hanging out with football players. It’s not that different. You still hang out with the same kinds of people.

Right. Was there anyone, basically up until this point, that you ran into who remains relevant in your life today? I think you mentioned a few.

Guest

Yeah. So, like I was saying, it's kind of like a Forest Gump experience looking back, right? In those early 2000s, one of my good friends from the computer Olympiad, aka the Informatics Olympiad, was Adam D'Angelo, who was actually Mark Zuckerberg's high school roommate, helped him build Facebook, was the first CTO there, and is now on the board of what was likely OpenAI. Two of the people from the physics camp are now co-founders of Anthropic. Somebody from my high school is Vlad Tenev from Robinhood, and that's just talking about founders, right?

I think at Harvard in the early 2000s, 2 of the people there came pretty close already to becoming president on either party. Another one served in the White House at a very senior level, and so on.

That's very cool. And so when you graduated at 19, I read that you were personally recruited by Ken Griffin to work at Citadel. What was that experience like?

2. Ken Griffin Closed Me At 18

Guest

Yeah, so it was when I was 18, and I think Ken—I wouldn't say he personally recruited me, but he personally closed me, right? The firm was already talking to me at the levels of the quantitative research team and portfolio management, and I was deciding between them and a few other firms. That's when Ken really got involved and spent a lot of time with me, walking me through how he thinks about markets.

That was, again, a very interesting time because markets had just become electronic a couple years prior, and he was building out some of these trading desks for the first time. One funny thing was that, based on some of the research I had done, I was trying to trade options on my own in college. Ken was like, “Yes, actually, some of those strategies did work for many years, but I just arbitraged them away, so that stuff doesn't work anymore. You should instead come work with us.”

He was very good at convincing me.

What were some of the—do you remember any takeaways or specific frameworks that he mentioned that have stuck with you? What can you tell me a little bit about?

Guest

Well, I probably shouldn't talk about any specific trading strategies, even now, 20 years later.

They'd come after you.

Guest

Well, I don't want to imply that, but I just don't want to give other people listening the idea that it's appropriate to talk about that kind of stuff in general, right?

But I will say one funny thing. My first week, Ken brought me these track records of other funds so I could check them out and see if there was interesting stuff in what these other guys—our competitors—were doing, right? I said, “Okay, I'll look at that.”

3. "That's A Ponzi": Ken Called Madoff In 2004

This was 2004, right? I had done some of my own research on other funds and track records, and I said, “Well, shouldn't we be looking at Madoff? His Sharpe ratio is very high, and he's trading options. Shouldn't we be figuring out what that strategy is all about?” And Ken said, “Oh, no, that's a Ponzi. Don't worry about that one.”

So he knew somehow? When was this?

Guest

2004. So this was a full 5 years before, right?

Right.

Guest

And then later on, when it was uncovered, the SEC published the full report and said that 3 anonymous hedge fund managers reported Madoff to the SEC. Maybe it was—I don't know exactly how that went down—but the SEC did look at it and thought they had checked it out. They thought it was okay, right?

Because he gave them a DTCC number. Madoff gave them a DTCC number to call, or to look at, and when they called DTCC, that was a fake number, and they never made the call. So had they just picked up the phone, the call would have uncovered it based on those suspicions.

I mean, stuff like that, I guess, turning it back to what I do now, is what got me really excited about using blockchain for finance, right? Something like Madoff would have never happened if the stuff was on-chain, where him getting called literally depended on somebody picking up the phone and asking DTCC a question.

How do you see that? How would blockchain have stopped Madoff from happening specifically? What about it would have stopped him?

Guest

Because the thing with Madoff, right, is that he actually never did any trading. He just said he did. He raised whatever it was, X number of dollars, and just said, “Okay, we made 10% last year, made 12% this year,” and just kept going and raising more money.

Like classic funds, there were no actual trades happening. He sent reports of trades to his LPs, but it was all fake. When the SEC tried to check it, they said, “Okay, what's the DTCC number for this account?” He gave them a fake number.

On-chain, all the stuff could just be verified. If you're up 10%, and the reason is because you bought Microsoft at 30 and sold at 40 or whatever, all those trades would be on-chain. Anybody could verify them.

Yeah, that makes sense. But one pushback that is often made is that people don't actually want all of their trades to be public in any meaningful way, and so you have to figure out a way to obfuscate that. How do you approach that problem?

Guest

Well, in terms of that, there are ways to do it with zero-knowledge proofs, actually, right? You could prove that certain trades were done without the exact trades being made public. There are different ways of doing that, right?

For one thing, it's not real-time, right? It's not like you're publishing the trade at a time when somebody else could front-run it, and there are issues like that. I mean, we're talking about longer-term investments here, but there are ways to implement dark pools or add additional levels of privacy.

I've actually been surprised that there's not as much market demand for that as I would have thought, because the way Lighter works, we use ZK more for scaling. We could use it for privacy and add these kinds of features, but it hasn't been much of a customer request. Once it becomes a priority, we can build more along those lines.

At this point, a lot of firms, including the one hosting the summit and others, trade on-chain, right? They're perfectly fine. They still have a lot of alpha in that environment, and they're perfectly fine executing.

I want to get into Lighter, but before we pivot to that, you spent a decent amount of time in finance. You were working at Citadel and then another quant shop, right? But after that, you actually took a break from finance and pivoted out. You worked at Quora as the head of ML, and then you also started an AI company. Then you came back to finance, so I want to hear: why did you leave finance, and then why did you come back to finance?

4. Why He Left Wall Street For Silicon Valley

Guest

Yeah. I certainly thought that going from Wall Street to Silicon Valley was going to be permanent. I certainly didn't come back to Wall Street in its traditional form, but at the time I thought, “Okay, this is really interesting. Trading, building out quant strategies, building out early forms of electronic trading—very interesting work. But at the end of the day, we're not really building new products and new markets.”

I saw that happening in Silicon Valley, by people like my friend who was CTO of Facebook and then started Quora, and others as well—early people at Google and early people—

So that's how you ended up at Quora, through your friend?

Guest

Well, yeah. I knew the company through him and others. I knew a lot of the early team there, but I considered a few different places. After Quora, I joined Joe Lonsdale to head up engineering at Addepar. There we recruited Scott Wu, also from the Olympiad world, and then Scott and I started a company a couple years after that.

Right. It's like one big club. What did you—are there people—

Guest

It's one big club, but it's an open club, right? It's not like an old boys' network. It's more merit-based. If you're really great at what you know—and it's not just math—if you're really good at customer success, if you're really good at operations, you're welcome to the club.

Maybe because up until you started Lighter, you've met a wide cast of characters and a lot of really interesting people. What are some of the biggest lessons that you've taken away from specific people that you think are valuable to you today?

Guest

Yeah. I wrote about this recently, and one of the big lessons from Joe Lonsdale, who also famously co-founded Palantir, was really the idea of having engineers be the tip of the spear, part of the customer success team—forward-deployed engineers. That idea was new.

It's funny because a lot of these learnings, if I say them now, some of you listening might think, “That's obvious. Of course it works that way.” But it wasn't at the time, right? That idea was an important learning.

Something I learned from the Tenev and Robinhood team was the idea that you can have a product with zero fees. At the time, that was considered crazy. Now it's like, “Yeah, of course you want to have zero fees for retail,” right?

I don't know. I'm trying to think: is there something that I learned from one of the industry greats that's still considered controversial?

That's a good one.

If you think about it at some point.

I feel like a lot of these ideas are about being contrarian and right—

Guest

And then it's no longer—

Right, it's no longer contrarian.

Guest

No, it's a problem with old advice, but I think it's also something that sometimes people just don't necessarily think about.

So, it might be commonplace knowledge among successful people, but if you're just starting out, you have to learn that framework at some point, right?

Guest

Yes.

It's like every day, there are probably 10,000 people learning the framework of a forward-deployed engineer because they've never come across it before, because they're maybe 18 years old.

Guest

That's right.

So, I think that's important. And I want to get to—actually, you mentioned Scott Wu. So, you've co-founded Lunchclub with him.

Guest

Yes.

That's right. And you worked with him for a few years before you ended up pivoting Lunchclub to Lighter.

Guest

Yes.

One thing that I noticed is that when you pivoted, even though it's a completely different concept, you managed to retain 80% of the workforce. Is that right?

Guest

That's 80% of engineering.

80% of engineering. How did you convince them to stay through it? I think this is very important for founders. How do you convince 80% of your engineering workforce to make a complete pivot into a different product line?

5. How To Pivot And Keep 80% Of Your Engineers

Guest

Well, hopefully because we've earned some trust from them. That's a starting point, but I think more specific things we did, right? One, they were part of the process. So, once we got approval from our board to do a pivot, we didn't just say, “Okay, we're going to pivot to this.”

We actually ran an internal YC within the company, right? So, we had 3 projects going at the same time, and then we did an internal demo day and pitch competitions and all of that, right? So, everyone felt like if someone—even the least experienced person on the team—came forward with an idea, “Hey, the whole company should do this,” that would have been considered too, right? And so they felt like they were part of the process, for one thing.

Two, they still knew that we had healthy runway, strong investors, and it's not like we were down to the last 3 months of funding or something like that. I think a third thing was, for a lot of our team, the technical problems they would have wanted to work on were actually closer to what we're building at Lighter. They joined the original team more because they wanted to work with other smart people. The problem space itself, they were somewhat interested in, but they were actually more interested in the problem space of Lighter, which is cryptography, scaling systems, quant finance, that kind of stuff.

That makes a lot of sense, and I guess that also is part of why that idea won the internal pitch competition, right? But, yeah, can you maybe talk about some of those technical challenges that you were solving? What were they, and what made them interesting? Because I think a lot of people hear the technical challenge and they go, “Well, I don't understand anything. I don't understand why that would be interesting,” right? But maybe you can translate that. What was interesting about these problems?

Guest

Right. Before going into specifically what was interesting there, I want to make a general point, which is, I think oftentimes there's this narrative: “No one cares about tech. It's all about distribution, it's all about user experience,” and this and that. I'll push back on that.

First of all, things like distribution and user experience can and do depend on the tech, right? When we've done partnerships with Telegram Wallet or Robinhood, they absolutely did diligence on the tech and cared a lot about that, right? Or user experience—shaving 100 milliseconds off trade execution, even if the user doesn't know how we're doing that, they absolutely care about that happening.

So, again, if you look at something like Bitcoin, how many people who use Bitcoin actually fully understand how it works? Not many, but they know that it does work, and they know that if it broke, somebody would find an error. So, I would make that meta-level point.

Why is the problem space of Lighter interesting? Because we're solving a problem—we're optimizing across a few different dimensions, right? We want to build an exchange that's low-cost, low-latency, verifiable, and secure. That kind of 3- or 4-dimensional optimization problem is very interesting intellectually, right? Because a lot of times when you make decisions, you trade off being strong in one of those areas and doing less well in another.

But sometimes—and these are the moments that really get engineers excited—you find novel ideas for a system that actually improve all of them, right? You write a piece of code where, after you deploy it, it's actually cheaper, faster, and more secure. That's the stuff I think that really gets engineers going.

So, you found that mostly these things are at odds with each other, and you have to make decisions, right? I mean, that's true of any—I mean, not specifically to us, but in general, when you're building systems, optimizing one goal usually means you have to compromise another goal, right? But sometimes you find these really cool ideas where all of the metrics improve.

So, can you talk me through some of these breakthrough moments in the process of building Lighter? When did they happen, and what product do you think you have today that really differentiates itself from the market?

Guest

Well, I guess one breakthrough moment was just realizing that we could actually build custom ZK circuits. We don't have to adapt general-purpose circuits to our use case; we can actually build custom circuits specifically for finance, right?

And we realized that the amount of compute you need to prove those circuits is actually only 1% of what you need for a general-purpose computer. And that's to run finance, whereas finance is, what, 30–40% of the economy. So, in a world where everything is on-chain, imagine you find a way to run 40% of the economy at 1% of the cost. That's pretty cool, right?

6. Running 40% Of The Economy At 1% Of The Cost

And is Hyperliquid doing these things as well, or do you feel like you've really created a new space in finance?

Guest

So, I think, again, going back to the point that there are a few axes here: low cost, low latency, verifiable, and secure. I would argue that we're stronger on all of those dimensions than pretty much any of our competitors.

Some of them were there earlier and built a strong track record. I think some of these guys had a step-function change relative to what came before them, right? So, I think we have to give them credit, too, and they had good products at the time when there were very few other options.

Any of these products in the decentralized space right now, at least in the top 5 or top 10, I think, are stronger than centralized exchanges for most customers, and that's where I think most of the shift will happen, also, from CeFi to DeFi. But we certainly believe that our technical choices have led us to being stronger across several different dimensions.

And we're seeing that being adopted either by direct users, but also through integrations, institutional use cases, and so on and so forth.

Do you think your partnership with Robinhood was directly a result of the technical choices, or was there something else? What were the conversations like there?

Guest

Well, the technical choices were a big part of it, for sure. Being on top of Ethereum—and, again, implementing what we've been able to implement while retaining Ethereum's security is a hard problem, right? Robinhood Chain is also on top of Ethereum, so that interoperability is really important.

Just low latency was important, too. I think in the demo we did last week, everybody there was pretty impressed with how fast it was, right? “Good speed on that” was kind of the quote. But it's not just that, right?

We forward-deployed engineers, right? Actually having people on the team who are there, working with teams at Robinhood, Telegram Wallet, and other ongoing partner conversations, that's important too. Or, like, being a good dance partner, as somebody put it.

It's not like—I think the idea of, “Okay, here's our tech; just throw it over the wall and use it as is,” can work in some contexts, but it doesn't if you're working with a large financial institution, whether they're on-chain or not, right? There are people there, and there are fine details to get right.

They have a lot of their own customers whose priorities need to be considered. So, I think it's much better to do that in a collaborative way.

Makes sense. Is there a world in which you ever move off Ethereum, or how important is Ethereum to your model?

7. Robinhood, Ethereum & Options Onchain

Guest

Right. Well, Ethereum is the most secure ledger for DeFi, right? If you think of that ledger as the on-chain equivalent of a clearinghouse in TradFi, it works, right? I mean, there's no reason why Ethereum wouldn't serve that function very, very well.

It's been secure and stable since the beginning. Over the last 10 years, there have been no hiccups at all. I mean, in a very hypothetical sense, if that stopped being the case, would we move?

If there was a new Ethereum that was even better in every possible way, would we move to that?

Guest 2

Maybe we could, right? But that's not, I guess, in our technical roadmap. That's not in the top 10 or the top 100 things that we're looking at, right?

What is the next problem for you to solve? Is it technical, or are you now focused on marketing and liquidity? Where is your focus right now?

Guest 2

Well, we have the capability of doing multiple things at once, but—

If you had to pick one, really, one—

Guest 2

Well, right now, one thing we're really excited about in Q3 of 26 is options: building real options on-chain and having that be on the same balance sheet and the same risk-collateral model as perps and spot, and doing that within Lighter.

Vlad Tenev

I mean, that's a really exciting problem, and it's technical, but we also need to get the right market makers involved. We need to tell customers about it. So it's a technical problem. It's also a marketing problem. It's also a partnerships problem.

Are people going to be able to trade options on Lighter through Robinhood?

Vlad Tenev

That's the goal.

That's—yeah. But do you consider yourself competitive with them, or is Robinhood to you just a layer for users?

Vlad Tenev

They've been very good partners. I think for a lot of these things, our approach is to work with a partner rather than go it alone. Our strength is in the technology part, right? So if there's a partner that already has very good distribution, relationships with institutions, and maybe some regulatory aspects—which we're also working on, too—we'd rather work with a partner in that case than go it alone.

Yeah, and the partnership, by all accounts, has—and reasonably, it looks like it's going to go very well so far. So congratulations on that. I think, generally, as somebody that's been in crypto for a long time, the financialization—the actual implementation of crypto in the world of finance—is very welcome. We're finally getting things that are useful and used, and people seem to enjoy them.

One question I think that a lot of people have, though, is the perennial issue with crypto: where does the value accrue, right? And I know you've talked about this before, but I think it's important for anyone new listening to get that from you. What is the value of the equity versus the token, and why do you have the token, I guess?

8. All Value Accrues To The Token

Vlad Tenev

Sure. So Lighter has a pretty unique structure in that we're a U.S. C-corp. We've always been a U.S. C-corp. There is no dual foundation or anything else like that. We built in the U.S. from day 1.

I guess our thesis at the time was that regulations are slow to come around, but they will come around, and that's been happening, right? To answer your question, we raised funds through venture funding. I think it's healthy to do that when you're building something as massive an ambition as Lighter. But we committed that the round we raised before token launch is the last equity round we'll ever raise, and everyone knows that. All the stakeholders at the time—we were 5x oversubscribed—so anyone who didn't like that and didn't think it was fair to them had an opportunity to get out at a very healthy return for them.

Only 1% of the cap table took that opportunity. So everyone else is all in on the token model, and the team is all in on the token model, with all value accruing to the token.

All value accrues to the token. Okay.

Vlad Tenev

Yes.

So the equity doesn't get any revenue or profit at all?

Vlad Tenev

Okay. Now, I will say that, in a longer-term time frame, let's say that we are in a healthy place with the CLARITY Act passing and the SEC continuing to innovate how they think about tokens, right? I think where we want to get to is where equities are tokenized.

So then let's say there was a project that wanted to have a native utility token and equity, for whatever reason that makes sense for them. Well, then that equity would also be tokenized. It would be like they have 2 different tokens.

Right?

Vlad Tenev

So I think now, for us, it would be 1 token, which we have now, and that token would also be equity.

That makes sense.

Vlad Tenev

So I think that's the world we'd like to get to, and from our perspective, we're already there. But from a regulatory perspective, once CLARITY passes and the SEC continues to innovate, to me, that's the exciting end state here. Then there will be no ambiguity about these things.

I think that's a good place. We have room for 1 last question. I've seen you reply on Twitter to a lot of people, and I think you have a very unique communication style.

My question for you is: is this just you shooting from the hip, or is this a strategy? Is this a marketing strategy, or are you just having fun out there?

Vlad Tenev

Yeah. Sometimes, if I'm taking a break in between meetings, I just like to—when I was at Quora, I did a lot of writing there. So to me, the feed is just Q&A. If I can answer a question, I'll answer it.

I think some of the stuff is pointing out the absurdity of this industry. It's funny to see some of the responses, right? Because I think the responses are even more absurd than the thing I was trying to make fun of in the first place.

I mean, that's welcome to crypto. Vlad, thank you so much for coming out today. This was awesome. Really enjoyed this.

Vlad Tenev

Thank you so much. Yeah.