All right. All right. Welcome back, everyone. Do we have a good lunch? Anything good out there? Food’s pretty good this year, right? Well, I hope you had a good lunch. Everyone from the live stream, welcome back. Take yourself off of uh whatever you’re doing and and and welcome back to the live stream. So, as I tee up this next session, I want to just preface a few things. When we came up with this idea, we’re like, will this work? Can this play? Um because yes, this is about the 2026 midterms. This does involve politics, but and I want to make this clear for you guys here in the live stream. This is not about left versus right. This is not a session about political punditry. It’s not going to be a segment from cable news. Uh we’re not here to debate the individual candidates or the issues at play. As everything we do, this is about trading. And unlike the presidential cycle where we actually launched our prediction markets product for uh the the race between President Trump and and Senator uh Harris or Vice President Harris. This cycle is a midterm cycle. So there are hundreds of potential events that you guys could look at and trade across House, Senate, gubanatorial, down ballot. And so this is like approaching the S&P 500. How do we narrow that universe down and find tradable opportunities? Which ones do we lean into? Which ones do we avoid? Or do we just use this as information to help us trade our normal financial portfolio? So, what we put together here are three experts from three different perspectives. We have a campaign strategist, we have a pollster, and we have a trader. And we are going to try to build a methodology for approaching the midterms like we would with anything else. So, please welcome to the stage Walter Hickey, who’s the executive editor of our media brand, Sherwood uh News. Danny Moses, who if you guys were at the trading lab just now, veteran investor uh featured in the Big Short, he’s going to be our trader. And then Matt Rose is a veter veteran political strategist, former campaign manager for Mitt Romney. And then Patrick Rafini, founder uh uh founding partner of Echelon Insights and one of the country’s leading pollsters and data strategists. So without further ado, welcome to Prediction Markets, the 2026 midterms, building your trading plan for election season.
Hello. Thank you so much all the folks for coming out. Hope you had a good lunch. Uh thank you for coming out to this session. Today we’re going to be doing something pretty specific. Uh we’re trying to build a game plan for trading the 2026 midterms. We’ve got three very exciting, very different lenses on stage. Matt uh from the political campaign space, Patrick from the polling space, Danny from the trading space. As we kind of kick this off, I want to just go a little bit around the horn. And behind me, you’re going to see the Robin Hood midterms election hub as we get going and kind of dive in on each of these individual races. But um let’s start from the very top. All right, we’ve got a very big outcome on the board. Uh we’ve got just fewer than 5 weeks until election day and I’m interested in how you’re viewing the race. Uh Danny, do you want to kick us off? Sure. Thanks for having me. Great to be here. Um, over the last several weeks, we’ve seen the chance for Democrats to take the Senate, which is really was the only one that was really in play at this point. House, I think, is up to 93% probability, from a 50/50 to roughly 63 or 65% chance, which inversely would be 35 or 37% chance for the for, you know, Republicans to take the Senate. So, what does that mean? I try to trade policy, not politics. So, how I would think about that would be what industries in the stock market is it potentially good for, who is it bad for? And and what does it mean to basically future policy legislation as to go so far as to say, will the government shut down on December 12th, which I don’t think enough people are talking about, which is another event that’s trading out there. So, I kind of try to take it all in. And then to your point, what’s priced in and what’s not priced in? I don’t think the Dems’s taking both houses in Congress is priced in yet. Uh that’s just my personal feel even though the prediction markets are telling. So something I’m watching. Matt, what are you thinking about right now? Yeah. Well, look, it’s great to be here. I know you guys are an educated bunch because you are investing in all these races. I feel like the media, no offense, Walt, is just kind of waking up and now they’re paying attention and they’re starting to write about some trends that you guys probably saw come about 6 months ago, some of these trends a year ago. And in our country, and I’m always looking at trends, whether it’s looking at polling data that’s coming in from a public standpoint, um historic trends in any given state, but in 11 out of the last 13 elections we’ve had, presidential and midterm, there’s been a change in either the House, the Senate, or the White House. So, what does that tell you? That tells you the American voter is in a mood to reject. They’re rejecting people left and right. If you read the media reports right now, you know, if if this is a date, like, you know, we’ve had rejections where they don’t call you back, the way the media is going in some of these public polls, this is a throw a drink in your face kind of rejection, but there’s still opportunities and and and Danny just hinted at that. You know, the House is the House. It’s the smallest majority anyone’s had going back, I think, to 1932. So, the margins are very small for Speaker Johnson. But in the Senate, the map is a good thing. And I think even some of the media outlets that are covering this, and they’re always going to do the horse race. That’s part of the trends that you guys got to think about and know about. And Patrick will get into that a little bit more. Uh but they want the horse race. It’s closing. But the map is such an ally. We’re in some very r very very very red places including the state that we’re sitting in now which you know is a huge pickup need and I say need for the Democrats to become the majority party in the Senate. So I agree with Danny there’s still a lot of I don’t want to say a lot of time there’s still time in the Senate there’s a lot of competitive races and the map is not the Democrat’s friend. Patrick I want to talk a little bit about some of your work. What are the polls saying right now? Now, are they saying a similar story to what we’re seeing in the markets? Are there any meaningful differences that you’re picking up? Well, if anything, I think the polls should be telling or the market should be telling a more different story than the polls. I don’t think um you know what we’ve seen um and I looked I looked at this coming in coming into today um that you see in most of these states that the probabilities at least on the vote hub uh forecast and uh you know and looking at Cali um you know uh they’re within a point or two and then there’s one glaring exception where there’s about a 20 point disagreement um in Kansas between um the polls and or at least the fundamentals and the forecasts right um the Nate Silvers of the world um and the markets. Um and those are all polling based markets, right? Um so, um I think if anything, um I think markets can add a lot more um because as a pollster, I would be the first to say that, you know, you should be taking a lot of the polls you’re seeing uh with a grain of salt. Um, you know, we’ve seen historic a historic trend of the polls not capturing in particularly some of these Midwest states. Um, the white non-ol population, which is a majority of the electorate. Um, this was the reason Donald Trump was able to surprise everyone in 2016. Um, we’ve seen states like Ohio, Iowa consistently miss uh on um, you know, and Republicans um, not pull ahead in those states until mid-occtober. um well, Democrats were always favored and I think we’re are we seeing a repeat of that or is the wave or is the fundamentals of this particular election cycle enough um to keep Democrats rolling through all the way through election day? I think that’s the fundamental question right now. Um but I think the markets play a useful role in correcting I think some of these historic mistakes that even as a pollster I would tell you um those are things you really need to be concerned about and watch out for. Uh, I want to back out a little bit and Matt, I I want you to take this because I want to talk a little bit about just midterms 101. We’ve got a lot of folks in the audience who are very very experienced with markets. We have a lot of folks in the audience who might not be as familiar with what makes a midterm election particularly new or interesting or unique outside of a presidential. So, could you just give us a framework for what makes a midterm a unique and kind of difficult to predict uh election compared to maybe some other national races? Well, again, another historic trend. midterm elections, much smaller turnout. And with all the transformation that’s happened in politics and the emergence of President Trump and the MAGA movement, back in the day when Patrick Graffini and I were working together on campaigns in the Bush Cheney world in a midterm, we’d want low turnout. But now, President Trump, Republican party, they want higher turnout. So when as an investor, if I’m looking out there and I’m looking for opportunities to invest in, look at a place like Texas, which the horse race theory is totally in play when you look at some of the public polls and some of the media coverage, but there’s a saying we have on campaigns and the political side. It’s not scientific, but when we’re looking at vote goals and vote totals, we talk about ducks on the pond. How many votes are out there that we can get? and with Attorney General Ken Paxton and talking to some of the folks that you know know him well and work in his his orbit. One of the reasons why in some of the public polling data he’s underperforming a little bit and is lower in the polls at least from a public standpoint than Governor Abbott the Republican governor of Texas is right now he’s he’s seems like he’s underperforming in rural parts of the state. So, while you guys are sitting in your hotel rooms tonight and you start to look at some of the political ads, I’m going to take the the over that you’re going to see a Terrico or a Paxton ad on TV. And the ad you’re going to see on TV, and I noticed this last night watching the Yankees destroy the Boston Red Sox is that it’s focused on a rural voter, not a college educated suburban voter in Houston, uh, or the suburbs of Houston. And so that tells me he’s got room to grow. There are still ducks on the pond for Attorney General Ken Paxton. Meaning there’s voters he can pick up. If a Republican, a conservative MAGA Republican like Ken Paxton can’t pick up and find some more rural voters in the state of Texas, then well then he’s got a problem. But I think he can. Yeah. This is again to your point, this is a race with h there are hundreds of races around the country and it’s not all down ballot from one at the top. Patrick, I I want to actually go to you real quick. And you know, we have lots of polls at the state level. We have lots of polls at the national level. How do you recommend folks kind of make sense of this on a race by race basis? Yeah, I mean, it’s uh there more polls than ever before, and I would say there’s more incentive uh for uh you have a lot of lower quality polls uh coming in. There were a couple fake polls earlier this cycle. Um and um you know, and I think it’s part of the media ecosystem that we’re uh in. There’s more and more people. There are rooms like this of people who are never would be interested in elections before. Uh would never really play in elections and are now playing in elections. And so um to feed that interest, you have lots and lots of polls. Um not necessarily always the highest quality polls, not necessarily the polls that we as campaigns are um are uh uh you know, really uh you know, and the way we conduct polls. Um, you know, we’re very careful to look at voter registration, look at um, every single if we have 3 million voters in a state, we have the voter file on all three million voters in the state. So, we know what that electorate. We think a few points or two is going to look like and we’re conducting polls on that basis and not everyone is doing that. Um, so, uh, you know, what you get sometimes are polls that, you know, can look like extreme outliers or don’t, um, wait on things like education. Don’t wait on, uh, are really not in the ballpark of how this state has ever voted in the past. What I like to do is take um you know, you have uh your polls in an individual state, but I like to combine all the polls in all the states at the state level and just look at what’s the shift from the last presidential election to uh this current election. Um cuz that’s going to tell you, right? And the reality in this midterm, I I like to um you know, say it’s like a big wave but a high wall. Uh, and the wall for Republicans is the fact that the state that you need to take control of the United States Senate is a state that voted for Donald Trump by about 12 points. Um, so, uh, that’s a pretty big home field advantage. Uh, right. And sometimes, you know, the White Socks can come to Houston and uh and uh beat the home field advantage, but there is a home field advantage that you have to take into account as a traitor and thinking about because political fundamentals, the sort of we would call political fundamentals. Um uh you know, the basic partisanship of a state, how many Trump voters, how many Harris voters matters a lot more than it ever has. Uh, and the the variation the the uh the spread between these races used to be a lot bigger uh when uh Matt and I were starting in politics and now it’s just a few points. Um, so Democrats really I still think have their work cut out for them in the Senate. That’s that’s so interest again. I love the line of a big wave with a big wall like that. That’s really interesting in terms of how to view this race. Uh Matt, I want to go with you as well. We’re still talking about the Senate a little bit behind me again. you’ll see on the midterm sub uh the Senate map. Uh like what are we missing for those of us who aren’t plugged in to the decisions that are being made right now on the Senate level, right? Like you’ve had like insights and and access to lots of really interesting rooms over the course of your career and how party decision makers, money decision makers are investing and deciding where to kind of go like what what are we not privy to necessarily that’s going on now? Uh, Matt, well, at the national level, whether it’s national super PACs or the national campaign committees, they’re making decisions just like you all are investing in these races. They’re making the decision on where should they invest their their resources. And so many of these decisions quite honestly should have been made uh and could have been made over the summer. But like where can we find our path to victory? And we keep going back to the Senate. And so as you guys look at races to invest in, you should follow where the money’s going to go. And there’s races that have been discussed in the last week or two where Republican national uh campaign organizations aren’t going to invest in. But where the action’s going to be, and again, if if Republicans lose three seats, they’re still in the majority. It’s a 50/50 tie. And there’s a plausible chance that that could happen. Um but follow the races, follow where the money’s going to go. You’re going to see a lot of action. There’s three seats that Republicans need to to at least keep two of the three. Alaska, Texas, which we talked about, in Maine, where Senator Susan Collins is the only human being on the face of the earth that could run statewide in Maine as a Republican and still be competitive and and win. There’s no other human being that could do it. So if Republicans win two out of those three races and then pick up a race and two of the races that are going to still be looked at and people are going to think about investing in are Michigan with Mike Rogers and another pickup opportunity in New Hampshire with former Senator Cenounu and the Cenounus up in New Hampshire are kind of like the Republican version of the Kennedys but not as good-looking. Um but they’re a great family and we’ll see how it all turns out. So like that is a plausible pathway and that’s where the money is going to go on the Republican side. So as you guys think about your decisions, you should follow those races and see what decisions are made because it’ll start to come out all these media buys, especially broadcast TV. Um if people start pulling and plugging in different places, you know that there’s polls, internal data, and vote goals, especially when they start adding in the early absentee voting, which is going to be starting next week. Is it October 6 where a lot of it starts where smart people like Patrick Rafini can overlay data on some of the returns and kind of have a good indicator of how bad or how good we’re doing as a Republican campaign. I want to jump from the Senate to the House real quick. And Danny, I want to go to you because a lot of what you’ve been talking about here is not just like the actual races themselves investing in, but also, you know, the the ramifications about it, the data center trade, the AI trade, the regulatory policy, and and the House is going to be very instrumental in all of these, right? even, you know, how is a, you know, potentially split house or a deadlocked, you know, legislature going to handle a Republican president? And so, what are you looking forward to when it comes to how are you how are you factoring in the house, I should say, when it comes to your overall investing decisions and your overall portfolio? Let me just say since this conference is about the stock market, a lot of people invest in the stock market. Historically, the stock market is the economy and vice versa. Never have it been in a period of time where that was this separated so much different. You have x amount of stock supporting the stock market and you have x amount of consumers, you know, supporting the economy. So it’s really bifrocated when you think about the breakout of the economy and that’s kind of what you’re seeing within this election outcome. So, so I think, you know, banks would not do well historically in a highly regulated environment that might happen if Dems get both houses and congress, right? So that’s one thing. As far as the capbacks and AI, we’re at an inflection point anyway. I believe on AI, forget safety for a second. Let’s leave that to the side. There is a mismatch of supply and demand going on in the AI trade. You can use it as an excuse that the Dems win. Oh, they’re going to halt it. That’s why I don’t think that’s why these stocks are kind of booing right now. I don’t think that’ll be a reason. I think that it’s too important to the economy on both sides uh to have this build out in a very smart way. Um, so I think that is a little bit of a misnomer, but could be used a as an excuse. Like I said at the opening, I don’t think the market trading in. And you bring up crypto and Bitcoin, a lot of people here own that as well. They if Dems take both sides of Congress, maybe it’s a negative, they’ll think because there will be less Clarity Act chances, things like that. So there’s a lot of moving pieces. Um, so it’ll be interesting how it plays out and I know we’re going to get into some of the specific maybe how to trade it and what to look for. Um but uh you know and with MAD in terms of um you’re going to get surprises. Yeah. I I think there’s a lot more volume to come in to these prediction markets um over the next five weeks and there’s going to be a lot of ups and downs I think here coming. So I’m skipping ahead a little bit but actually on that point I’m super interested in what your thoughts are on some gubernatorial races particularly as it relates to the data center issue and how it reflects the data center trade. Are you looking at these? What’s on your mind? I haven’t done enough work on with I mean I know the states where a lot of these centers are being built. Um I know that it’s going to be important part of how people vote potentially. You’re already getting complaints of energy prices up in an area noise complaints obviously for data centers. But again I also think that it’s actually not a negative for the AI sector if things were to slow down a little bit. That’s a whole another podcast segment obviously what it means. Um, so I haven’t paid, you know, enough attention, but it’s definitely going to be going to be a focus, um, for sure on some of those races. So, so I I want to talk about some close races here. Uh, and I’m interested in kind of where you folks are looking on the map. I mean, Matt, you know, you’ve been the RNC before. You know, how people assess this large national map. You can kind of identify folks who are outperforming potentially. You know, what has your eye, what has your attention, what’s a close race that you’ve been looking at? Yeah, on the House side, I think there’s a couple races you should really look at to kind of make a decision from a broader standpoint of how the night’s going to go for for Republicans in general. Uh, one is Pennsylvania 8, uh, which is a Republican seat, but it’s in the Scranton Wilsberry market, which is a very, no offense to Scranton Wilsbury, a very cheap investment from a financial standpoint to buy TV and media up there. And so the Democrats, you know, wisely are spending a lot of money in that market uh in Pennsylvania 8. So that’s a race to watch. If Republicans were to hold that and Pennsylvania came in early, you know, that means that a lot of these public polls were showing more of a surge or wall than was expected. another race that I always go back to and I feel like I go back to it every cycle and he’s a buddy of mine and I love to to pitch him too. So like unlike Danny, I have a a heart on some of this politics. That’s why I like listening to him. He has no heart. He just wants you guys to make the right investment. But Lawler, Mike Lawler, New York 17, that’s uh Rocklin County. So just north of the city where I’m from, we call that downstate New York. Um it it’s it’s a true swing district. Mike Lawler though is one of those guys that you constantly see out there. You might not agree with him, but you know, no offense to a lot of members of Congress in the US House. A lot of them don’t do much. Mike’s out there, you know, even when he disagrees with the president, he does it in a way that the president actually listens to him and pays attention to him. And you saw that on salt tax policy back in the state of New York. Um, if he can hold on there, then it’s not going to be as as bad of a night for for Republicans either. and he’s got some really some things going for him. One, dynamic personality that actually does things. People know him. They actually hear about him constantly out in the news media. And there’s some voting blocks there. There’s a huge Jewish vote in Rockland County that I think is going to come home for Mike Lawler. So, when you’re looking at investments and you’re looking for ducks on the pond, you know, there’s a lot of ducks on the pond that I think Mike Lawler can bring home on election day and put him over the top of New York 17. So, I’d watch that. That’s a very expensive race, too. And the president just invested out of his own super PACs, I think $8.8 million. So, that’s that’s another encouraging sign for Mike. And it shows that you can have a public disagreement with the president and he still can love you and give you a big $ 8.8 million hug. And uh the president did that. So, keep an eye on New York 17. It’s so interesting because again like that is a very expensive media market but it is a reminder that like in as much as nationaliz politics have become nationalized all politics still is pretty local and that race in particular candidate quality really does matter. Patrick I want to ask you is there any part of the map that especially in the house that we’re not paying that close attention to. Obviously there was a lot of redistricting this past cycle that took a lot of races off the board put some on the board. Where are you looking for interesting races? Yeah, I mean on both sides of the redistricting equation are um you know you have seats where here in Texas Republicans uh tried to draw themselves five extra seats and they may be lucky if they get three of them um because in this environment right um you know you can’t um even if a Trump plus 10 seat is not safe uh for uh maybe you know next cycle it may be safe but for now it’s not a safe seat. Um and you also have um particularly with these uh districts along the border um where uh you saw a huge surge to Trump in both 2020 and 24, but it seems like a lot of those voters might be moving back and Democrats have done um a good job with candidate recruitment in some of those districts where some of these Hispanic heavy districts in Texas um even beyond those districts on the border, Texas 35, um even Texas 15, it’s one of those border districts. Uh Trump won it by 18 points, but Democrats have put up a a very strong candidate. And with the Hispanic vote, you can’t predict because they vote differently down ballot than you do at the presidential level. But I think we’re also seeing an interesting divergence. Um it’s not um between some of the blue states, what we’re seeing in some of the blue states and the red states. And I’m always a little cautious about this when people start talking about, oh, there’s a bunch of states that are going to vote completely differently. So, I would I take that with a little bit of a grain of salt. But you’ve seen polls out of Minnesota, very close race. It’s a very blue that’s a pretty blue state. Not not massively blue, but Democrats reliably win there. Um you see, um polls out of the Oregon governor’s race where Republicans uh you know, have a shot. And I think in particular um where they may be alpha um and but I think it requires um really knowledge of the states, knowledge of the environment is in gubernatorial elections. We’re talking a lot about congressional elections. We don’t talk as much about the gubanatorial elections because we don’t have the scoreboard who’s going to of partisan control. Nobody keeps track of that. Um, but that’s where you see a lot more openness of voters kind of switching sides because it’s less about what’s happening in Washington, more about what’s happening in their state. I look at a state like New York. I don’t think Republicans are favored in the state of New York, but the governor of New York, we saw it in the last time, and she’s trying to run for a third term. She’s very unpopular. I mean, uh, you know, she’s, I think, underwater by 15 points favorabilitywise. Um so some of those states you’re seeing a little bit of a signs of a split environment um and particularly in some of these statewide and guminatorial elections uh where people aren’t happy with um you know governance in those states either. Um if this is an anti-inccumbent wave it may hit um some of those Democratic incumbents in blue states too. It’s been so interesting at the gubernatorial level as you said you see states like Nevada as well where you’ve got again like states that are very much in the mix at this point. You’ve got also, I guess, Phil Scott in Vermont who’s a Republican who’s really running very very well in a traditionally blue state. It really seems like those tend to defy some of the conventional wisdom. Yeah. And that’s and that’s the thing. I mean, like I my thesis of this election, right, the wave meets the wall. Um, but that really applies to Washington doesn’t apply as much to the state level. I mean, you’ve seen some pretty idiosyncratic. You have a Republican governor in Vermont. You have a Democratic governor in Kentucky. Um, so that’s where politics really gets interesting. Um, and you know, as much as you know, there are a lot of races on the board, um, and a lot more maybe offensive opportunities for Democrats this cycle, um, you really have seen a real decline in the number of districts, um, particularly with redistricting and particularly with this hyper efficient and hyper optimized redistricting cycles that we now have. um where you’re really talking about two dozen seats in the House that are really competitive and are going to attract tens of millions or multiple millions of dollars in outside spending. Yeah. There’s just a lot of going back to the beginning rejection and it’s not good to be an incumbent whether you’re a Republican or a Democrat. And I was fascinated on the rejection theory looking at the state of Rhode Island. obviously not a bastion of conservatism, but they had two primaries, governor and the mayor of Providence, and they threw out both Democrat incumbents. And then you’re like, well, let’s look into it, you know, and partisans would want to look and say, oh, it must be AOC, you know, Democratic socialist candidates that just, you know, storm the gates and beat back these Democrat moderates. And that wasn’t the case at the ginatorial level. the the incumbent Democrat governor was beaten on the right and then in Providence it did happen there, you know, the candidate was beaten on the left and these were primaries on the same day and it just shows you the power of rejection out there. So when you’re in the majority and you have the White House, the Senate and the House, there’s an opportunity for the other side to try to run up some scores. Yeah, Danny, I want to talk a little bit about trading mechanics. You know, earlier Matt was telling us all about New York 17 uh behind me on the board. I’m going to pull that up. Um, and I would love for you to kind of talk a little bit about what you look for in these races, how it compares to, again, are you looking for volume? Are you looking for uh, you know, various different like do you where do you want to see these asymmetries? Do you want to see a race that has a lot of interest? Do you want to see a race that has a little uh, I’m just pulling up behind us uh, in terms of how this actually looks, but can you walk us through how you build a strategy with the trading mechanics on this? Sure. I think this is an interesting race because it’s East Coast and again, I don’t know the timing. everything comes in and polls are closing and so forth. But when you get an upset early, if Lawler, for instance, was to actually win or he was projected to win, it would swing things rather dramatically in terms of what people would predict. I think moving forward from there because maybe affordability wasn’t as big of issue as people thought, whatever it might be. So that’s one thing I think a race you would look at key and I would I would totally defer to Matt on which races he would look at on the East Coast that might be a bigger signal for what’s happening the rest. But in something like this, trading uh one of these markets, right, there’s two ways. Obviously, Dems’s getting the house is already trading at 93%. So, I would never really own anything at 93 cents to make 7 cents. That’s just not a great riskreward. But in something like this, maybe down ballot or, you know, in in a local house race, if you think Lawler’s going to lose, I I can’t see exactly where it’s trading, but the risk, you say to yourself, is there really a 65% probability that Lawler’s going to lose? Maybe. And I would watch it during the course of the evening, right? And so again, I would put limits in to sell things because things get obviously very uh may may get over it skis early. So maybe have something in at 90 cents. So maybe the you know the first 10% reports in that precinct and Lawler’s losing by a lot in an in a particular area of the of the district where he was supposed to do well, then you’ll go to 90%. I don’t want to be around for that last 10 cents. So use limit orders, use smart and look for liquidity. And so I would screen on this app by volume which you can do and anything below uh you know in terms of volume and open interest total you’re not so such little money could move those markets that it can send you know a false signal. So you got to be really careful uh with the volume and use limit orders is what I would say. So yeah, let’s also talk again about maybe a close race too like behind me I’ve got New York 11 the Staten Island race uh between the incumbent Nicole Maliotakis and you know you’re seeing here that you know these limit prices are rather these prices are adding up to over a dollar as in it seems like there’s a big skew between what you’re asking and what you’re bidding on this. So that comes down to market makers willingness to um basically provide liquidity into a market. So all event contracts should have add up to a dollar in a perfect world. Maybe with the bid to offer maybe dollar two since things are supposed to realize either at zero sense or at a dollar. So those should add up to be the same. When they don’t that tells you there’s lack of liquidity and there’s not a lot of market depth. So to me it’s a it’s a signal that I would stay away from the market potentially because obviously these market makers aren’t providing enough liquidity and it could move and you could get taken out of your position andor uh get scared out of your position rather quickly. So something else, you bring up a good point, something I look for as well there. So that’s really interesting. Anything else that you would kind of add on some of the trading mechanics element of it, like how are these similar to more traditional assets and what kind of strategies work just as well in this versus versus elsewhere? Well, this is a 24/7 market obviously. I know Rob had introduced pretty much 24/7 trading last night, so you could trade stocks with it. So they’re very different, you know, in that regard. Um, again, there could pockets of liquidity moving on a headline. uh that may be misunderstood in the media that gets picked up by an algorithm. So again, you got to be very careful on what’s moving it and um you know certainly not for the faint of heart, but it’s it’s a nice I I use these prediction markets a lot in general as a news source to help me in other things that I’m doing, not just with elections or whatever it might be and the implications of it, but it brings it makes you think about I didn’t even realize that that was even an event to be concerned about or that might be occurring in the next few days outside of elections obviously. So I kind of use it as part of Wall Street Journal, the FT, bottomup research, reading AKs, and then looking at event contracts, tell me what’s happening. So I want to talk a little bit about what you know makes these unique and why elections might be there’s some unforeseen elements of this, right, Patrick? I want to talk to you a little bit about what we can expect on election night, election week, couple days after, the idiosyncratic ways that these states might tabulate their votes. like what is would be might be new for traders who are more accustomed to a uh more specific settlement time than than elections might offer. Yeah. I mean um I studied this during the primaries. I don’t trade on prediction markets cuz I consider it as a pollster. You know I don’t trade on anything I might be pulling which could be anything at any given point. So I just don’t trade but I do I do think I do follow it closely. um I do um you know as an alternative source of information and um you know I was looking at the primaries and there was very clear biases in terms of how these the markets behaving oddly on election nights in these primary elections where um you know it seemed like there um was maybe almost an overreaction to these early ballot drops that in particular when they favored these progressive more progressive candidates um you know early in the Right. Um Elsa, yeah, was up to I think 99.9% on one of the markets. Uh and the race that was up within one point, right? Um so I think there’s a lot of emotion still that in in politics that there isn’t in other markets that you can take advantage of as a trader if you have a majority if you you know know that um and you can tell that a majority of traders on a particular contract want one outcome to happen. I think taking the other side of that is is probably a good bet because they’re going to believe any bit of good news, right? And if it’s even if it’s legitimately or seems outwardly to be a piece of good news that favors their preferred candidate, they’re going to tend to believe that faster than they’ll believe the good news on the other side of the equation. And uh it’s really complicated, right, coming in. You really have to know on election night the order um that ballots come in uh which counties which counties are reporting early votes uh which counties are reporting election day votes. There’s a dramatic difference between mail ballots and election day ballots. Um so there’s all this complicated thing and it changes from uh just because a state did it one way the last time, they don’t necessarily do it one way the next time. there are uh you know aggregators uh you know great accounts to follow that that do keep track of this. Um but at the same time you know I think and and but the markets I think in some ways were overreacting to some of those accounts. Um uh so um you know but there were pretty clear biases in the primaries that I think um you know light the path for uh I I pulled up California behind us just because they have a shall we say unique strategy of counting ballots that can kind of have some of those mirages as we saw during the primary. Yeah. I mean in California you know specifically I might say it’s a very blue state. Um but um you know in particular I mean that’s something that’s coming come in late in the night. So, um, uh, you know, I I think they’re probably, um, you want to be paying attention to maybe some of what are some early bell weathers early in the night. Um, like Kentucky 6. It’s not like that’s considered a competitive district, but it’s kind of a suburbish district that didn’t vote for Trump by a huge number. And it’s going to report very early. It’s going to have full reporting very early, and it could give us a good indicator of how the rest of the night is going to go. But um but you know in California remember during the primary I I was polling for one of the candidates in in California and uh you know Tommy Styer was up to be based on uh the way I think one of these accounts was characterizing the ballot drops the late ballot drops in California which obviously as we know California counts like takes forever to count. um based on how they were characterizing it um the markets went up to 50% and I you know I was pretty sure that there was no more than a 10% chance of Tommy Styer but I think there happened to be just a lot of sty bros there happened to be a lot of Hong supporters there happened to be a lot of supporters on these markets so that’s you know if you can really pick up on that I think that’s an opportunity Patrick can I just say something so Patrick and Matt bring up great points and they’re much more in tune with what’s the idea to to buy a contract at three or 5 cents does make sense if you believe that it’s you know 20 to1 which you’re the payout would be is way mispriced and so it’s not for me to decide cuz I’m not in the weeds like these guys are but I’m sure if you screen them then you could look at them and say that okay he might lose or she might lose but no way should it is it 20 to1 it’s probably like 2 to1 and then you can have opportunity but I think I think it’s key to point out that on the night of the election the market’s going to be very wide. So you talk about adding to a dollar, they might add to $180 because the market makers won’t be able to get the information that they’re going to have or whoever sources they’re using in time to get caught off guard. So just wanted to add that. Uh on the note of interesting data drops and things like that, Matt, can you tell me a little bit about Alaska? Uh this is going to be a race that’s going to trip some people up. Like rank choice, I know you’ve got some strong feelings on, but what can we look forward to in that kind of specific environment? Yeah, first off, Alaska is six hours behind and I’ve been on the receiving end on Super Tuesday needing to win Alaska and not getting any credit in the media after you you have because everyone went to bed. And if it comes down to, you know, the 5050 and it’s all rank, it’s all about Alaska, it’s going to be a long night and the the cable stations are going to go nuts in in large part because it’s a competitive race, but also because they have rank choice voting up there, which is just a variable that I just think our system, not just when it comes to you guys investing, but our system as a whole, as a country, just can’t handle. we’re there’s too many conspiracy theorists on both sides in this party in this country and people just can’t handle it. And so when you’re ranking out who’s first and second and you have all these in a place like Alaska, Patrick made the point in California, you’re going to have so many early votes, absentee votes, people in the military, um it’s going to be a long long night and it’s going to it’s going to create a lot of heartburn. So if you’re looking to invest in that overnight, like I’d be I’d be careful. I’d be careful because I think that there’s going to be some chaos there if that’s as competitive as it seems to be right now. The other thing I would say and the Democrat Mary Pelatollah has, you know, she’s she’s gotten the horse race factor. She’s gotten some good public data. There actually was a vote there because they have rank choice primaries and so they had their primary vote in August and she ended up beating or leading Senator Sullivan in the rank choice primary by seven points. Um, you know, honestly, I like Senator Sullivan. I wish he trailed by one or two points. That would make me feel better. Uh, unfortunately for Senator Sullivan, you know, we’ve got rank choice and then this is the state where the Democrats went out and recruited a second Dan Sullivan to to vote who I think received 2% of the vote. So, a lot of chaos up there in Alaska. But, I’ve done referendums as recently as 2020. And I keep going back like where for a Republican are there pockets of voters that can still turn out and I can tell you we did an oil and gas referendum up there in 2020 that I was a part of and we did our last big poll statewide uh in late August kind of make our final decisions about spends and media and everything else and it was right about the time where they just had their primary vote and excuse my French we’re getting our asses kicked and President Trump. This was President Trump versus Joe Biden uh race. And at that point in time, President Trump ended up winning Alaska easily. Uh but what was going on is Republicans hadn’t come home. They hadn’t come home for President Trump yet. And they certainly hadn’t come home. Uh and they were a key part of our our our voter pool that we needed to win. And we were able to win and and Republicans did come home. And so I’ve seen it happen. So that’s one to keep an eye on. Will Republicans come home for Senator Sullivan? But I think even if they do, it’s going to be a close race, a long night, and I worry about chaos up in in in the great state of Alaska. Uh before we do our final whip around and ask what we got to be looking out for over the next 5 weeks, Danny, I want to go to you and just ask essentially like what are the down ballot races? What are the outside races? What companies do you think you have an eye on heading into this uh this final stretch? Obviously, there are some companies that you alluded to earlier that have a lot of exposure to, you know, Congress and and the regulatory infrastructure. What is on your mind as we finish out these last five weeks? AI and data centers obviously within each of the states where they’re being constructed certainly uh that’s one of them. Um solar panels and green energy alternative sources of energy is a whole another sector. the potentially is going to get impacted in various areas. You have as much as the stocks and the dump gambling companies on online gambling companies, you know, there’s certain states maybe voting for that as well. Cannabis in various states, legalization, things like that. So, there’s a lot of them and I think it people aren’t paying enough attention to them and I think over the next month a lot of analysts will start to write about it. Um but in general I think people are focusing on the bigger picture which the bigger ones governor races which are probably AI data center related and potentially halting construction and so forth. So things one of the things I’m looking at Matt you want to address that? Yeah there was two things that have happened over the last two years that really surprised me from a polling political and policy standpoint. One is how quickly President Trump completely owned the economy and was no longer able to blame President Biden for everything, which really worked well for us in the last election. And it was a great tactic because in the past we, you know, I’ve been on the receiving end of this. President Obama was able to blame our former boss, President George W. Bush, for everything for almost eight years. But like there’s changes in the environment and how we consume information. Now, unfortunately for Republicans and President Trump blaming Biden, people washed their hands of them there. His own party did. We should have learned from the Democrat party itself during the campaign. And then the second thing, and Danny keeps talking about it, data centers and the impact that they are having, especially with incumbents, incumbent governors who, you know, it it seemed like brilliant politics, brilliant economics to recruit and get data centers to come to their state to create economic growth in communities. And I have never seen an an issue like data centers plummet as quickly as it did over two years. And I have some theories behind it. I think in the beginning in places like Northern Virginia outside of Washington DC, uh there was some people playing with matches out in the woods and sparking uh some what felt at the time organic opposition in places like Lden County, but now it is full organic like it spread everywhere. And to think that the numbers would drop as quickly as they did over a 2-year period and you could see it coming. It’s just I feel like again it was the media is late to the the ball game. No offense. Um and everyone’s starting to pay attention to it, but it’s shocking and that it’s an impacting in a negative way. Yeah. Especially governor’s races. I never would have saw that coming two years ago. It’s been wild to see that even in like Nova where they’ve been jamming data centers in there since do like it’s been fascinating to watch. That’s a great point. Patrick, I’ll finish with you. like what’s something heading into November that we haven’t chatted about that’s on your mind that that you’re interested that you think might be uh good last note for traders to think about? Well, I think the minute uh 26 is over 28’s going to start. Um so I think um I’m always fascinated by this period um right after the midterms in terms of what lessons the parties learn um whether or not somebody like JD Vance will be we you know weakened or strengthened um by the midterm results um and which Democrats are going to potentially emerge. I mean, we’re not going to be taking very much of a break uh after this election’s over. That’s amazing. All right. Well, I want to thank our panel so much. Danny Moses, Matt Rhodess, and Patrick Rafini. Let’s give him a big hand. Thank you very much, folks. Thank you very much.
Guys, thank you. Just setting this up for the next panel. How’s everyone enjoy that? Was that pretty good? Yeah, I thought so, too. I mean, to get that much mental brain power on the the midterm elections on one panel and then you throw in Danny Moses, uh I I think that was uh fantastic. I learned a ton. So, we just spent the last session taking a huge uh universe and narrowing it down to some opportunities. This next one takes the same idea but applies it to private markets and private companies asking questions like how do you identify business and technologies that could shape the future? How do you evaluate them before they reach the public markets and how do you broaden the access to those opportunities? And that’s the purpose behind Robin Hood Ventures. How many people have heard of Robin Hood Ventures? Excellent. So, we put together a panel once again to help us understand it all from the ground level on up. And so, please let’s welcome Robin Hood CFO Shiv Verma, head of Robin Hood Ventures, Sarah Pinto, and Arc Invest founder, CEO, and CIO Kathy Wood, and your moderator, co-founder of Risk Riverful Media, and co-host of CNBC’s Fast Money, Dan Nathan. This is Inside Robin Hood Ventures: Private Markets, Innovation, and the Future of Investing. Enjoy.
Hello everyone. Uh really excited to be here. Uh as far as all the content we’ve had today and yesterday, absolutely amazing. But I’m super excited about this conversation because for me, as somebody who’s been in the markets nearly 30 years, I’ve spent so much time staring at screens like a lot of you guys do and having at the tips of my fingers ways to transact. But I think some of the most interesting things going on in the markets are going on in the private markets. And I, you know, we’ve been talking a little bit about this in the leadup to this conversation. Um, I can’t remember a time where so much of what was going on in the public markets is being driven by what’s going on in the private markets. And so these folks right here are giving access to private markets in a manner with a level of diligence from an investing standpoint um in the private markets as you’ve accustomed to or become accustomed to in the public markets. All right, so enough of that. Um, I I want to start here because people know of ARC and they know of Robin Hood and you guys obviously all know them pretty well for having access and tools to the public markets. Why? I’ll start with you ship. What What was the um inspiration for offering this to your customers? because I think knowing your company and being involved as a a partner for the last 3 years, there’s been this evolution of aspirational products and we learned about a lot of them last night or were refreshed with them during the keynote, but what is it about access to private markets that is really interesting for this cohort here? Yeah, great great question. So, when we talked to customers, one of their main pain points was they didn’t have access to these great private companies. And so actually we started think about this in 2021 and a couple things all came together last year. Uh first new administration they put out great guidance. They actually said the best way to hold private assets for retail is in these 40act funds. The second thing that happened was a lot of these great companies were staying private for longer. No no surprise there. And then third we liked to launch products when we have a push not pull meaning our customers were asking for these. And we go through and the number one thing I kept hearing from customers is how do I invest in open AAI or data bricks and stripe. So we looked at the way to do this and the vision statement was can we do for private markets what we did for public markets and we came up with four tenants. The first was best-in-class names like if you do it you want to have really really great companies for customers to invest in. Uh the second was daily liquidity. We heard from all of our customers they’re used to trading. They’re used to getting in and out and so how can you have a vehicle where they can actually get liquidity? Uh the second or third one was no accreditation. 85 to 90% of Americans are not accredited. So it was a huge pain for customers. They couldn’t invest in accredited funds. And the fourth is they wanted competitive fees and a way to do it. And so that’s how we came about it. We launched our first fund which was late growth. Awesome portfolio data bricks openai stripe some of the largest names. We then heard from customers they want to do early stage. So our second fund was focused with YC and early stage customers. People love that. Uh, and now we’re getting a lot of new in inbound demand and and Sarah and the team are cooking some other new funds and we took a lot of inspiration from Kathy because she’s actually one who pioneered this with private public market funds and how to do this. So, yeah, we love the vision and and we’re going to keep innovating for customers. Yeah, Kathy, you know, uh, I think a lot of these folks know you as someone who’s a prolific innovation, a tech investor. I think it’s not just if you’re not invested in Kathy’s funds, you probably use a lot of what she has to say about markets, about individual names, about themes to work into your own processes. And so I’m just curious because you’ve seen lots of cycles and you’ve seen how innovation can really transform different industries and the like. What was the this obviously sounds like a logical, you know, sort of evolution for you. Um, what was it that you at ARC decided to create these sorts of vehicles? So regular investors unacredited here and there can invest either solely in private but also public private. Yes. So um we got the idea from our clients. Uh we had a lot of uh young clients working in the tech industry who were saying how is it that we who work in this industry and understand these companies, understand the technologies better than institutions, better than family offices, why can’t we have access to them? Uh because we don’t make enough money. Uh our net worth is not high enough. Uh, well, that’s just unfair. And I and I I agreed. I said, that’s unamerican. So, let’s try and figure this out. And uh and so we’ve done it in a little bit of a different way from uh Robin Hood. Uh and they both have their their pluses and minuses. I think uh 100% liquidity, which is your hallmark uh at Robin Hood, very important. In our case, uh we have quarterly redemptions. So daily inflows, quarterly redemptions up to 5% of NAV. Now uh what that means is that our portfolio is always selling at NAV. Uh whereas of course uh Robin Hood’s portfolios can go to uh premium or discount. Now, uh, when I first saw, and I we were talking about this earlier, when I first saw that Robin Hood was going to put private into, uh, a closed end fund like that, I thought, my goodness, the only example we have out there is Destiny Tech 100, which at the time was at something like 600 premium to NAV. And I think what Robin Hood has done beautifully is educate. So before you buy one of their funds, you know exactly where it stands uh relative to NAV. And right now I think you’re in the 10 to 15% range on both. Yeah. Ship, just really quickly tell us what were some of your considerations like with that structure. Yeah. So we debated a lot. You know, Kathy pioneered the interval fund and and we started closed end funds. There’s pros and cons of them. The main thing was customers wanted day liquidity or our customer bases and the only way to do that was in these closed end fund formats. Now the converse is as Kathy said the fund can trade at a premium or discount to a NAV. I think a sweet spot is if you’re kind of plus or minus 10% on either side and so when we talked to customers we said that’s a known risk. You can trade at a premium to discount but you can get day liquidity. And so that’s why we chose to do that. The converse is in cap these funds, you know, you’re always going to get in or out at NAV, which is great, but you might have quarterly of liquidity. So, I think the best thing for customers is you choose where you want to be on the spectrum. If you want day liquidity, great. We have a product to do that. If you want something with less liquidity, but you know you’re going to trade at NAV, you can go to Cathy’s funds and then it’s your own choice for where you want to be on the risk spectrum. And I’ll just say I think both of us um have started with a direct to to a a direct to cap uh table psychology. So um we are not invested either one of us in SPVS which and layered SPVS which include fees upon fees upon fees that are kind of hidden um in other products. I think both of ours direct to cap table is one of our calling cards. Yeah, absolutely. The other thing we did as we were talking about this before is every investment we made, we went through the front door, meaning we talked to the company and so you take OpenAI, you take data bricks, you take Stripe. We spent a lot of time working with them and we had had some things in the press where initially they weren’t so sure if they wanted to do that. But once they understood the power of retail, how important this is for their brand, for their company, that these were their customers, uh, now not only are they in the product, they’re actually promoting it. They’re telling other companies, “Hey, you should talk to Sarah. You should learn about these products.” So, it’s been a fun year. We went from the new kids on the block trying to get in uh to now people coming to us and saying, “Hey, how do I join part of your fund?” Yeah. And I was going to say, Sarah, you you kind of have one of the coolest jobs I think in this entire room here because, you know, if you are someone who’s curious and optimistic and really focused on innovation and finding value for others, um you’re that’s your seat right now. And so, I look around the markets and you know, a lot of the stuff’s picked over. We all trade it every day, right, on the Legend and all that sort of stuff, but it’s the stuff again going back to the private markets. I think they’re driving a lot of the stuff that’s going on with the companies who have been public for a long time. So, talk to me a little bit about being on the doorstep of some of the most interesting companies and I think we can say that any of us have ever seen. You got to go back to the 80s, you know, when Apple and Microsoft and all that sort of stuff. So, talk to me a little bit about that experience. Yeah, of course. Thank you. And look at that. You get a round of applause. Got a nice cheer for you here. Thank you. Um, so I’ve been a private investor in the venture market. Something cool is happening there. Um, I’ve been a I’ve been an investor in the private market since 2010. And so when I started, it’s always been fascinating. It’s always been interesting. But when I started, companies would go public when they were worth 10, maybe a hundred billion. And for companies like Shopify or for companies like Square, you could have bought at the IPO and done extraordinarily well in the public markets with a lot of the growth and a lot of what these companies are today happening post IPO. And what we’ve seen in the last 10 years is that that is just not the case anymore. And companies are staying private much longer. And so much of that value creation is happening exclusively in the private markets. We now have companies worth trillion, one trillion plus that are still private. I I never thought I would see this in my career. And with this AI movement, we’re just seeing an explosion of opportunity and of incredibly cool innovation happening. And I just didn’t think it was right that so many of us, so many of you wouldn’t have the opportunity to benefit from that and to learn from that and to gain from that. And so that’s why I would agree. I think I have one of the coolest jobs. But to give you an example, I was lucky enough uh and probably somewhat smart enough to invest in Anthropic in early 2023 when it was pre-revenue and largely pre-product. And you know, it’s it’s probably a unique example in the history of capitalism. Seeing that company go from where it was then to where it is today has been the ride of a lifetime. And now that we’re building this at Robin Hood Adventures with RVI and RV2, we’re making that kind of ride accessible to everyone, which is incredibly fun. So Kathy, what Sarah just said is pretty fascinating in in the scope of my career, your career to see value creation to this scale in such a short period of time. And you know, your point about anthropic is like, think about it. Chat GPT had just come out in late 22. People Anthropic was not on the tip of most people’s tongues. If anything, they were like, you know, well considered well well behind and look at how we’ve just had this sort of flipping a little bit. We’ll get to that. Um but uh like speak to like past cycles when you’ve seen this sort of stuff. Is it something that has longevity or do you have to be so good at nailing a theme but also picking the winners because I think in technology often times it’s been winner take all. If you think of like Amazon, if you I mean there’s no shortage of examples going back to the late ‘9s. Google’s a good example too. So just help us think about that. Put that in some context for us. Yeah. And I’ll just set it up. I mean it was beginner’s luck maybe, but we our fund started late 22. So the end of a bare market and one of our first investments was anthropic. Uh and believe it or not, back then I think it was a $40 billion valuation back then. No, it wasn’t. It was a $4 billion valuation. $4 billion valuation. And back then because we had been in such a terrible bare market, the public markets, you know, there were founders who really wanted to talk to us about what we were doing because they knew about our research. Very often our research ends up in their pitch decks, our our big ideas research. And so we started our relationship with the founders at at a very interesting time. In terms of your question about this relative to past cycles, the difference is there are so many technologies evolving at the same time. Uh so the five major platforms uh AI, robotics, energy storage, public blockchains, multiomics sequencing and the life science space. Those five major platforms involve 15 different technologies and they’re all converging like we’ve never seen before. And so think about scurves, you know, uh we we have innovation slowly slowly then all at once slowly slowly then all at once. What we’re seeing right now and the reason we’re seeing these valuations scale so quickly is these scurves are feeding each other. Uh if you think about Tesla, it’s the convergence uh among AI, the autonomous vehicles will be powered by AI, but also robotics, robo, robo taxis are robots and energy storage, they will be electric. So that’s three scurves feeding each other. And yes, autonomous vehicles. uh we started doing the research 2014 when I I founded ARC and we thought it was on the horizon on the horizon and 12 years later here we are but it’s going to happen really fast now and the market is beginning to sniff that out and of course AI is speeding everything up when the cost of something drops 99.99% per year as AI inference costs are dropping now. You’re going to get an a lot more of it. So that’s why we’re seeing this explosion. It’s pretty exciting. So Sarah, um Kathy just laid out these kind of different converging sort of themes when you are constructing a portfolio because I think that a lot of folks out here like you know they’re not just oneoff trading this or buying that or whatever. They think about it holistically a little bit. How do you think about it? Because again a lot of these themes are kind of overlapping. the vend diagrams or you know and that I’m I’m sure it poses challenges sometimes for concentration purposes but it also lets you kind of really lean into some of the themes that you really believe in how how are you thinking about that right now because I have friends who are in VC and if they have not invested in all the names that you guys have early you could call it dumb luck I don’t believe it um you know I mean that sort of thing it’s really hard to raise money right now if you are not in open AI anthropic and agile I mean the list goes on and on so how how do you think about it from a portfolio construction production standpoint. Yeah. So, we thought long and hard and we think long and hard about what products can we build that will be attractive to retail that will perform. We obviously we want products that will deliver outstanding performance and that we can uniquely build very well. And so we started with a concentrated portfolio of what we think are the top 15 to 20 companies out there. And the bar there is extraordinarily high. So, think of data bricks, open AAI, Stripe, 11 Labs that just announced an up round today, Revolute, Ramp, and a few others. It’s it’s a it’s a fairly known universe, but we have to get these companies, we have to pick the right ones. We have to get in front of these companies and get them to say yes to us. And so, that’s that’s one strategy which we think is incredibly attractive because we think these companies have a lot of value creation ahead of them. And we actually think that a lot of value, a lot of talent, a lot of interest continues to acrue to these winners kind of as they become big, they become even more interesting often. And then we have a second strategy which is our second fund RV2 which is the other side of the barbell. So as you think about what AI is creating is it it’s really opening up every category from consumer to enterprise. Everyone is looking at their tech stack and rethinking what they’re using. And so we think it’s a really interesting time to have exposure to early stage. And the right way to do early stage in my opinion is to have a very diversified portfolio. And we picked Y Combinator as the right ecosystem to go and hunt in because it’s they they just have an incredibly high quality proven track record of attracting and creating amazing companies, many of which we actually have in in our first portfolio. And so that one is a different kind of portfolio construction that will be attractive to certain customers. We just want retail. We want everyone to have the kind of choice that very high net worth individuals and institutional investors have. If you want diversified early stages exposure, we have a product for you. If you want concentrated lateage household names, we have a product for you. And it’s just the beginning. Okay? Now, listen, we have these mics here. All right? And if you guys don’t line up behind, I’m going to leave a bunch of time because we got a couple legends up here and I really want you guys to be able to interact with Kathy and and obviously Sarah is building amazing uh you know portfolios and and Shiv’s building great products. So you guys were all here last night and you heard about all the different products. I know you guys know about most of them, but as they’re rolling out different ways to kind of uh execute trades and manage risk and all that sort of thing. Chip, Chip, give me your best pitch on why someone out here who has all these tools at their fingertips now, right? And all these different products, why they should consider putting these products in their portfolio. It’s not something that you guys are going to be able to see every tick of every day, you know, that sort of thing. And maybe that’s a good thing, right? because it’s not something, oh, I want to trade that and I know that there’s some liquidity, but what’s the best pitch of why someone should buy this or one of these funds, put it in there, and not look at it. Yeah, I mean, I I’ll start. Uh, the main reason is it’s just a diversified way to private markets. So, you can trade as much as you want in the public markets. We stand for access. We think that’s fantastic. But if you want to invest in Open AI, data pricks, etc. before they go public, this is one of the best ways to do it. You can get data liquidity and get low cost. That’s it. Now in your own portfolio you should decide what your allocation is going to be. Some people will want a lot of access to private some will want smaller but for us just having access that’s the way to do it and then you design your portfolio how you want. And I I would add uh another reason important reason is um thanks to the speed at which things are happening today technology is progressing there is going to be a lot of disruption disintermediation in the traditional in the traditional world and a lot of the larger benchmarks around a lot of highfrequency trading is based uh a lot of companies companies in those benchmarks are going to be disrupted. So if for no other reason but to have a hedge against the disruption because these companies are if you think about every sector transportation is going to be completely disrupted energy completely disrupted almost every sector is going to be disrupted so I think it’s important to at least have a hedge in my own case I think this is the way the world’s going to work so this is where I have most of my exposure all right so you use the term hedge just so you guys know and Kathy mentioned the research that she puts out the big ideas. Um you’re not going to find someone who’s just giving of their brain and their thought process. Um it’s all out there. You can get it. You see her on TV a lot and and that sort of thing. And and you got to love transparency and access when you’re thinking about investing. So I give you a lot of credit there. Um when I first met Kathy, uh it was I think late 2017 and Bitcoin was 1,700 bucks. I just want to be and you were taking a very long-term you were not somebody who was saying by the end of this year it’s going to be 10 grand or 20. That’s not what your thing is. You’re talking about the reasons in which you think it could go to these sorts of levels. Where are you right now? Because I’m sure you have a lot of views about these private companies that are going in your portfolios and they’re informing your views about your existing public market investments. What do you do when you get I you just used the term hedge, but some of these companies that are in your portfolios are going to get decimated, right? Is that fair to say or no? I mean, when you think about it, you mean in in the public markets, in the public portfolios, a bunch of the private stuff you’re investing is coming for your public stuff, like to the point you just made as far as disintermediation. Oh, yes. Are you I’m I’m having a little trouble hearing here. So, you’re saying that uh that some of these private companies moving into the public? Well, I what I mean is you taking that long-term view like you did in Tesla and EVs and Bitcoin and SpaceX and that sort of thing. Some of the investments you’re making right now, you’re taking a very long-term view of how do you think they’re going to affect, you just talked about disintermed disintermediation. How do they affect some of the names that are in your portfolio? Because maybe it’s helpful for this group to kind of think about that if they have access to these products. How might they think about moving out of some of their public equities? Well, I think you know even within the public markets there is uh for companies that have very little cash flow or not big cash cushion, there’s still risk aversion. Uh we’re seeing that especially in healthcare. Healthcare has been the most difficult uh space in the last four years and we think there’s going to be massive disruption there but a lot of those companies are in the public markets because venture wasn’t as open to funding them in the private market. So interesting. This is why having a public private portfolio which is what ours is 80% uh private 20% public gives us an opportunity to arbitrage between the relative valuations or even the existence of opportunities in either or space. So, so Sarah, um, when I think about, you know, you just used that term private for longer, you know, when companies um, are looking to get liquidity or an exit, it’s a dual path for the most part, dual track, it’s, you know, IPO and M&A, right? And so when you talk about some of those names that you’ve had access to, Stripes and Data Bricks and the these are amazing companies and they have valuations that would put them in the top easily 50 of the S&P 500, that sort of thing. How do you think about okay maybe these folks they don’t feel any need to do it you still are getting the acrruel from a value standpoint but what are you seeing on the on the lower end you know what I mean are there are you just seeing amazing opportunities in companies that are just kind of bubbling up and doing some new things like how are you thinking about the early stage because to me a lot of the money has been made for the for the time being until you get an exit in the open AI and anthropic and and some of these other names where are you seeing what what parts of the private markets in around AI are you seeing the best opport opportunities, the most exciting opportunities. Yeah, I I think the winners are still really really interesting, which is why we invest in RVI in some of those even though they would appear to be really expensive. We we build an investment case for each of them and there’s very good reason why we pick them because we think they have a lot of growth in front of them. But in an early stage portfolio or in an early growth portfolio, which is also a category that can be really interesting, we think about strategic value all the time. And if it’s a if it’s an N of one team, if it’s exceptional talent, if they’re building something that is really valuable in this moment in time, then chances are that they’ll be very good M&A candidates as well. And we’re seeing it with Stripe acquiring Open Router and AMD acquiring World Labs and, you know, Cursor being acquired and and lots of these companies. You never hear about these acquisitions because they don’t happen because those offers are turned down. But I actually think we’re seeing a resurgence of really interesting M&A now. As coming back to your previous question, some of these large incumbents want to bring AI native talent inhouse, want to diversify their offerings to meet this AI moment and maybe sometimes the best way to do that is in organic. That that’s such a great point about the M&A. When you think about Stripe, I I don’t think a lot of folks maybe maybe Kathy was thinking about it, but like how do they become integral into this AI economy and they buy a company that’s been around for two years at a valuation like wait what you know but that may prove 10x you know in two years that sort of thing. Um, I want to get to some questions, but ship, I gota I got to ask you one last question on the product front because I know that you guys have been branching out trying to offer different ways in which we just spent a lot of time investors can have access to things. IPOs is one of them. How does this strategy fit within you gaining credibility with companies but also other underwriters to make find your way into let’s say these you know underwriting groups when these companies are coming public? Yeah, it’s a great question. So, we have two constituents here. One is the retail customers and one is the companies. For the retail customer, our goal is you should be able to invest across the entire life cycle when they’re private, when they go public at the IPO, and when they’re when they’re publicly traded. For the companies, it’s a very similar pitch. Our goal is any stage of the life cycle you need capital, the Robin Hood customer can be there to support it. So, you’re in early stage round raising your first capital. Great. The early stage fund can do that. You’ve grown, you’re going to the growth round, we can do that in the growth fund. you want to IPO, we just announced we’re an underwriter, so we can help you there. And then after you go public, we can help you engage with retail. For example, you can use our save product where you can talk to customers. We do that on our own earnings calls. You can now live stream your earnings in the app. And so the appeal is we don’t just want to be there once. We’re not a VC. We’re not just going to provide you capital and go away. We’re going to be there for the entire life cycle. That’s the vision. And when I talk to Vlad and the team, what does success look like? Success looks like in 5 years, every company that’s raising says, I want Robin Hood on the cap table. every company that’s going public says, “Can you help me with my retail strategy?” And that any public company that wants to gauge with retail knows we’re the destination. And you can see the pieces now. And it’s because of everybody in this room and listening. And I think we’re getting we’re getting pretty close. Yeah. Um All right. Listen, I want to get to a lot of questions, but you got to do me a favor. Let’s treat it like a speed round. Let’s have you know short questions and we’re going to give you efficient answers because I know there’s going to be a lot of you. Let’s start right here. Hi. Uh my name is uh Hong and uh uh by the way thank you uh Kathy for all the good content you released regularly on internet it’s really good. I have uh two macro questions. The first question is uh uh a lot of people say AI is going to give us a production boom and I agree with that but some people say that it’s going to solve the debt problem. uh if we look at the uh history of the United States for the last 100 years, it seems like the spending of the government and has been accelerating much faster than the uh uh booming of GDP and uh I don’t see how necessary AI booming is going to change the behavior of the government. So what could be a possible way of the solution for the debt problem? The second problem uh second question is related. Let’s just do let’s just do the one dude like I love you. I love great hat Kathy. Give it to me. Okay, thank you very much for the compliment, but I am standing on the shoulders of an incredible research team. So, that’s where I’ll start. In terms of the the debt problem, I know that that $40 trillion is grabbing the headlines. Uh, and I I I feel as though I’m back in the early 80s when I first started my career. Uh, and the same question, it was the exact same question. And the deficit as a percent of GDP was 5 a.5% back then as well. And the right answer was we grew out of that deficit. And while the debt never went down very much ever, uh the economy grew and the wealth in the economy grew so so much that it began to shrink that debt as a percent of GD GDP. So, uh, I think that’s the main answer and I think this, uh, S-curve feeding S-curves couldn’t have happened at a better time because we need that kind of growth and I think we’ll get it right here. Okay. Yeah. Hello. Um, I I really wanted to ask about the Robin Hood venture funds and the fact that, you know, they have a negative NAV in both of them. I wanted to understand that a little bit better and I also wanted to see you know as some of these companies that are venture start to become public you know we’ve seen some of these other use cases before that that could really drop you know the price of the overarching fund sometimes depending on allocation so I just want to understand what you guys are thinking about and how to address that I can take the first piece so our uh our navs more or less in our two funds at this moment in time are about $25 5 a share. Um I haven’t checked in the last few minutes, but last time I checked, our first fund RVI was actually trading at a premium to NAV. And that’s been true for most of its life. Um it’s it’s you know, obviously I don’t comment on the share price, but that’s been true overall as a fact. We most importantly the what we can control is the inputs which is getting you guys access to the best companies that we believe will deliver performance at scale and then making sure that we pay the right price and then making sure that we every quarter deliver a valuation that is fair and there’s a very disciplined process to do that. It’s highly scrutinized by the SEC, by our internal teams, by audit, external auditors. And so every single quarter, these both of these funds will release a full asset byasset fair value. And that is what the NAV per share will be based off of. Our second fund, which is our early stage fund, last time I checked, again, was currently trading at a slight discount. It’s it’s not it’s not surprising. It’s a new fund. It’s a new product. It’s a diversified portfolio of very early stage companies. I’m I’m incredibly again what we can control is be in the right universe. I I would definitely stand behind Y Combinator as the right universe. Make sure we have the right portfolio manager. Rich Aberman is incredible. He’s a exited successfully exited YC founder, former visiting partner. and making sure we’re in the right companies. Uh in the last in the last pre in the previous batches, we aimed for 40 companies out of 200 which we believe are the most promising and we got there and we got 40 companies to say yes to us even before the fund was public which I think is quite an achievement and would be very difficult to replicate for any individual retail investor. She have anything to add there or no? Um, I think when you look at the clos fund structure, it’s the for the early stage fund, it’s not surprising. This is a long-term time horizon. Most of these companies aren’t known. What you’d expect is some of these companies would do well, some won’t. But as soon as you see a company do well, the NAV should go up and the fund should trade. In the in the uh growth stage fund, as Sarah mentioned, for the life of it’s actually trading at a premium. I think a healthy premium, if you look at historically closed end funds, is about 10 to 15% and for the most part, that’s where we’ve been. But the nice part is investors can make their own decision. If you think it’s trading cheap, you can go in and buy it. If you think it’s trading rich, you can sell it. I think that’s a feature, not a bug. It gives the investors the ability to uh to trade in and out if they would like. Over here, hey, uh Kathy Wood’s uh Arc Investments funds have underperformed QQQ since the insion. So why did you based on what credentials you guys invited her uh where there are many people who are putting their money return expecting great returns. Thank you. May I answer that question please? So this is also making the headlines right and uh there’s a lot of endpoint sensitivity involved here. Uh, so you’re looking at the five-year record. If you look at our oneyear, threeyear, this is as of I believe the end of August. One year, three-year, 10-year inception to date, our performance, ARC’s performance is in the top five to 10% in each of those periods of the morning star database in our category. Now you are comparing us to QQQs. Uh that is an incorrect comparison because we are focused on technologically enabled innovation across all sectors. One roughly 30% 25 to 30% of our portfolio right now is in health care which we believe is going to be the most profound application of AI. The QQQs are not involved in health care or in financial services. It’s barely involved in financial services. So there’s no comparison. Thank Thank you, Kathy. Um,
let’s go over here.
Uh, so first of all, super happy that you’re here, Kathy. Thank you for taking the time and traveling to us and I’m super excited to hear your thoughts on my question. So a theme a major theme of this year has been space right not only of this conference but of the overall market. So I’d love to hear your thoughts especially with the recent pullback in a lot of these stocks. What are the areas that retail investors should be looking at whether it’s infrastructure launch connectivity IoT that are you think are underpriced by the market for long-term value? Or this is specifically on the space space. Yeah. Yes. Yes. Uh well, you know, when uh people ask us about um about the ramifications of AI on everything and talk about job losses, uh we we actually bring to life to them this new world that is opening up. And I I think it’s going to create part of the boom out there. Now, it is very interesting. SpaceX has been taking most of the oxygen out of the room. Uh, understandably so because it is going to be the most important company not only in space, but I think potentially because it probably will acquire Tesla, probably uh it will be the generational company of our time. And I think if you’re listening to to Elon, he’ll tell you in or that chips of course are the biggest gating factor for him because he’s not looking at just launching rockets or at Starlink. Uh but he’s looking at his neocloud business terrestrial and soon to be in space uh which is going to solve our infrastructure problem here. and he is also looking at chasing open AI and uh anthropic and becoming the premier frontier uh AI play. So we’re we’re we’re looking at space as a big part of enabling AI. It’s a big part of the infrastructure play. Uh so I was just in uh I’ll this is the last thing I’ll say. Uh I was in New Zealand, got to visit rocket rocket lab Peter Beck uh just last week to 10 days ago. uh and uh just uh talking to him uh I began to understand that what SpaceX is doing it and especially since it’s going to phase out the Falcon 9 is opening up a a whole new world for for companies like rock rocket lab who are thinking about vertical inte doing this vertically integrated way. So I think that variable is what you should really be looking at. What who is helping these uh companies that want to vertically integrate uh with reusable rockets move into space and help create this new world. Thank you. Thank you. Hi, good afternoon. Um so my question is uh what challenges this is open for anyone. What challenges have you faced um evaluating early stage or early growth companies and what signals gave you confidence to navigate through the um ambiguity and noise to find strong candidates that yield potential? I’m happy to take that one. Um look, that’s the that’s the job, right? Um first and foremost, for early stage and for early growth companies, it’s all about the team. Is this an absolutely outlier group of people that is going to beat the odds whatever they do and that is going to be a really attractive group of humans for potentially a larger company to want to bring on. And and that’s kind of what we’re seeing for some of these amazing teams that are getting these crazy acquisition offers from large companies is it’s not so much their product. Some of it is, but it’s really the ability of this group of humans to build something really special and to do it in a way that is extraordinarily differentiated. And honestly, that just simplifies the question because when you think about is this person a top 10 people I’ve ever met in my life, it would I quit my job to go work for this person? Then you kind of get to the answer a little bit more easily. I was just going to add to that. I agree the talent is absolutely critical. It’s the number one score in our scoring system. I also think doing research on these new technologies uh and actually uh choosing the the right technologies is critically important here. uh and trying to understand how what is the learning curve of this new technology and how is it going to scale across se sectors and become a really big opportunity which with with AI we have so many opportunities is this kind of company going to be able to do it and you’re right whenever things are not going well I think about the last conversation that we’ve had with the management team looking in their eyes and uh you know you can see conviction in eyes. I’ve been doing this for a very long time. Uh and sometimes you just pick up the phone and you say, “Hey, uh what is going on here?” There’s a lot of confusion. So being able to call management teams, I think is really important. Thank you, Kathy. Hi, Kathy. Um thanks for all the work that you do and your amazing team. Shout out to Tasha, Brett, Daniel. really excellent team. Yes. My questions regarding SpaceX and the AI compute buildout. Uh so Elon has said next year that they’re forecasting 8 GW of AI compute. Uh possibly more 8 to 10. Yeah. 8 to 10. And it seems to me like institutional analysts broadly do not think that that’s going to happen. Um I I believe that when you uh assign elite uh space engineers to these problems then good things happen. Um but I wanted to know do you feel that this is priced in and uh what’s your sense on them achieving that goal in the next year? So, um, one of the things we’ve all learned is there’s time and there’s Elon’s time. And of course, Elon thinks things will happen a little faster typically than most most people do. So, our view is that it won’t m they’ll they’ll get into the five to 10. That would be heroic if they do anywhere in that range. But in terms of really scaling this business, we’re looking more into 28 29. We have a fiveyear investment time horizon. So that would be wonderful if they if they got Now he’s saying uh that he expects uh you know much more than 10 gigawatts in the in the 5 to 10 I mean in yes in the fiveyear time horizon. Um I agree with you institutional investors are finding this difficult to believe. uh but and they’re being appropriately cautious. I think that’s good news. I love the fact that there’s a lot of concern, a lot of caution that we’ve got institutional skepticism. This is the wall of worry we need to create a very durable bull market in not only SpaceX but a lot of other stocks out there and I think that’s what’s happening. Uh last one very sadly guys. Oh, perfect. Good afternoon. Thank you panel for being here and your inspiration to us guys. Um for Miss Kathy and this kind of piggybacks off the previous gentleman when evaluating an early stage disruptive technology particularly AI and robotics how do you distinguish a company that has genuinely crossed the promising technology into a scalable business from one that’s still primarily a compelling technology story and thank you Miss Sarah for what you said too because in my job people are the mission but technology and scalable and crossing over. How is that? Yeah, that’s a I can take the first pass and then maybe if you want to add on, but um that’s a great question and it’s particularly true with physical AI, robotics for example, where there’s there’s a lot that needs to be proven, lots of safety questions and issues. And often times the best way to figure that out is to talk to early customers that are deploying these technologies as pilots and also to see where in the background of these founders have they defied gravity before. So for example, Tesla engineers or SpaceX engineers tend to be very good secondtime physical AI founders because they found ways before to think from first principles and do things that were you know maybe not even science challenges but engineering challenges and solve them. So, a combination of has this team done something like that before and can we talk to a lot of early customers to figure out if it’s kind of tipping into that um usefulness. I’ll just add I I think you nailed it uh Sarah, but I I all I always say follow the developers. Developers love hard projects. And if you see a company attracting more talent, again, we’re back to the talent question. And we’re probably going to be talking more and more about follow the agents given what we heard from open AI about dots yesterday. So uh again even this monitoring for success world is changing very very rapidly. Listen great question. Um thank you all for being here. This I could have done this all day long. This is amazing and uh we really appreciate all your uh you know insights here and uh I hope you guys check out what they’re all doing because I think they’re taking a very very interesting approach and they’re bringing it to you and I think that’s what’s really important about this the access and democratizing that seems like something that is a theme here and this is my third hood summit and it seems like they keep building on that every year. So congratulations to you guys and thank you Kathy for being here. Thank you. Thank you. Thank you.
Well, they didn’t disappoint. Thank you, Dan, Kathy, Shiv, Sarah. All right. Well, where’s everyone going, guys? This is it. This is We’re getting to the finale. We’re in the bottom of the eighth inning here. Uh penult penultimate session before we get to our finale. But uh we spent a ton of time today talking about markets, where potential opportunities are, how we find them, how we put capital to work. But now we’re shifting away from the market and we’re looking inward to ourselves as traders. Because having a strategy is one thing, but actually following it when there’s real money on the line, something totally different. How many people have experienced that? like, “Oh, it all feels good until you’re in the trade and things go sideways.” I mean, I’m a trader. I’ll be the first to admit I’ve chased trades. I’ve held on my losers too long. I’ve taken profits too early. I’ve gotten frustrated. When I get on a winning streak, I get overconfident and oversized. And my personal favorite, I’m literally looking at the screen and I know I’m about to make a decision that was absolutely stupid right as I was actively making it. And I said, “You know what? This is a bad idea.” and I push the button anyway. So, quick show of hands. Anyone else recognize any of those behaviors in your trading? Great. So, this is basically group therapy now. So, that’s why I’m so excited to work with our next speaker. I I started talking to Jared Tendler uh uh earlier in the summer. Um, one because he’s he’s phenomenal, but two, I need a little help help with my golf game, and he also wrote a book about that. Uh, but Jared spent his entire career studying these mental patterns. Not just how to recognize them, but how to correct them. So, if you’ve ever known exactly what you should do as a trader and then watch yourself do something totally different, we are in the right place. So, please welcome to the stage author of the mental game of trading, mental game coach, Mr. Jared Tendler.
Happy to be here. You have heard from some fantastic speakers over the last couple days, including those who were just on stage. You’ve gotten some amazing advice. Unfortunately, it’s all useless to you. That is useless to you unless you have the right frame of mind to actually make use of it. The best knowledge in the world is absolutely wasted when you’re not in the right frame of mind. When you cannot access it. Look, we all know trading is intense. Your goals are on the line. Your future is on the line. Your money is on the line. Now, being able to have the mental and emotional wherewithal to withstand that emotional intensity, to not get steamrolled, just as Obie just mentioned, where you know exactly what you should be doing and can’t quite actually get yourself to do it, right? It’s one thing to know that you should stay on the sidelines, not jump into a trade out of fear or FOMO, greed. It’s another thing to be able to have that wherewithal in the heat of the moment. you know, you know, you should, you know, not close a a trade prematurely out of out of fear. And yet, what happens? Price dances around, you know, tantalizingly longer than normal, and you just kind of can’t withstand that intensity. Or if price is nose diving right back toward your entry, you’re closing out of panic. And it’s easy to say, stay calm, be poised, sit on your hands, not revenge trade, trust your strategy. But can you do it when it matters? Right? I’ve been a mental game coach for over 20 years. I I have clients in 45 countries. I coach PGA Tour winners, professional poker players, sports betterers. I have clients that are institutional day traders, fund managers trading books of seven to nine figures. But I also work with retail traders just like yourselves. And the reality is you’re all dealing with very similar stuff, right? You know, as a mental game coach, my job is to condition your mind, much like an athlete must condition their body. Now, we know Texas is known for a few things. Obviously, the space program, as we all got to experience last night, uh it’s also known for football. Can you imagine a football player not conditioning their body to compete? It would be illogical. They would get destroyed. They get injured. And yet, just maybe quick show of hands. How many of you actively work on your mental game every single day that you trade?
I don’t see too many hands. And there in lies the point. You’re basically allowing yourself to get steamrolled. Okay. Now, one of the top priorities I have in my career is making the mental game tangible, right? emotions, this mental stuff, like it’s it’s hard to make real and tangible. Well, we’re gonna do that today, okay? And make it a lot easier to help understand how to work your mind, how to condition your mind. Now, today, I am your coach. And I want you to take that seriously. This is an opportunity. You don’t know where the breakthroughs are going to come from. Maybe it’ll happen today. Maybe you’ll plant the seeds for a breakthrough that’ll happen down the line. But the reality is your engagement is essential for that. So, we’re going to get started right now. I want you to open up your Robin Hood app, okay? And I want you to navigate. You’ll see a little button that says watch live. Click on that and you will see a poll.
I want you to answer the question. And for those of you watching the live stream, not here, please do the same. Can you see emotions when they affect your trading decisions? Can you recognize that happening in real time? Now, I’ve done some research on this 5 years ago with a help of several partners of mine. We surveyed over,200 traders from around the world and you’ll see these 90% men, 10% women, stratified across age demographics and from people from around the world. And the effect that we found helds up across all different demographics. 90% 91% of traders had the ability to see in real time when emotions were affecting their trading. All right, let’s put up the results here. 84% can see it. Okay, so numbers a little bit lower, which tells me that we’ve got some work to do. And perhaps what we’re going to do today is going to help you to actually be able to do that. Now, one more question here. Navigate right back to that same spot. You’re gonna see another question. Okay. The next question is, do you have a concrete strategy to be able to manage your emotions effectively in real time while you’re trading? Yes or no? How many of you have that concrete strategy in place? Now, what I found was a whopping 57 point gap. One-third of traders had the ability to manage and control their emotions in real time. Everybody else getting steamrolled. And even worse, when you can see what’s happening and cannot stop it, that’s going to send your mind into a tail spin because it’s inexplicable how you could do something so dumb. You know better. As Obie was saying, you literally I’ve had clients literally grabbing their hand on a mouse and they cannot stop themselves from entering a trade. Okay, so this issue is ubiquitous. It happens around the world. You’re not alone, but there is solutions. All right, let’s see the poll results here. And it looks like the numbers are quite similar. Okay, so 37% of you have a effective strategy. Now, for those 37%, maybe we’ll help to refine that strategy a little bit more. For the rest of you, pay very close attention. Right? This is your opportunity. Take it. We can do something about this. You’re not helpless. I work with I work with traders just like you every single day. There’s a lot we can do. So, let’s drill down. All right. There are five big problems that I see every single day, right? And I want you to open up that app one more time. Last question that I’ll ask you through the app. The rest we’ll do here. Which issues do you struggle with? There are five big ones that I find. Discipline, fear, tilt, which is another word for anger, getting, you know, a little bit of revenge trading, hating to lose, things like that. Confidence issues, and of course, greed. So, which of the issues do you struggle with most? And you’re perfectly welcome to select more than one. I want to understand what we’re dealing with here because as a coach, I like to personalize everything I do, including a group of this size, right? I want to have an impact on every single one of you. So, let’s see what the results are here. All right. 34% lacking discipline, 25% uh deal with greed, 25% fear and confidence. Okay. So, it’s a pretty decent stratified mix. So, the question is well uh let’s go back to the other screen. the uh five mental uh five big issues. So, let’s talk about each one in just a little bit more detail. Okay, I want to make sure that you all have a good idea of what we’re orienting ourselves around. Okay, first off, discipline, which was the biggest issue that you all said was an issue, but do you really have a discipline issue? I would argue that you don’t. Now, it’s easy to look at your violations of your rules as just being a discipline problem, but you must rule out that it’s not caused by fear, anger, a lack of confidence, overconfidence. Overconfidence is a sneaky one, or greed. Because if you try to correct your discipline issues and they’re actually caused by emotion, guess what? You are going to make that emotional issue worse. Why? Because discipline is like the muscle of the mind. You are pushing yourself to adhere to your rules. And there are times where you can squatchch your emotions. And we’ve all done that, right? you know, situations outside of trading that kind of frustrate us, but you can’t really let that frustration out. You’re able to kind of control it in the moment, but trading is way too intense. It’s not like situations in life where you can get away with that. What’ll happen is that ability to squaltch will get overrun by that emotional intensity. And I will explain more about that in a minute. So, the discipline issues that we’re mostly dealing with are boredom, right? like those times where you, you know, mind starts to tune out, lacking a little bit of energy, market’s chopping around, not a whole lot going on, right? And then you kind of just do something random, you know, almost take a trade just to boost your excitement a little bit, have a little fun. Talking about impatience, sometimes that impatience can come from a lack of energy. Sometimes that impatience comes because you have way too much intensity. You’re so motivated to make money that you cannot help yourself. So, you get overrun. Okay, next issue, greed. Now, the greed, fear spectrum that you see popularized is a kind of poor representation of what individual traders deal with cuz there’s not a single person on the planet that I would ever say that Michael Jordan, the Houston Astros are greedy because they want to win championships. In trading, your job is to make money. So to say that you’re greedy trying to make more of it doesn’t really make a whole lot of sense except when your efforts to make money actually work against you. Now you’re like one of the Astros trying to turn a single into a double and you get picked off. But as traders, you have to define the line. You have to know exactly when your decisions are being guided by greed that’s excessive versus when it’s actually just your inherent desire to profit, make money. Fear, obviously FOMO is a big one. Fear of losing sometimes even the fear of failure. There’s that overthinking. The mind starts to spiral and go into overdrive. There’s fear of losing, right? You get very defensive, protective of capital excessively. yourself. Now, one piece of advice around fear, especially for those of you that close positions prematurely, regularly, there’s a problem that you have. Sometimes fear actually protects you from success. Imagine you have a t-shirt business and you’re continually selling your t-shirts at a discount just because somebody walked in your door. Like, you can’t run a business that way unless your profit margins are designed that way. So, if you’re protecting yourself by continually closing positions prematurely, not being able to get out the full, you know, scope of your trade, not trading the the way it’s designed, you’re basically guaranteeing your long-term failure because trading is not going to be successful enough to truly make your time worthwhile. So, be very careful about what you’re protecting against because sometimes it might actually be the success you’re after. And of course, tilt. Now tilt comes from poker but basically means anger and frustration. The hatred of losing and many of you are very very competitive. Just quick show of hands. How many of you are very competitive and hate to lose? That doesn’t surprise me. Look, it’s a trait that many people has led to a lot of success in trading and elsewhere. We’re not shy about your hatred of losing. I don’t I don’t want you to lose that. But you got to understand what losing means in trading because it’s not the same thing as in baseball and basketball, right? You cannot think about a losing trade like losing game one. You have to think of losing and trading like maybe striking out in the first inning, maybe uh you know having a small error. You just something just one single play. Imagine playing a baseball game that lasts 3 months. That’s what trading is, right? So, if you hate losing, have at it. But just zoom out and make sure that you’re not thinking of trading like everything else because it’s not. This is a diff very, very different game. You cannot trade the same way. All right, last one here. Confidence. Now, as I said earlier, overconfidence is a very sneaky problem. And I would imagine that very few of you here have the ability to recognize those early warning signs when your mind starts to deviate and starts getting a little high in your own supply, right? Believing that you’re more capable than you actually are. Believing that you deserve all the profits that are coming your way. There’s luck in this game. It is a reality. All right? I work with poker players. Any poker player that comes into trading has an edge in being able to understand that in the short term you are not in full control of your results. But if you believe that you are, your mind is going to start to deviate. You’re going to start to put on more size. You’re going to start to take more trades. You’re going to start to assume that you know what’s going to happen. The best way to know that you’ve become overconfident is that you start become pred start to become predictive of what’s going to happen. start. Solid confidence means being very comfortable with what you have done in the past, but knowing full well that you have absolutely no control over what is going to happen in the next trade. You are a probabilistic business. You do not have psychic powers. But all of you can sometimes get a little bit seduced by it. Look, I’ve institutional traders that killed it in 2020, 2021 and then they absolutely were awful in 22 23 until they started to really understand how much overconfidence had infected their perspective. Of course, on the flip side, right, a lack of confidence, you’re really kind of down in a draw down. It can very easy to question a profitable strategy and you start working against it or maybe even not trading it. Market conditions are challenging. it can be hard to know where your edge still lies. Now, when we start to understand confidence, it’s to understand that confidence is an emotion. It is not something that’s solid. And as an emotion, it’s influenced by your perspective. So, it’s easy to have your sense of your own capacity be altered. I want to ask another question. Quick show of hands. How many of you would like to make easy money? Wish that you could make easy money. Okay. Now, how many of you also believe in Santa Claus? Okay, to me this is adult Santa Claus. Okay, it is fiction. You do not have the ability to make money easily except the trading will kind of maybe give it to you once in a while. Anything hard is worth doing. And if you believe and if you are motivated to make easy money, I can promise you that when you are making money easily, you are going to get overconfident. And when you are struggling, the idea that you can make money easily is going to be eviscerated. So you’re creating a lot of emotional volatility by having that little outdated wish hanging in the background of your mind. Okay. So let’s drill into this a little bit more and understand why it is very difficult to control your emotions cuz I’ve just given you a bunch of advice and as I said at the outset maybe it is worthless too unless you are able to use it. So let’s understand how we can uh drill into your emotions a little bit more uh by discussing a concept called the Jük Dodson law. Now, I am color blind, so I’m going to try to get these colors right. Uh, and the reality is that emotions make us dumb. They allow us to believe things that aren’t real, and they are the primary cause of all of the repetitive problems that you have in your trading. Okay, these are not that’s an R.
All right, so on one side we’ve got performance and down here we’ve got emotion or energy.
Now I’m going to say some important things today. Hopefully maybe a few of that I’ve already said. This needs to be burned into your brain because if you do not understand this very simple concept, you are fighting against reality. You are believing that you can send a rocket into space without any propulsion. Like that you could fly, right? Gravity is real. We all accept gravity. If you don’t understand this concept, you are fighting against the reality in your brain. All right, here’s what this is. So when your performance is low, it’s because you don’t have enough energy or emotion to power the mind. So think about those times when you’re exhausted, burned out, tired, just getting back from vacation, right? Your performance is going to struggle. As your energy rises, performance rises as well, right? But you know, you get up in this space now, this is where the boredom might start to take place, right? You’re there trading but not totally energized. we find ourselves right at the top. Okay, now if this is not green, somebody yell at me. Okay, now this is the peak of your performance. Okay, green means go. Now for the institutional traders, the traders have been trading for 25, 30 years, they’ve got a lot more territory that is green. They can have a little bit less energy at times. They can have a little bit more emotion at times and they will still be rock solid. The more junior trader you are, the less experience you have. You’ve got a narrow slice where you’re going to be at your best. So, you got to know what that looks like. You got to know what helps to create it. Talk about preparing yourself, conditioning your mind like you condition your body. What’s going to get you there? Do you know? I would argue many of you don’t because you’re not studying yourself enough to be able to do that. Now, problem is that’s fickle. So, as emotion or energy continues to rise, you’re going to fall down this this curve and your performance is going to suffer and we end up down in this zone. Let’s call this 80, right? 80 out of 100. This is where mistakes are inevitable. You cannot stop these mistakes from happening. You can only rip yourself away from your desk, from your phone, chuck it, run away. because at that point the emotion uh the intense emotions have shut down your ability to think clearly. This is a fundamental law of human nature. You may have heard of it as the the fight orflight mechanism. Okay. Now higher brain functions include thinking, planning, making decisions but also includes emotional control. So just understand this clearly. The part of the brain responsible for controlling emotions is shut down and turned off by intense emotions. Okay? It’s a sadistic way the brain is wired, but this is the reality. So when you get to 80, you are pretty close to being in a blind rage, on a blind panic or euphorically blind, right? The the language there is real because at that point, you’re not thinking at all. And if you’re not thinking well then you lose access to new knowledge. You lose access to the advice that I’m giving you right now and the other things you’ve learned today. So this is firmly a red zone. Do not go. You have to be able to prevent yourself from getting to that point. And if you do, you rip yourself away. That is your only defense. Okay. Everything else, you know, we’ll say is sort of shades of yellow, right? Caution. Now, there’s a few other points here. When you’re at 75 and 80, one of the most difficult parts about that is that you have awareness. It’s like the last mental feature to be dissolved just before you become blind. You’re still aware of what you’re doing, but you cannot translate your thoughts into action. As Obie Obie was saying earlier, right? Know exactly what you’re doing is wrong. Cannot stop yourself. That is why It’s not some random thing. You’re more emotional than you realize. Now you know and now you can’t make the excuse.
Now from this point down to here, there are early warning signs. And as we begin to develop a strategy here, this is what you need to keep in mind. Okay. So let’s keep working at this and begin developing a strategy that is going to help you to take your trading to the next level here. All right. So step one, mapping your pattern. You all have spent years studying the markets, studying the charts, studying the patterns that exist there to find opportunities for profit. Turn that same skill on yourself. There is no randomness here. There is no randomness on that board. The patterns that you see in yourself need to be studied and nailed down so that you have the warning signs before your emotional system shuts down. You can’t stop what you can’t see. It’s as simple as that. So, here is what you’re going to do. You are going to create a map of your emotional patterns. Okay? And this is an example comes from a client. And I’m just going to read a couple of these. But the idea is you’re trying to create a scale from 1 to 10. The blank spaces are purposeful. Okay. When you’re first getting started with this, you might only have, you know, 1 and 5 and 10, right? Very early warning sign. The signs that you’re in danger, right? Kind of firmly in that yellow. And then the signs of complete mental shutdown, whatever that looks like for you. Okay, this is personalized. You have to spend the time yourself studying your own patterning. Okay, so example here at level one, start thinking about the utility of my money, wanting to lock it up again, right? Want to have a big trade to secure profit. So very clear example of an early warning sign. Now he knows that greed has begun to take hold in his mind, right? the very end here at level 10. Want the absolute best return right now. Give up all control. Only focus on making money. Okay, not very complicated. And this right now is enough to give you some control. As long as you’re taking action early enough, but why stop here? There’s some holes in this. And the more you study your own patterning, I promise you, every single one of you will find more details. This is not something that you’re born with. This is a skill that is developed the more you pay attention and the more that you practice. And this is what you can end up creating. Okay, this took about 2 to 3 weeks. I’m going to give you some advice on how to do this, but it is not overly complicated. And one thing I want you to notice very clearly, step one or level one is different now. Just logging on to this client’s brokerage account was an indicator that something had changed mentally. just logging on because he wouldn’t do that. Now, this is a swing trader. He would not do that if he was truly comfortable with the positions. When he starts looking for more, he wants to get a taste of what that P&L is running at that moment. So, you see the other things that are now filled in. There’s more detail. There’s early warning signs. He set up a phenomenal defense. You want to win championships, you got to have a good defense. This is the beginning of how you develop a good defense. And here is how you do it. You’re going to spend time collecting data around whatever problems you dealt with, right? Whether it’s discipline issues, fear, FOMO, greed, overconfidence. And here’s how you’re going to do it. Okay? Every single day you’re trading, you’re going to pay very close attention to whenever your emotions start to creep up. Right? When you know what is optimal, it’s easy to see when they deviate. You also can do this immediately after a mistake, whether or not you know it was emotional or not. You can do it defensively, maybe every hour, every two hours. Okay? The point is you are actively collecting information that gives you indicators about where your emotions are, right? Study them over time. You do you do this, you know, three times, you’re going to gain more information than you know now. You do it 12 times over a few weeks. You collect these puzzle pieces that eventually allow you to turn it into this. And
there it is. Okay, that’s what you get to create. So, let’s just go through a few examples so you know exactly what we’re dealing with here. Okay, so first you’re listing down the instrument of the situation. Then the trigger, like what sparks the emotion, what sparks the mistake. Was it a loss? Was it market conditions? What are your thoughts that are happening in that moment? What are you thinking to yourself or out loud? You know, I can’t believe I was so stupid, right? Or I’m looking for more money. Uh what are the emotions? Can you identify what you’re feeling in that moment? What are the actions or behaviors? Right? The behaviors might include, you know, death grip on the mouse, maybe you’re leaning into the monitors, maybe your foot’s tapping a little bit more, maybe you actually feel some tension in your head or your chest. And of course, what’s the mistake? Now this last one change in decision-m I do not mean what should your decision-m be I mean how does your thinking about your trading change right now all of a sudden you’re maybe thinking probabilistically you’re thinking deterministically like you know what’s going to happen maybe you’re worried about uh losing profit uh certainly unrealized profit let’s look at an example okay situation bought Apple trigger got stopped out by a tick And then of course it races to your target. Thoughts. I can’t believe this is happening again. Obviously not saying it with the same kind of inflection as you would when you want revenge, right? There’s a lot more intensity there. Behavior. Hyperfocused on finding a new entry to get my money back. Okay. Then of course finding a sub-optimal entry because that’s what you do when you’re hunting. Anything looks good at that point. And then the change in decision-m is being overly focused on making money. So like I said, you spend time doing this enough and over time you have a clearer map of your own emotionality gives you an opportunity for control. All right. Now the next step getting to the root. I want you to just imagine that you experience pain in your foot while you’re walking. What would you do? I mean certainly some of us would just try to walk it off. Maybe assume it was temporary. Maybe you hope it just goes away and maybe it does. But if it doesn’t, you’re going to investigate. You’re going to want to understand what the heck is causing this pain. You’re not going to live with it. Why do you not do that with your emotions?
Emotions are a signal, right? They’re a a pain signal in a sense, right? That there is something wrong. And in this case, what is wrong is with your perspective. The the flaws, the biases, the wishes like making easy money. These illusions that we can easily get, you know, kind of sucked into, they are what cause the emotionality. Emotions are not a problem, right? As we saw on the whiteboard, we need emotion to perform. It’s not bad. What is bad is what causes it to become excessive and have you cross that threshold and have it start to work against you. So, if you’re going to develop a strategy that is going to actually not just gain control, but truly correct your emotionality. Look, the reality is you want to be able to not have to defend against your emotions. If you’re constantly having to be aware of and monitor your emotions, guess what you’re not able to do as well? Focus on the charge. Be as receptive as you want. You want your mind clear and not having to play aggressive defense, but to get there is going to take some work. So, you’ve got to understand what the hidden flaws are. Okay? And these are some examples. I know many of you got the mental game of trading. In the book, I talk about 40 different of these underlying flaws. Just go through a couple right now. Expecting perfection. There’s a massive difference between expecting perfection in your performance and in your results, right? Execution is maybe more in your control. You can have perfect execution aspirationally at least, but if you expect it and you underperform, then your reaction to mistakes and you know can be quite a lot worse, right? The trigger is the loss or the underperformance and it causes you to have frustration because you were expecting more of yourself than you could reasonably deliver. Okay? aspirationally be perfect, right? Some of the best traders and athletes in the world have that desire, but they do not have the expectation, hating bad luck, you know, hating to lose. If you have these beliefs or perspectives in the back of your mind, it is going to produce anger. It’s going to create overreactions when things happen in the market that you do not have control of. Hindsight bias, one of my favorites, right? you see how much money you could have made and then falsely assume that you’re going to be able to do the same thing in the next time, right? That this hindsight should turn into foresight is a flaw that many many people struggle with. Okay? So, your job is to figure out I want you to really in be inquisitive around the mistakes that you have. Now that you’re collecting more data, you’re peering into your issues a little bit more clearly. Ask yourself why. What what is going on in the background? Why am I reacting in the way that I am? and you’ll start to uncover these flaws. Okay, now we’re going to put this all together and allow you to start to correct the problem in real time. Bring the battle to the moment. The reality is conditioning your mind is a lot like conditioning your body. You have to be able to train. And the difficult part about know the mental game is that the best time to train is in the heat of the moment when the weight is at its heaviest. Look, if you go to the gym and you’re only lifting weights, it’s easy. You’re not really going to gain much. So when you’re trading, you have to be ready for those moments to be able to push yourself to have the right perspective in those moments. And when you do that again and again and again and again, rinse, repeat, that is how you start to retrain your mind, that’s how you gain control and ultimately delete these issues entirely. All right, so like I said, I like to uh make the mental game tangible, right? And let’s put this all together here, okay? Just so it’s very very clear. What if we start labeling all of these points much like the map I was talking about there like this? Now we can do the same thing on the discipline side, right? When your energy is too low, but this is effectively what we’re talking about. So the yellow area, right, is your best time to be injecting the right perspective. you still have enough kind of brain capacity, enough ability to think clearly that you can fight up against your patterns, right? If you wait to hear, you’re going to get steamrolled. That is a reality. So, by finding those early warning signs, you create the ability to work against the issue, work against the reaction, and pull yourself back up. And maybe on days where you typically would have, you know, turned towards revenge, taken in several losses in a row, frustrations rising, you’re in a little bit of a draw down, just rough conditions, don’t really see a whole lot of opportunity, right? Well, can you hold? Can you avoid the self-inflicted wounds that maybe have blown accounts before, maybe turn into actual gambling? I mean, to me, betting on a negative edge is gambling. And when you’re not trading with an edge, to me, you’re gambling. So, can you in those moments keep yourself in control and take steps to decrease your emotionality? This is not rocket science. Went to Houston yesterday. I mean, the the space center. I mean, it is remarkable what they’ve done. This is not rocket science. This just takes a little bit of diligence, a little bit of preparation. Right now, I want to challenge all of you right now. Just show of hands. How many of you are ready to to battle in the way that I’m suggesting? How many of you are going to take the time every single day to start conditioning your mind? Okay, great to see a lot of you raising your hands. For those of you that are unsure, understand that the next time you struggle, and you will, if you’re not ready to avoid your mistakes, this is the path forward. I I wish there was, you know, something that could just sort of snap my fingers and make you have the perfect mentality. I wish there was advice that was capable of transforming you instantly, but that’s not reality. We deal with rules. And when you understand the rules of the game, you have an opportunity to develop a strategy that might actually bring things home for you. All right. So, as we wrap up here, uh, I want you to understand just a few key takeaways. Got time for a couple questions. Um, and when it comes to the mic, I’ll be happy to answer any questions about anything I’ve talked about. Uh, any questions that you want, maybe a little bit more personalized, I will be at the Robin Hood booth during happy hour. Happy to answer questions then. Uh, so first off, you cannot rely on emotional control. Why? Because emotional control is a mental process that gets shut down by intense emotions. So what are you going to do? You’re going to understand your pattern of emotions. You’re going to find ways to be really detailed and specific about what you’re struggling with and where and why. And when you do that over time, what is happening becomes queer. You now have something that you can work with. Again, you’re making the mental game tangible. It’s not rocket science. And lastly, uncover those flaws, right? Take the time to ask yourself that why question, right? It can be challenging. Like I I will not not be shy in saying that the biggest gap between my abilities and my clients is in this step. Really being able to understand the underlying flaws. But it is not impossible. You start asking better questions. What a great mentor of mine said, if you want better answers, ask better questions. And just asking a why question is an will give you an opportunity to to do that. All right. So with that, we have a few questions here. Yeah. Thank you. Um when you get to one of those extreme levels where the mind’s turning off, you’re not thinking critically. How like time frame? Think about real time. How long should you wait? Uh what are some indicators that you can check in on to know that hey, I’m ready to revisit this again through. So ideally, you’re catching those earlier warning signs before you even get to that point. But let’s assume that you didn’t. Right. Right. Uh you want to act immediately. If you don’t act immediately, you’re kind of gambling with your mentality at that point. You’re hoping that you’re going to get lucky and be able to, you know, kind of gain control. So honestly, in those moments, just rip yourself away. If you can just stand up and run, I I mean, close the position, obviously. Do what you need to protect yourself. Get away. And then you could do go do a bunch of writing. Do a data collection. Just dump out what’s going on in your mind. It’ll help to make what’s going on a bit more objective. Sometimes when the emotions are kind of running rampant in our minds, it’s hard to kind of see things clearly. I actually had a a PJ tour player who I worked with who u he would send me uh voice notes, you know, after the round and you’d hear at the first few minutes was just all the frustration just getting released and then by the end he was answering his own questions, right? We’ve all had those instances where, you know, once you sort of leave a heated argument, cooler heads prevail. So, that’s my advice. Just run away, get it, get it out as best you can, you know, and give yourself an opportunity to kind of digest a little bit. Thank you. Yeah. Yeah. Go ahead. Hi. Um Oh, it’s not Oh, there you go. Oh, there we go. Hi. I really like what you said about betting with a negative edge is gambling. And I think when you have an edge or believe you have an edge, like emotions can blur whether you actually have an edge or not, like some people look a technical analysis and then they misread it because of emotions or they might just be mistaken. And I’m wondering how do you determine if you truly have an edge versus something that’s just like an emotionalbased edge. So that’s beyond my pay grade because I’m not I don’t get into anything technical or strategic. So you you need to prove over a large enough sample that you have an edge. Uh you know that’s sort of easy to say but if you need advice and perspective there’s lots of great traders around who can help you do that. But what I will say is it’s okay to at least be questioning, right? If they’re go through periods where you’re having high profitability and you’re not certain exactly what your edge is, if you can’t explain exactly why you’re making money, that gives you an indication as to, you know, what to be looking for, what you at least give yourself some pause for to think here. Generally speaking, I think if you’re not overconfident, if you don’t get too far ahead of yourself, if you’re kind of a little bit cautious about the profitability that’s happening, I I think you’re you’re well ahead of most traders in that regard. Thank you. Yeah. Go ahead. I got time for one more question, then I guess I’ll take the rest elsewhere. Um, thank you so much for this. Like this is wonderful. Um, so my question is basically regarding uh a bias. So many of times you think you have this stock in mind or an equity in mind and you go in with that conviction that okay I want to get this. So I personally try to go to AI and ask it to challenge me right. So I would be like play my devil’s advocate and tell me where’s the flaw in my thinking. But my question really is like if I am the one who’s choosing the prompts, the assumptions, the evidence and everything and then when AI challenges me, I’m like, “Oh, no, you don’t get the context, and here’s the context.” So, how do I actually genuinely make AI give me that right perspective that I might be lacking? Like, what are some of those practices you would recommend so that an AI can genuinely be helpful? The AI training I’m going to leave aside because I think more complexity and uh than I can get into in 30 seconds. Uh what I will say is, you know, have a a a pool of people that you can trust to at least bounce ideas off, right? Don’t just rely on a computer to challenge you. Find people that can do that that you know you respect. Uh but you also can do it for yourself. So if you’re keeping a very clear trade journal, to me that includes lots of trades that you do not take. I think a it’s very easy for traders to only track the ones that they’ve taken. But when you go in with certain biases or thesis, it’s okay to, you know, track how those thesis play out, whether or not you actually take trades or not. Because over time, again, you’re going to see patterning in your own ideology, in your own thoughts, your own thesis, and then how things play out. And over time, you’ll be able to make sense of a little bit more. Again, when you get lost in your mind, when when emotions are swirling, the best way to gain some some objectivity is through writing for yourself. Whether that’s turned into an AI that’s going to maybe help you make sense of it or not, I will be very very clear and honest. AI is awful at mental game diagnostics. It may help you summarize these themes, but it is honestly quite dangerous in some respects. Some of the things I’ve seen come through are quite bad. So just be very very cautious at this point about how much you’re relying on AI for your own kind of perspective. I’m not saying don’t use it like like a lot of things it’s a tool and when there’s a lot of kind of overlapping uh perspectives you kind of converge on a on some certainty. So that’s true with AI it’s true with other people right you we have all it’s impossible to not have bias. So all right that’s all the questions for today. Like I said I’ll I’ll take uh additional questions uh back at the booth during happy hour. At this point, the improvement is in your hands. Okay? My my job as your coach has concluded. So, take the next step seriously, right? You’ve got an opportunity and you know, it’s one that you can take now. So, I wish you well as you take that and uh really make some progress here. So, thank you.
He’s
got visual aids and everything. And Jared, you know, he was worried about his handwriting emotional. I can read it. It’s good. All right,
we’ve made it. I don’t know about you guys, but I’m considerably more aware of what’s happening inside my own head when I trade, which is useful, also a bit terrifying. Um, but we are there, guys. We are at the finish line. We have one session left and this has become one of my favorite traditions at HoodSummit. We started it three years ago because we launched Robin Hood Legend and we were looking for a a fun name to go for a segment. We came up with lessons from a legend. Uh and the goal was simple. Bring someone on stage who has spent a lifetime in the markets. Get beyond the headlines and the hot takes and the mechanics. Actually, this one has a lot of mechanics, but let’s let them teach us what they’ve learned over their career. Two years ago in Miami at our first Hood Summit, it was Mark Fischer taking us inside the world of futures trading and the career that he built in the pits in New York. Last year, we were in Las Vegas. We launched shortselling and we brought in uh Fami Kadir who gave us a totally different perspective on the world of shortselling. And this year, we turned to a legend that came from the options world. But trust me, this one is going way beyond options. Now, I started my career working for this guy back in 2007. I was young. I was new to the retail brokerage industry. And somehow I got lucky enough to be surrounded by this incredible group of people at this company who thought about markets differently, thought about trading differently, and they genuinely loved it. And at the center of all that was Tom Sausnoff. And so a huge part of how I learned to trade about options, thinking about probability, risk, and frankly this entire business that we work in started with Tom. Uh and so the guy that I get to introduce that’s going to introduce Tom, uh he’s also been woven in my entire career as well. Uh I’ve worked with JJ Kahan for nearly 15 years. Uh he’s been a boss, a mentor, and a friend for a very long time. So, getting to stand here and watch JJ introduce Tom and then afterwards sit down with him and moderate a Q&A for you guys, it’s pretty special and there’s really no better home for it than a s a session sponsored by our friends at SIBO. So, let’s finish strong and to introduce our legend, please welcome to the stage senior vice president, head of retail expansion and alternative investment products at SIBO, my friend and fellow White Sox fan, Mr. JJ Kahan.
Thank you, Obie. Uh I’m I’m honored to introduce Tom. He’s been a boss, a co-orker, a friend for many, many years. Tom and I started uh on the floor of the CBOE many, many years ago. I think they actually may even have a picture of it. We stood in the OEEX pit which at the time had 600 people in it. And so uh you can see the yellow uh circle around Tom. I’m actually at the very top left of the picture. If you look in front of the American flag, the guy with the giant forehead, that would be me. And so we were in that pit together for many, many years. Tom went and founded Thinker Swim. I went and worked for Tom at Thinker Swim. And then uh at Tasty Trade, Tom called me and I was CEO at Tasty Trade. And so we’ve been together in different roles for about 40 years. Uh quick thing about Tom before he comes up, he’s probably one of the most humble people I’ve met in my entire life. He really does care that everybody else in terms of being a retail investor is successful. He has all the time in the world. For anybody here, anybody who was a client of our firms when we had brokerage firms, Tom would sit and listen to a story about a one lot vertical spread for hours. If any one of us suggested anything, Tom would say, “You’re an idiot. You don’t know what you’re talking about. Please be quiet.” And uh you know, that was just how he operated is he will talk about, if you’ve ever read anything about Tom, it’s always no high fives. Uh you did your job if something went well. You’re an idiot if it didn’t. And in talking about humility, he always wanted to be one of the team. Uh, one really quick story, my son went to work for Tom as an intern at one time. And so my son comes back home after the first day. I’m like, “How was it?” He goes, “Oh man, it was so great. Mr. Saznoff is so smart. Teach me.” So I I learned so much on the first day. After the second day, Tom calls me that night and he goes, “I’m firing your son tomorrow.” I’m like, “What’d he do? I’ll kill him.” He’s like, “He keeps calling me Mr. Saznoff. I’m Tom. I’m one of the group. He goes, I’m not a hundred years old. If he comes in tomorrow and calls me Mr. Sausnoff and not Tom, he is going to get fired. My son had said to Tom, I can’t do that. My dad will kill me if I call you Tom. But I’m like, well, if it means your job, you better go in and call him Tom. The whole point of the story, Tom always wants to be one of the group. He’s the, as I said, one of the most generous people here. Many of the folks who are now at Robin Hood worked with us at Thinker Swim Around on the pit and Tom was a huge influence in all of our lives. But that’s enough of an introduction because I’m assuming many of you already know who Tom is. And with that, Mr. Tom Sazoff.
Thanks, man. Beautiful. Thank you. All right. That’s the nicest things JJ ever said about me. I’ll take it. And it’s a true story, by the way. Um, yeah, I was never really going to fire his son, but I hate being called Mr. Sausnoff. I hate being called Grandpa now by my grandkids, so I have to. It’s Tom. Okay. Um, no, it’s amazing to be here and it’s uh when when the guys asked me to do this, I was like, “Sure, I’d love to. It’s really cool and it’s been an incredible event and um happy to be here.” I mean, I had a I had a couple of jokes that I was just doing this so I could get a gold card, but uh quick little story. I applied for the gold card, but they rejected me. So, if you’re the only ones that got rejected, don’t worry about it. Happens to everybody. JJ, Q, Obie, I mean, you know, um we have these great stories. We go back 45 years together. 40 years together. I met JJ playing softball, um and found out we were trading in the same pit. I met Q when he stood about 10 feet to my left. The funniest story about the best story about those two guys is that um they when we started Thinkorswim I I tried to bring them over and so first I went to JJ and I said JJ I’d love you to come work with us. We building an education part component to this brokerage firm and he goes you think I’m going to work for you? Never. Okay, that was the rejection year number one. Rejection year number two, same thing. you’re number three. I got him. And uh we’ve been together now the last, you know, whatever 25 years. Uh Q, the exact same story. Rejected me the first year, rejected me the second year, third year he came over and now he’s pretty much, you know, doing all the every running everything at Robin Hood. So, it’s just awesome to see what’s happened. And there’s so many other people and I’m sure a lot of you have anybody ever seen me speak before? Where the hell you guys been hiding under a rock? I’ve been on the road for 25 years talking about options. I’ve probably done 500 600 shows all around the country, all around the world. And it’s how we promote, you know, and um uh I’m the only reason I have this whatever they call it, legend status, is because I’ve outkked my coverage. I’ve lived longer. Legends aren’t anything special. It’s just you live long enough, you keep doing something long enough and it gets kind of um it gets kind of special. You know, one of my big things is uh there there’s very few outliers in life and occasionally you’ll run into an outlier. Like the guy that’s going to come up and close this event, Vlad, he’s an outlier. You know, he turns turns builds this amazing company, turns it into an incredible uh an incredible venture. Those are outliers. Most people uh the key to success is longevity. The key to success is being able to do something like for a ridiculous amount of time like you know I mean Warren Buffett’s probably the best example in the world of finance you know doing it for I don’t know how many years 70 years 80 years um but for a lot of us like this is year 45 for me and you know the long if you can do something for a real long period of time it’s really special and that’s how you get kind of this you know reputation or you get to talk to people like you guys and um I only talk to self-directed investors. I only talk to do-it-yourself traders. I’m on the active side of this business, not the passive side. In fact, I put out another video today which talks about, you know, the dangers of passive investing just but I’m not going to scare anybody. Um, the piece I put together today, this is a relatively short piece to take you through different stages of both my life and also kind of things that I’ve learned with lots of different takeaways. So, I’m going to get right into it. Most important thing, and this is the thing I just want to stress to everybody here that this is the biggest takeaway. Just bet on yourself. Life is all about you get all these different choices and the one person or persons, you know, the one the one thing that you have, especially when you’re a little younger, actually any time in your life. I didn’t build Thinkersome until I was 42 years old. I didn’t build Tasty till I was in my early 50s. Um, I’m not building Lost Dog now until I’m in my late 60s. You know, this is something if you get an opportunity to ever bet on yourself, just bet on yourself. I am a freak about that. But for today, I want to talk about, hey, where do I start? The reason you came to this event and the reason you go to any event like this, the reason you take time out of your day, your resources, whatever else it is, is to figure out, hey, where do I get started down this path? What do I do? How do I get here? And it to make it, how do I make it special? Well, learning how money works is not easy. So, you have to challenge yourself non-stop. I spent 20 years, that picture Jay just showed you of the trading pits. I spent 20 years challenging myself, standing in one single stupid spot that was about a foot wide just to figure out how this business works. I was a political science major raised by a civil rights attorney and a and a art teacher. And so I loved finance. I fell in love with the trading floors. But I challenged myself non-stop. And you know, that’s how you survive. The real risk in life is not really is not challenging yourself, not taking any risk. And when you’re young, and one of the things I stress more than anything else, roll the dice on everything. I I can’t stand when people say measure your risk or think about risk or take a step back and think about what you’re about to do. Don’t take a step back. Don’t think about what you’re going to do. Take as much risk as you can when you’re young because you’re not going to build wealth when you’re 22 or 23 or 25 or even 30 years old. That all happens later on. But if you don’t start when you’re young, it’s really tough. Wall Street’s version, put a little timeline together here. Wall Street’s version of wisdom is to surrender. That’s the tra traditional conflicts. That’s the embedded conflict in Wall Street. There’s something called the 40-year nap. The 40-year nap is is this fun little saying I do that when you’re 25 years old, you close your eyes. You take a nap. You just close your eyes, say, “You know what? I’m going to I’m just going to go to sleep for a few minutes. I’m tired.” You wake up, you’re 65, and you’re like, you look around and you’re like, “Where the [ __ ] did my life go?” And you’re sitting around going, “I’m 65 now, and I got no idea how markets work. I don’t understand strategies. I don’t understand financial markets. I don’t understand options, futures. I don’t understand crypto. I don’t understand anything because you’re 65 now. Take the risk when you’re young. That 40-year nap, it happens to everybody that’s not in this room.
Success is not about marginally beating a benchmark. I want to stress this because it’s such an important thing. People think success is the S&Ps are up 11% this year and I’m up 13%. I killed them. No, you didn’t. Doesn’t mean anything. If you did it passively, if you did it if you did it without strategy, if you did it just because you’re a bull market genius, it doesn’t mean anything. Success is not about marginally beating a benchmark. Success is about learning how to consistently improve against yourself, improve against risk-free rates, improve against whatever the opportunity is. Like if the market’s down 5% and you’re unchanged, is that success? I would argue not. So success is not about marginally beating a benchmark. When you outsource your money decisions, and this is really cool because people in this room are here because they don’t outsource their money, their money decisions, but when you outsource your money decisions as a default, you’ve already lost. Because there’s only so many things in life you can do where there’s an efficient market playing field, where it’s literally an efficient market and it’s literally a laying a level playing field. And when you get to that point, you get to make so many decisions and so many positive things happen. you learn so much and if you outsource those decisions, it’s over. You can’t catch up. So, I’m going to give you a little brief background and then we’ll talk about it. the picture JJ showed before, which I didn’t even know those they orig they had. Um, I grew up in New York and I grew up I got out of college in the late 70s and I moved to Chicago in 19 Well, here’s the thing. I was a political science major and I got in there were no jobs in 1980. I got a I got a job interview on Wall Street. They offered me the job. I took it. Six months later, I met some people. They’ve said, “I’ll put up some money if you move to Chicago.” I moved to Chicago and I never left. The reason I never left is cuz I stepped on the trading floor and it was the last frontier of raw capitalism. It was an insane place. There were people yelling and screaming. I had no idea what’s going on. I’m like, I got to figure this out cuz this is the coolest place I’ve ever been. That’s how I started my career. It was very entrepreneurike before there was the word entrepreneurship. So 20 years I spent trading in the S S&P 100 pit and I stood 15 feet from Q. I stood 30 feet from JJ and my friends that that I still have today. My partner Scott Sheridan and a bunch of other people Tony Batista that I work with. We’ve been friends for 40 years. One of the coolest things is you know a working with your kids or b working with your friends. And I’ve been lucky enough to work with my friends for my entire life. 1999 2000 we built Thinker Swim. I’m not sure how many people in this room have ever traded on Thinkerson or even heard of it, but it’s a pretty big platform. It it was the first platform to democratize to democratize trading for retail investors. I mean, we were a public company. We were bought out by TD Merit Trade and TD Merit Trade was bought out by Schwab. So, now it’s Schwab’s primary platform, which is super cool. And there’s a lot of fun stories about Thinkorswim, but all I’ll say is just to give you just a tiny little bit of background. The name Thinkers Swim, I made it up when I was walking through my living room one night. And a reporter for Cranes Chicago, which is a business newspaper magazine, when we were launching wrote a story that said, “This is the worst name I’ve ever heard for a brokerage firm.” When when this reporter wrote that, Scott and I looked at each other. you go, “Oh my god, we’re going to be successful.” Because you need people that hate your name to kind of motivate you with bulletin board stuff. Well, anyway, the name Thinkersome obviously stuck around because it’s still around today. But when we sold Thinkerson to TD Merit Trade, TD Merit Trade, the first thing they said was their CEO said, “Oh my god, I hate the name Thinkersome. I’m going to change this name to the ultimate trading platform.” I looked at the CEO, I said, “You know what? This is a dumb move. Everybody loves the name Thinkersome.” And needless to say, they went through a couple of different studies. They spent a few million dollars figuring out that everybody loved the name Thinkorswim. And then Schwab did the same thing. And today, Thinkerswim still exists. And outlive TD merit trade. That’s one of my fun stories.
So when I when my when my deal was over with TD Maritrade, I wanted to build another company because I just thought financial media needed something. So I wanted to build this company called Tasty Trade. And I was friends with the CEO of TD Marit Trade. So I went to him and said I said, “Fred, I’m going to leave.” And he goes, “I thought you were going to leave eventually because I knew you wanted to do something else.” And I go, “Yeah, and I’m going to build a network and not another brokerage from the time, but just a network.” And he goes, “Um, I’m sorry I’m going to ask this, but what’s the name?” I go, “Tasty trade.” He goes, “Oh my god, I hate that name worse than thinking.” So I looked at Fred and I said, “I I knew you were going to say that, but” And then he and then he did the weirdest thing. He goes, “But I’m going to bet on you, so I’m going to write you a check.” It was a big check. And he goes, “I want to be a partner.” And we were partners. And um we launched Tasty Trade. And then and then 11 years later, we sold Tasty Trade. You know, those were two billion dollar companies at the time that we sold and now they’re two multi-billion dollar companies. But I don’t look backwards. I want to keep moving forward. Now, we’re building a company called Lost Dog, which is about optimization of portfolios and optimization of careers. And we’re about to launch a the most amazing platform we’ve ever built called One Lucky Dog, which is about ideas. And the reason I love ideas is because as opportunists and as self-directed traders, you know what we need? We need ideas. We need we need we need we always People always say to me, “What are you doing? What are you trading?” You know, “What are you doing?” And it’s just like we all need ideas. I’ll be doing a live show and somebody will say, well, what do you think about XYZ stock? And I’m like, I don’t know, I never looked at it. And then all of a sudden, I’ll look at it. I’ll make a trade in there. So, I love that whole concept. Anyway, that’s where we are today. So, the most important thing and one of the most important things in life, whether you’re an entrepreneur or a trader, whatever it is, a business person, you need to know that you own the opening trade. You need to know that that decision, you control that decision. You control that opening trade. Like after you make a trade, you have no control over what the underlying is going to do. You don’t know if a stock’s going to go up or down, sideways, or whatever is going to happen to that company. You have no control. But you control all the dynamics, all everything that goes into making that opening trade. No matter what it is, no matter what kind of investment you make, you control that point. You control the decision to make that trade based on whatever it is that you’re looking at. And you can never forget that. control what you can or just own the opening trade. The root cause of wealth inequality is just a lack of financial knowhow. It is a fact. People that are not successful or do not build wealth do not have we call financial knowhow. It’s called there’s a it’s called economic bias. And economic bias comes from not making enough decisions and not making enough essentially enough trades.
I talk about this next slide and it’s one of the most important things in life. If you run into anybody that has built a lot of wealth or has been very successful, I can promise you the one characteristic of every single person is they make the quickest decisions of anybody you’ve ever seen. Speed over everything else. Being first is way more valuable than being right. And that’s something you almost never hear from anybody else in the world because I just this is this is my life in a nutshell. I don’t necessarily care about being right. I care about being first because I want that opportunity and I want to figure it out. Most of the time most of the time our intuition most of the time our our sense of correctness our sense of probabilistic outcome is really strong. So being the first person to that has the opportunity to make that opening trade or make that trade, that’s the single most important thing. And every person you run into that’s super successful will be the quickest decision maker. When we put boards and stuff together, I always like to bring in really successful people. And the reason is not because I really care about their knowhow. I just want their speed. I want speed of decision-m. Make a quick decision. Don’t think about it. One of my a quick little story. My son is um when he got out of grad school, he he got a job offer and um he called me up and said, “Dad, I got this job offer. It’s it’s a great offer. It’s just what I was looking for with an amazing company.” I said, “Okay, when do you start?” And he goes, “No, I told him I need the weekend to think about it.” I’m like, “What’s wrong with you? like I’ve been training you for, you know, 27 years to make quick decisions and now you’re going to take the weekend to think about it. If somebody did that to me, I would hire somebody else. So, I told him that. I don’t think it made a dent, but I tried. Most losses most losses from most losses stem from a literacy or a mechanical gap. The business of finance is not rigged. This is not a rigged game. Most of the time when we make a mistake, we do something like we trade too big or we do something else like that. Like people don’t like you don’t know what’s going to happen next. Nobody knows what’s going to happen next. So most of the losses it’s just it’s just hey, you know what? We did something that was mechanically incorrect. We lost our discipline. Whatever it was, the agentive tools that are being launched now on new platforms, it’s really going to solve a lot of that. But for the most part, it’s just important to know, you know what, the counterparty, it’s not rigged. Nobody knows what’s going to happen. You don’t know. They don’t know. Nobody knows. But we do understand how to optimize mechanics nowadays. Going back a couple of years, they said it would end in tears, but it didn’t. when firms when when essentially when we eliminated commissions in this industry and Robin Hood is obviously one of the leaders in eliminating commissions, they thought they thought that no commissions would remove the structural disadvantage that separated retail from the pros. But you know what? Everything is better today. Markets are tighter. Markets are more liquid. Markets are more efficient. Everything’s better today than it ever was. There’s more products, more liquidity, and the technology is so much better than it was, you know, 5 10 15 years ago, it’s just incredible. It is a true level playing field today. Real time experience pays dividends. So, when you sit back and you think, you know what, I’m going to paper trade for a while. I’m going to think about this. There’s lots of ways to do things that are very capital efficient. And it’s really important to recognize that the value is not necessarily in the return. It’s in calibrated judgment over uncertainty. That just means do it. Put your foot in the water. Put whatever. Jump in the water. Whatever it takes. Keep your size in check and and just experience it. There’s nothing that can replace experience. If you’re going to bet on yourself, you have to make lots of mistakes. If you’re going to bet on yourself, you’ve got to take the last shot all the time and you’re going to miss a certain percentage of them. That’s cool, but you’re going to get paid. Most people never get to sit on a cap table. That’s a very fair statement, but trading is what makes it possible for some people or it’s made it possible for somebody like me. the your ability to articulate things because of your understanding of how financial structure works and financial markets work is critical. Once you can articulate things, you can get to places that you’re like, “Wow, I didn’t even know that that was possible. Articulating the mechanics, super important um to everything. If you can articulate mechanics, you can jump ahead of virtually everybody else in the queue. Most people, including most young entrepreneurs, have a really difficult time of articulating the mechanics of how they generate free cash flow, of how they’re going to turn the business into something successful or how they’re going to trade or whatever else it is. Once you do that, opens up a million doors. There’s a fallacy out there. It’s called the fallacy of the crystal ball. And essentially, that’s the assumption that you know what’s going to happen next. I mean, that’s just it’s it’s crazy. There’s there’s no such thing. And so thinking that somebody else knows what’s going to happen, that’s a fallacy. What you need to understand is just how the mechanics work. Control trade size and then you therefore you control your risk. Um that’s all this whole business is about. If you control trade size, you control your buying power, you control your risk. When genius fails, when genius fails all the time, when genius fails, it’s always because tra people trade too big. We’ve owned two brokerage firms, millions of customers, and the only time people blow out is when they trade too big. It’s it. It’s the same thing for everybody.
Understand law of large numbers. Know how that works. Law of large numbers is simple. If you do stuff that has a high probability of profit, a high probability of success, and you do that one time doesn’t mean that much. 10 times doesn’t mean that much. 50 times doesn’t mean that much. 100 times doesn’t mean that much. A thousand times, law of large numbers start to work for you. Your 70% probability test is going to come in 70% of the time. There’s a reason to this day, this year, I’ll make about somewhere between 15 and 17,000 trades. A lot of them will be losers, a lot of them will be winners. Whatever it is, but whatever my statistical probability of success is when I opened every one of those trades will be the exact number with give or take 1% at the end of the year. That’s essentially how you use law of large numbers to your advantage or to your benefit. It’s always decision making speed over deliberation. First person to make the trade. The reason JJ’s up here, the reason Q was up here, professional traders, it’s always about speed. It’s not about being right. It’s just about speed. And life is like that.
I I just ask everybody here because you came out midweek to Houston to meet people, to network. It’s crazy important. All the stuff you’ve done here over the last day and a half is super important to how you network, how you articulate, and also how you carry the torch, how you tell people about this industry, this business, the wonderful parts about finance and the opportunities it presents. So first, right now, everybody in this room, you carry the torch. Next thing you pass it on to whoever that is, your friends, your family, whatever it is, you we we we just ask you when you leave here to hand down fluency. A lot of people focus on the fear part of this business. What happens if the market crashes? What happens if I lose money? I feel more comfortable if somebody else makes decisions because then I can blame them for bad decisions. Hand down fluency, not fear. Fear is this insane meanreverting opportunity. And let’s focus on that. Let’s end this with leave here. Walk out these doors tonight as an opportunist. Nothing else. Just think about this. Everything I learned at this event over over two days. I’m walking out of here as the consumate opportunist. Thank you.
I’m going to bring back JJ. I’m going to bring back JJ. We’re going to do a little a quick little um fireside chat or Q&A. That was a great speech, wasn’t it, guys? How about it?
That’s it.
So Tom, uh, you know, it was great and and I think your messages have always resounded well with people, as I said earlier, Tom, you know, really does care that the people in this room are successful. But those of you those of us who have known you a long time, uh, I think the question people always ask about you is this. How do you stay motivated? As you know, we said in your intro, you you you’ve sold two businesses, you know, for a lot of money, almost a couple of billion dollars, but you work still hard. Tom works harder than anyone I know. If you send Tom an email at 1:00 a.m., your answer is usually at 10:03. Uh, so I know Tom doesn’t really sleep much, but that all said, how do you still stay every single day where you’re always excited? You’re excited to give these talks. I think you’re giving, you know, four or five over the next couple of weeks. What keeps you going that way? I actually going to turn this around on JJ. Well, first of all, I should say I don’t have a hobby. So, like I literally don’t have a hobby. So, that’s a bad thing. But I I think the other thing is I don’t understand like the other like it’s weird. My brain’s wired in a way where I don’t understand the other side. Like I don’t know what I would do. Like I love to work and I work with my friends and I I like and I find technology to be fascinating and I think you know I don’t think Warren Buffett should have retired at 95 or six whatever it is. I really don’t. I think he should have kept going. I don’t think he should have retired. I don’t think anybody should ever retire. If you’ve if you’ve never heard me speak before I don’t believe in work life balance either. You believe in work work balance? Yeah. Um, all right. Well, you know, the second thing, and actually I’ve heard Tom speak quite a bit, but I’ve only heard you give this talk once and you know, and that is you talked the entire talk. It was an hour and a half, and it was nothing about his successes. It was just about his failures. And I would say it was my favorite talk of all the ones I’ve ever heard you give. Not because just because it gave me a few laughs at some of the investments over the years, but what what I really thought was important is people see the glory, but they don’t see all the little things that go into it. And it just translates so well to everybody’s trading. So just talk a little bit if you can about how you transition from some of those bad things into making things successful because you love to talk about entrep you’d love to talk to people outside trading who are just entrepreneurs about this also. I think it’s important that we measure ourselves by a lot of different things. One of the things is not how much we make but how much we give. And other things is I think it’s important that we have lots of failures. The tour JJ’s talking about a tour we did for a couple years called the bad trader tour. I did it all around the country and talked about all the horrible investments I’ve made in my lifetime, which is like millions and millions and millions of dollars. But the other side to that is I don’t know that I ever would have built anything like crazy successful if I didn’t have all these ridiculous learning experiences and and just and and what would have happened if nobody like when I moved to Chicago when I was 23 years old. what if somebody didn’t give me a check to trade with like you know somebody took a blind shot with me and and it worked for them but so I’ve done blind shots with you know hundreds of people and it’s you know some works most don’t but I don’t care I think it’s just important to remember where you you know remember how you got here and and support young entrepreneurs I mean we probably make 30 investments a year in young entrepreneurs around Chicago the Midwest mostly in fintech And to be fair, I’m not sure any of them ever paid off. I don’t even know if I’ve ever cashed a check. Well, I’ve invested with Tom and I remember one time where it did turn out pretty well and he’s like, “Can you believe it? We actually made money.” So, uh, my Irish good luck charm. But that leads to something else. First of all, I think you, uh, you’ve invested in a lot of entrepreneurs. to understate the amount of influence you’ve had in people’s lives and the amount of individuals you’ve helped to hire. Uh when we were at Thinker Swim, one of the women who ran Balancing was the Starbucks uh barista two weeks before that, but she worked really hard. Tom noticed it every morning. It’s like, you want a job? And so, you know, there are a lot of people who I’ve worked with at the firms that, you know, Tom has owned who were doing something completely different, but Tom noticed they worked hard at what it was they were doing and they were friendly, so he’d hire them and let people like that into the financial industry and change their lives. That all Yes, I agree 100%. You know, it’s funny, but I I I go through life with this idea that everybody’s smart. I know that’s not the way everybody else thinks, but I think that I’ve spent enough time on the road, met hundreds of thousands of people. I think everybody’s really smart. I think the difference sometimes is that you you talk to somebody and you realize this person’s actually really likable. This person like like this is somebody I want to spend time with, you know, in a business that I love. I I really like li likeability is super important to me. Yeah. Well, there’s no question. Uh we we we as Tom said we’ve been fortunate. We work with people we’ve liked our whole lives and it’s been absolutely fantastic. Uh so you know Tom we talk about there’s so many new products. I can’t remember a time where the industry is changing so rapidly as it has in the last we’ll say 3 years. As you look at the new products which ones are you most excited about and is there any that you’re like that one kind of scares me a little bit? I I don’t want to say anything scares me because I don’t want to jinx anything. I think that the coolest thing about new products is that it creates new areas of opportunity that you really don’t know, you know, what what it’s ultimately going to turn into. I think if there’s anything scary about it is I I don’t want there to be this gap in knowhow. You know, like sometimes sometimes you’ll find an exchange that will launch a new product and they’re hoping that somebody like me or JJ will will talk about it or or Q and then we’ll talk about the product to help them promote the product. That’s not really that’s not really the business we’re in. We want to promote opportunities for retail investors. And if we don’t think the product’s liquid or it has legs, we’re going to make the exchanges, we’re going to make the product creator prove it. make show us that this product is really good. Show us that there’s show us there’s a market for pers. Show us there’s a market for crypto. I mean, whatever it was at the time. Show us there’s a market for tokenization. Show us there’s a market for, you know, for everything that comes on board. And if there’s a market for it and there’s liquidity, I mean, I’m all in. And, you know, one of the things I I found your talk really good and again, I’ve heard you talk a lot. one, you you talked about a lot of mistakes people make and a lot of ways to think about planning. One of the things I don’t think you emphasize as much as I’ve heard you emphasize perhaps before is in terms of knowing your risk and really setting out your risk before you actually you said own the trade but uh own the opening trade I believe it was but you didn’t talk I think as much about how I’ve always heard you talk about really defining your risk in trading and I think for a lot of people here who maybe have made a few trades going to the next level it’s important. So, I’m I’m pretty much a premium seller and and I do a lot of undefined risk trades. Um, but I think the most important thing is you have to keep your size buying power in check. The one mistake people make is that they they don’t use really simple back of the envelope u mechanics. Back of the envelope mechanics for risk is buying power. So, if you have a $100,000 account and you’re using $5,000 for a trade, that’s acceptable. You have $100,000 account using $2,000 for a trade or $200. That’s absolutely acceptable. You have a $100,000 account using $80,000 on a trade. That’s not acceptable. So, it’s all about trade size and it’s all about how you use capital efficiency, how you use leverage and and none of this stuff is overly complicated. It’s actually very common sense driven when you think about it, but buying power reduction back of the envelope way of really understanding risk. Yeah. And I think it’s really important and I don’t know that enough people actually talk about or actually think about it when they’re first making their opening trades. And then the other question I know you’ve gotten quite a bit in the past and some folks here who don’t know you as well probably wondering it. They were like, “I’ve never heard you talk about any individual stocks or any individual equities.” So, now’s your opportunity. I trade a lot of stocks and a lot of individual equities. I just when I talk I I talk in more general terms. When I trade, I trade in more specific terms. Meaning like when I come out here and there’s an audience of a thousand people that say, “The last thing you want to hear is what stock do I like? Who cares what I traded today?” You know, I bought and sold a bunch of different stocks. I traded a ton of options today. I probably made, I don’t know, 50 trades this morning from my hotel room. I love trading, but who you shouldn’t care what I think. What’s interesting about what I say is the mechanics that we that we drive people towards so that we optimize your returns. So, we optimize the things that you do so that you have better outcomes. That’s why I don’t talk about specific underlings, right? And and and I think that with that when you think about how you trade, I always feel like it’s an interesting message for people. You want to make money on every trade, of course, or you wouldn’t make it. But to you, it’s more of a bigger game in terms of the overall portfolio, right? Not just the one individual trade because one of the questions I love when people ask is they will say they’re buying a call in Apple and they buy it and they’re like, why would that person sell it to me? So, I always find it interesting that everyone’s worried about the person on the other side of the trade rather than themselves. Yeah. Yeah. Don’t ever worry about whoever’s selling you an option. When you’re buying an option, don’t worry about that person. They’re okay. Um, that firm is doing just fine. Don’t worry about it. You know, I I look at this business and I want people to focus on really the opportunity that’s in front of them. Like, listen, I’m doing this trade because everything looks exactly the way I want it. Okay, fine. Make the trade. Move on to the next trade. Don’t overthink it. Like, don’t you don’t know anything and the counterparty doesn’t know anything and you don’t know what the market’s going to do next. So, you made your trade for all the reasons you made it. That’s great. Move on to the next trade. And yeah, no one knows anything. I think uh the more the longer you trade, the more you realize that you certainly know nothing. But uh you know I I think you get used to the fact that there is no one who actually knows what’s going to happen in the markets overall. And so with that said I think you know one of the things just talking to so many of the nice people who are at this event uh I think people have a question about their own confidence. So what I mean by that is not in a bad way. They’re like how do I know when I should be trading a little bigger? You talked about sizing a position. I think it’s a really important message. How do they know when they should go from say three contracts to four or five contract? What is it that should give them that confidence? So first I just have to say one other thing that I about the last question because I forgot to say this which is really important. All my friends trade. So I don’t have any friends that don’t really trade. And the beautiful thing about that, which is a huge advantage for me, not because they know anything, but because I have the opportunity in life to do the opposite of what all my friends do. So when JJ looks at me and goes I go, “What are you doing?” He goes, “I’m I’m selling bonds here. I’ll buy them.” When he when when Steve comes out here in a few minutes and he goes, I’ll say to him, I’ll go, “What are you doing?” and he’ll be look all smiley and he’ll look at me and he’ll say I’m buying XYZ and I’ll short it. So I have the advantage of knowing what my friends are doing and knowing that they don’t know anything which is really a good and as I said earlier he thinks we’re all idiots. So no I don’t think you’re idiots. I just love the idea of um it goes back to a time earlier in my career. I was on the trading floor and there was a huge trader who I had met who I was really respected and he was amazing trader, probably the best trader in Chicago. And um I was walking off the floor with him once and we were going on the elevator to go up to our office. And I said to him, “Man, can’t believe that selloff. I bought the clothes. I think they’re going higher tomorrow.” And he looked at me and said, “Do me a favor. Don’t ever tell me what you think again.” And here I was thinking I’m some smart kid. And then and he’s like, “Don’t ever tell me what you think again, cuz I don’t even want I don’t care what you think.” I I think you scale when you prove concept. So, a lot of people will start in the self-directed space with a portion of their money and they really want to start, they really want to move more over, but they don’t yet have the confidence. So, what you do is you scale very small and you prove concept at each level. There’s no rush. Everybody in this room, you’re going to be doing this like J and I for the next 40 years. So there’s no rush. You start small and you incrementally increase and you prove concept at each level that you can handle the additional risk. Ideally, first you widen the strikes. Second, you add contracts. If it’s stocks you’re doing, you incrementally add shares. If it’s futures you’re doing, you start micros and you move your way up. That kind of thing. So you incrementally increase. I I know there’s one other question. I think uh the folks from Robin Hood actually had one more question. Our buddy Obie is gonna come out and ask this one. Uh oh.
So, a couple things I want to accomplish with this question. You mentioned you’re a premium seller. We know that. So, you don’t buy options. Uh and you’re a bit of a sports fan, especially a Chicago sports fan. I am a Chicago sports fan. There’s an a great debate going on between generations of who is the greatest basketball player of all time. So, two questions here. I believe on Taste You Trade, you once said the last call option you ever bought was your season tickets to the Chicago Bulls in 1984.
And you mentioned experience is what matters. Tell the audience about your experience with Michael Jordan, why he’s the best basketball player of all time. And we got proof. We got proof of this. Oh, no. That’s That’s Tom on the floor of the old Chicago stadium in the It’s like the 1991 NBA finals. I’m going to tell you a quick little story cuz this is kind of fun. So, we’re a bunch of cocky young traders. It’s 1984. I think it was 1984. Bulls draft Michael. The whole deal. You have to remember in the 70s and early 80s because JJ grew up in Chicago. I grew up in New York as a Knicks fan, but the Bulls were the worst team. 3,000 people used to go to this the old Chicago stadium to watch the games and nobody every seat was empty. 3,000 it held like 19 or 20,000 Bulls drafted Jordan and the Bulls ticket office decided we’re going to go and try to sell courtside seats. 1984 1985 we drafted this kid Jordan. We’re going to be good. We’re going to try to sell courtside seats. They never sold them before. They were $75 a ticket in 1984. 1985 I don’t remember exactly the year. So they hit they knocked on our door first and which just out of pure luck they came to our floor. They knocked on our door. There were a bunch of trading firms. They just happened to knock on our door. They sat down with us. They said, “Would you guys like to buy courtside seats? We drafted this kid. He’s going to be really good.” We’re like, “All right, we’ll take a shot. We’re we’re young. We’re like, we’ll take a shot. We can afford it.” We, four of us, we bought one ticket each and we bought the four courtside seats at center court at the Chicago Stadium 1984. One of my buddies leans over and he goes, “The Bulls suck. We don’t want the center court seats. Let’s take the four seats at the end of the bench and sit next to Jordan cuz he always sits at the last seat on the bench.” So I go, “Okay, we’ll do that.” So we took the four seats at the end of the bench. Those seats became very valuable over the course of the next 15 years and six championships and we got to talk to Michael every night. So that was that was the best long trade I ever made. Yes. And settler for everyone. Not only is he the best basketball player all time, probably the best athlete of all time. Why are you asking me this? Cuz I think there’s some people out think out there that think otherwise. I I think Michael’s the best basketball player. Yeah. All right. Thank you, Tom. You don’t want to hear my You don’t want to hear my story when I played basketball against Michael Jordan, do you? Can I tell one last story? This is This is where is yours? So, Michael had I wouldn’t He didn’t have a gambling problem, but he loved to gamble. I’m going way off topic here. Remember, it’s me. He didn’t have a gambling problem because he had a lot of money. So, well, he didn’t at the time. One night, Michael Jordan leans over to us and we’re sitting on the edge of the bench and he goes, “Someday I just want to make as much money as you idiots.” Talking to me and my four friends. We’re like, “We’d like to bet on your career as opposed to my friends, but whatever.” Anyway, couple years later, he or a year later, he didn’t have any friends in Chicago. So, he we’re not really friends, but we’re talking to him every night. He goes, “What are you guys doing tonight?” And it’s like a Thursday night. We’re watching a Bulls game. I go, “We’re going to go home, you know.” I go, “We’re going out. Where do you want to go?” And he goes, “Let’s go out and play cards.” So, we go to a buddy’s house and Michael Jordan shows up and we played cards and we became friends and that went on for a number of years. Well, one night, one night we’re playing cards and we have a basketball court at the place we’re playing. And so we decide it’s Michael and another person who played at North Carolina, one of his best friends, against four, let’s say, Wreck League Jewish players. Okay? And at 4:30 in the morning in the middle of a playoff series against the Philadelphia 76ers, we played four on two against Michael and he was in slippers and he had been drinking all night. And we’re thinking to ourselves, if one of us steps on his foot and hurts this guy, we’re going to be dead. We’re going to be Bartman like 20 years before Bartman. Anyway, we played basketball for about an hour. Surprisingly, he beat us. I was shocked. We lost a couple thousand dollars because we had to bet on the game to make it worthwhile and that memory has stayed with us forever and it was just a good time and that is why he is a legend folks. Thank you so much Tom Saznoff, JJ Kahan, our friends at SIBO. This was a blast. Thanks so much. Thank you everybody. All right, one more round of applause for JJ Kahan and Tom Sausnoff. Thank you. All right. Well, as they say, all good things must come to an end. And after 2 days of product launches, trading, markets, technology, innovation, and conversation, we are reaching the end of our journey. Space Center Houston has us on approach, and we’re ready to re-enter the atmosphere. And there’s obviously no two other people I’d rather have up here to help us officially land the ship. So, please welcome back to the Hood Summit main stage Robin Hood’s founder, chairman, and CEO, Vlad Tennv, and chief brokerage officer, Steve Cork.
We just challenged Tom and JJ to twoon two. Yeah, we’re going to bet. We might be playing out here if there’s a hoop out there anyhow. They told me I’m never touching the ball because Q here’s a ball hog. I am quite a ball hog. I will freely admit that. They used to call me the block. I did. Yeah. Yeah. I’m a I’m a uh I think we’ll play quite well together cuz I’m just a lock down defender. Okay, that works. Blocking shots. Rodman. If you defend and rebound, we’re going to get along great. Yeah, that was a great shot blocker. Um amazing. Well, thank you guys. Uh look at this crowd, man. At 8 in the morning, the crowd wasn’t quite as uh No, I think you I think everybody’s kind of come too now. Little too much fun at Space Center last night. Maybe they were up all night trading. Yes, you had alcohol. That’s true. That is true. I didn’t have any, but I’m glad you did. He’s from Wisconsin. Oh, nice. Well, uh Q, what what was your favorite part of the the day? Uh you know, I thought today was really good. There were a lot of sessions that I some that I was participating in but some that I was uh just able to sit and listen to at least components of and it was just really good. I mean, everybody was extremely engaged and um you know, I just think as we kind of talked about this morning, listening even listening to people talk to each other and exchange information and just talk about what they’re going to do from a strategy standpoint and sharing wisdom was really kind of cool. And you know, I’m hopeful that we say this every year, Vlad, right? Next year this is going to be twice as big. Right. Well, so I got to give Q your flowers here. So, HoodSummit’s really Q’s brainchild. I frankly didn’t think it was a great idea at first. I was like, why don’t we just go out there, launch some products, call it a day. But he’s like, “No, we’ve got to have these events, have the traders there, have educational content, and um have this Star Trek thing.” I was like, “No, Q. We don’t want to do that.” The Star Trek may not have been my idea. I mean, not that I not that I have an issue with it. I was like I was like Q, it’s too corny. We can’t do it. He’s like, “No, it’s got to be like a movie.” Um, but I think I think to Vlad’s point, like there are there are companies, firms, and others that do events to launch products, and there are companies, firms, and events that do educational. But there’s very rarely somebody who launches a product and then spends the next day teaching you how to use the product, which makes absolute sense, right? And then continues to educate so that you can use it suitably and be successful with it. I think that’s where you get the magic. And and by the way, it’s not just us. There’s a lot of industry participants and our partners and sponsors here that all we’re helping with this education because you know we when we’re all successful the industry is successful. Everybody’s successful and that’s really what we’re striving to do here. So I was just uh amazed at how unhappy people were today. People are very unsatisfied. It just keep coming to me asking for more stuff. Options on futures, naked options. It’s like it’s never enough. That was just Tom. Yeah. People want um people also want more hood summits. So I told them we’re going to do this every month and we’re taking the show on the road. I love that. Got to hit every major city in the USA. I love that. How about that?
That would be exceptional. Actually, you guys might have to uh increase your travel budget a little bit though, right? We got to get to work. Hopefully, we can get the sponsors to sponsor a hood summit every month in every city. So, Obie, how about you? You know, I won the main stage. You guys are great today. Give yourselves a round of applause. We had uh a lot of tough choices to make, but that’s our job as traders between the trading lab, the pod stage, the main stage. I hope we did uh justice for uh Hood Summit. I hope you guys enjoyed the panels and the speakers. For me guys, you know, in early part of my career, I was on the phones every day and I was talking to customers with, you know, questions about their account this and you you’d have a really good, you know, your finger was on the pulse of what was happening with customers. Over the years, I’ve I’ve gotten away from that. So having a an event like this allows me to really kind of hone back into what matters to you guys, what’s important, what products they’re looking for, what education they need. Uh and more importantly, it’s great to be around traders. Like this is feels like family and and Vlad, I think with the launch of social like this community is just going to exponentially grow and improve and whether it’s in person or on the phone. Um I can’t wait to see what’s next. Yeah. But before we before we completely wrap up, I think we want to thank a few people. Um to everybody who took the time to to speak, moderate, join panels, thanks for sharing your time, your expertise, and all your wisdom. And um we appreciate it. And to the sponsors and of course all the teams, the sponsors all here, we thank you this morning. We’ll thank you again uh for making this all possible. Um, and most importantly to our event team, the whole production crew, you know, everybody with the food, the drink, it it all showed pretty well. I mean, it was pretty amazing experience. I I think we should all give him a round of a hand. If if you guys if we could lift the curtain, there’s an entire village back here of people working hard, the producers, the event staff. Uh, and it was great. I I want to thank everyone that waited in those huge lines to take selfies with me or to have them have me sign their badges. Please don’t sell those badges on eBay for at least another 20 years. I think they’ll be worth something. Be worth more. Yeah. And Vlad, how about the hoodies? How about all the hoodies that put this together? Unbelievable. And uh it’s just we get to talk about these products and be here on stage, but there’s just an army of people and AI agents working very hard to to create all of this AI Vlad is is good. Yeah. Yes. Well, boys, I think uh it’s it’s about that time. Vlad, any uh parting words as we head to happy hour? I think you guys should know that Robin Hood works very very hard and we’re actually going to go and continue to work on all the things that we’ve heard from you today and and yesterday. And our goal is to make it so that you’re at a disadvantage keeping your money elsewhere, trading elsewhere, managing your finances. So, we just take the obligation to make this the best possible financial home for you extremely seriously. So, thank you for the trust. All right. Well, Glenn, and keep pushing us to get better, too, because actually I love I know Q loves the criticism. I love it a little bit less, but uh I send all of the feature requests to Q. And this is this is the way it works. Compliments, please send them here. any criticisms? I have very thin skin because they’re going to go that way anyway. But, uh, no, keep keep the feedback coming. And it’s just the the honest feedback for how we can serve you better that leads to 16 product launches every every couple months. Yep. Well, you want with that, I think you you got to you got to and I look forward to trading with you all on Saturday. That’ll be fun. And Sunday. All right. Well, folks, we are officially cleared to land. A few housekeeping notes with that. Happy hour officially open. We’ve got CNBC’s Fast Money Guy and Dan are doing the remote hit. We’ve got I think CME Group giving away some silver. That’s not bad. Make sure we check that out. Uh and also don’t forget NASDAQ selects their market site New York City trip winner if you’re in on that. Uh we’ve got hosted food and beverage and uh I think Vlad, are you spinning or do we have a a DJ? Do we have a I mean DJ Vlad? I was uh DJ DJ Vlad is a real guy. Uh uh so please don’t leave because the party’s just getting started. Grab a drink. Find somebody you didn’t get to meet. Keep the conversation going. Vlad Q. Everyone, thank you for spending two days with us making hood what it is. Thank you. Thank you. Give it up for Vlad Tennis.
Live long hoodies and prosper. Take us up. Live long of hoodies and prosper.