Howard Lindzon - “I Think There's So Many Ways the Markets are Rigged That I Think It's Best to Just Follow Along the Trends" | #84

Episode Summary

Executive Summary: Howard Lindzon argues that both public and private investing are best approached through trend-following and network effects: follow great investors, invest early in disruptive fintech and software, and accept that outlier winners—not broad consensus—drive returns. He highlights Robinhood, StockTwits, and angel investing as expressions of this philosophy, while warning that private investing is luck- and vintage-dependent and requires diversification.

Main Topics: Trend following as the core investing philosophy (Priority: 5/5): Lindzon describes himself as a trend follower who prefers liquidity and momentum over valuation work, using analogies like pilot fish following a great white shark to explain the importance of aligning with already-strong trends. Public vs. private markets are converging (Priority: 5/5): The discussion explores how cloud computing, free distribution, and abundant capital blurred the line between public and private markets, making it easier for startups to stay private longer while individuals gain access to private deals. Fintech democratization and Robinhood (Priority: 5/5): Lindzon explains why he backed Robinhood: zero commissions, mobile-first UX, and viral customer acquisition changed brokerage economics and opened investing to younger users. How young investors should learn (Priority: 4/5): He advises new investors to open accounts, journal trades, lose money early, seek mentors, and focus on a small set of trusted voices rather than consuming endless information. Angel investing requires patience, breadth, and luck (Priority: 5/5): He stresses that private investing is much harder than public market investing, depends on vintage effects, and usually needs a portfolio of 50-100 investments to capture rare 100-baggers. Network effects and software investing (Priority: 4/5): Lindzon’s fund thesis centers on network-driven companies and tools that help modern financial services and support infrastructure compete, including fractional ownership platforms and customer-support software. Personal wins and misses shape investor memory (Priority: 3/5): He says the most memorable investments are often the ones he missed, such as Twitter and Zynga, even though successes like LifeLock and Robinhood are satisfying.

Key Arguments: Trend following works in both liquid public markets and less-liquid private markets because people can fast-follow proven winners and avoid pretending to predict everything. The market rewards outliers; in both stocks and venture capital, a small number of winners drive most of the returns. Younger investors want low-friction, mobile, transparent financial products rather than legacy brokerage experiences, which is why Robinhood succeeded. Information overload is not the main problem; filter failure is. Investors need a small, high-quality network of mentors and ideas. Angel investing is not easily repeatable by cherry-picking a few deals; it is more like farming across vintages and requires enough capital for diversification and follow-ons. Private-market access is valuable, but individuals should recognize the long time horizon, illiquidity, and luck involved. Technology, especially the cloud and social platforms, lowered startup costs and improved distribution, fueling a long boom in private company formation. Customer acquisition economics are crucial: companies like Robinhood can outperform incumbents by acquiring users at far lower cost through product virality rather than advertising spend.

Data Points: Years of experience in financial community: More than 20 years - Describing Howard Lindzon’s background as investor, author, organizer, comedian, and entrepreneur Angel investing tenure: About 20 years - He says he has been doing angel investing for two decades Robinhood growth: Fastest-growing brokerage of all time in the U.S. - Used as an example of fintech disruption and mobile-first investing LifeLock acquisition: $2.4 billion - Symantec acquired LifeLock, one of Lindzon’s angel investments Blockbuster-style brokerage context: 1987 market crash - He says he was kicked out of the stock business after the crash Twitter valuation miss: $20 million valuation in 2008 - He says he passed on Twitter at this price, later calling it overvalued Bitcoin price at early eToro discussion: 12 cents - He recalls Yoni Assia pitching Bitcoin when it was still extremely early Bitcoin price when Fred Wilson blogged about Coinbase: $200 - Lindzon cites this as a sign the trend was becoming credible Crypto later trend example: $200 to $8,000 - He uses Bitcoin’s rise as a trend-following illustration Robinhood team size: 80 to 100 people - He contrasts this with the scale of larger incumbents E-Trade marketing spend: $300 million to $400 million per year - He uses this to illustrate customer acquisition costs incumbents bear Robinhood account scale comparison: More accounts than E-Trade - Used to show Robinhood’s customer acquisition advantage Angel investing portfolio size: 50 to 100 companies - He says this is needed to have a realistic chance of capturing outlier wins Fund check size: $500,000 to $1 million per company - Social Leverage’s stated investment range Portfolio size per fund: 20 to 25 companies - How he describes Social Leverage’s construction Peloton service cost: About $80 a year - Subscription for his long-form trend research service

Pivotal Quotes: "There's no such thing as information overload, only filter failure." — Howard Lindzon: Used to explain that investors should curate a small number of trusted sources rather than consume everything "I like looking at things that are already doing well and then globbing onto them." — Howard Lindzon: His plain-English description of trend following "I think to be a great angel investor, you've got to really invest over three, four generations of tech." — Howard Lindzon: His view that successful private investing requires long horizons and experience across vintages

Implications: For investors, the message is to embrace trends, diversify private bets, and use trusted networks to cut through noise. For finance, product design and network effects are overtaking legacy distribution, and the public/private divide will keep narrowing.