Exchange CEO Business Model

Shaan shares a story about meeting a stock exchange CEO and learning how exchanges actually operate as businesses.

"I met the CEO of either NASDAQ or NYSE once. He came to my office to meet Michael Birch, our main investor. I didn't even know the exchange was a business - I was like 'why would it have a CEO?'

He explained it's not only a business, it's a phenomenal business. First, it's actually a software company. They power stock exchanges for different countries - like Finland needs a stock exchange, they're not going to build their own thing, they'll just take the US's battle-tested, military-grade exchange and be a customer.

Second, they compete for IPOs. That's why he was in Silicon Valley meeting people - building long-term relationships so when companies decide which exchange to list on, it's a big deal for them. It's a network effect - the more great companies you have on your exchange, the more valuable it becomes.

You get the defensibility of network effects and regulations, combined with the business model of enterprise sales. Plus it's a marketplace where they can take fees on all transactions. It was a reminder that everything you see around you didn't just show up - it's there because somebody somewhere has a motive and profit to generate that product or service."