Disruptive Innovation And Unbundling The S&P 500 With Howard Lindzon
November 11, 2021
AI Summary
5 min readThe Unbundling of Everything: Howard Lindzon on Disruption, Community, and the New Investing Landscape
The S&P 500 is not a passive investment. It is an actively managed portfolio that happens to be packaged as passive. Every quarter, Vanguard kicks out poorly performing companies. That is a quant fund, not a passive strategy. And for years, that meant anyone who wanted to own the market was forced to own every company in it — including the ones they hated. As Howard Lindzon put it, "Betty Lou wakes up, she hates Wells Fargo, she hates Lehman, she hates Bear Stearns, she hates Goldman Sachs after 2008. But she wants to participate in the S&P 500. She wakes up and every month she's fucking contributing money to Wells Fargo, Goldman Sachs." That contradiction, he argues, is what drove the entire fintech revolution.
The Unbundling of the S&P 500
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What you'll learn
- 1 (06:17) **The Broken Financial Rails for Entrepreneurs** - Greg shares his personal story of being denied a mortgage by Chase despite having sold companies, because he lacked W-2 income.
- 2 (10:42) **The Disruptive Innovation Framework (Clay Christensen)** - Greg introduces the core framework for the episode: how small upstarts can disrupt large incumbents by serving a specific customer archetype extremely well.
- 3 (12:42) **Case Study: Carrot and the Creator Economy** - A concrete example of the disruptive innovation framework in fintech.
- 4 (14:10) **Tactical Advice: Community Immersion for Startup Ideas** - How to find underserved communities and build products for them.
- 5 (21:17) **Introducing Howard Lindzon** - The hosts bring in Howard Lindzon, early investor in Robinhood and Stocktwits, to discuss disruptive innovation in finance.
- 6 (24:26) **Community as a Business: Web2 vs. Web3** - Howard argues that community is not a good VC business, but Web3 changes the equation.
- 7 (31:14) **The Unbundling of the S&P 500** - Howard's core thesis: Vanguard had the technology to let people customize the S&P 500 (e.g., exclude Wells Fargo) but hoarded it, creating the opportunity for Robinhood, Rally Road, and NFTs.
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Show Notes
In the first episode of Where It Happens, Howard Lindzon (@howardlindzon) -- the man behind StockTwits and early Robinhood investor -- helps us rethink the financial industry, places big bets on Web3, and presents a new way to think about investing. And, hosts Sahil Bloom (@sahilbloom) and Greg Isenberg (@gregisenberg) provide the Where It Happens community with a task that kept Greg up all night.
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