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Regardless of how you feel about their marketing practices, it is clear that investors are investing in the customer base. As Robinhood continues to grow, they

by sna1l 6y ago

Regardless of how you feel about their marketing practices, it is clear that investors are investing in the customer base. As Robinhood continues to grow, they can/will offer more and more products (mortgages, bonds, DAFs, etc), eventually becoming a one-stop shop for millennials/zoomers/whatever. For example, currently if you want to invest in a crowdsourced real estate fund, you need to use something like Cadre/Crowdstreet. If RH can eventually support all these possible investment avenues, they will have a lot of room to grow in the retail space. Given their current laissez-faire approach to investor education/responsibleness, the question will become whether this level of investing ease is good or bad.

EarthIsHome 6y ago
The investors are preying on their users who think that they are investing. I'm not 100% familiar but doesn't this app allow you to re-invest your paper gains without actually having anything material? [0] We're all told to invest, so it's only natural for millennials/GenZ/etc to want to do that. Everything costs money, so if you can "make more money out of the money you already have", then that's quite appealing. As if creating money out of money makes any mathematical sense. I think in the end, all these "investment" apps are really just shuffling money from users. How else can you "make" money without taking money from someone else? Maybe someone who's used RH could chime in. [0]: https://www.forbes.com/sites/sergeiklebnikov/2020/06/17/20-year-old-robinhood-customer-dies-by-suicide-after-seeing-a-730000-negative-balance/#7a4dc5be1638 https://www.forbes.com/sites/sergeiklebnikov/2020/06/17/20-y...
- outworlder 6y ago
  > I'm not 100% familiar but doesn't this app allow you to re-invest your paper gains without actually having anything material I can't parse this sentence. You can 'reinvest' non-settled funds. This is the definition for any margin account. "Paper gains" is usually in the context of paper trading, which the app doesn't allow. So this doesn't make sense. Your link is not working for me, but the case for that customer was a lack of understanding, he didn't really owe 730k. It was a temporary balance. Which is the kind of thing you need to understand if you are trading options. > We're all told to invest, so it's only natural for millennials/GenZ/etc to want to do that. Everything costs money, Robinhood is mostly used for 'gambling'. If you want to invest, you should open a boring account in Vanguard, setup automatic deposits in VSTAX or similar (or manually on VTI), but otherwise forget about it. That's investing. Playing around with short term market fluctuations is either trading or gambling. > so if you can "make more money out of the money you already have", then that's quite appealing. And yet that's what people do. If you are not doing the same, you are doing yourself a disservice. This concept doesn't only exist in stocks. For instance, take a savings account. It appreciates over time. The reasons why are left as an exercise to the reader. > As if creating money out of money makes any mathematical sense. But it does. It's not about money creation, it's about wealth. Wealth is being created all the time. This is why the long term market tendency is always up. The moment we stop creating new things is the moment this will stop. Since you are on Hacker News, read this, by Paul Graham: http://www.paulgraham.com/wealth.html http://www.paulgraham.com/wealth.html > I think in the end, all these "investment" apps are really just shuffling money from users. How else can you "make" money without taking money from someone else? Congratulations. You have discovered trading. Someone buys, someone else sells. Note that this is only a zero sum in the short term.
- throwaway5792 6y ago
  Are you familiar with how stock markets work?
- shajznnckfke 6y ago
  > Everything costs money, so if you can "make more money out of the money you already have", then that's quite appealing. As if creating money out of money makes any mathematical sense. Do you have a job? Does your employer make money? Aren’t they “making money out of money” by paying you? The use of capital to generate wealth is one of the basic features of our society.
  - EarthIsHome 6y ago
    Let's dig a little deeper into this. You're exactly right that they are making money out of money by using me. But me, myself.. I am not making money out of money. I do not have enough money to make more money out of what I have. I get money by exchanging my labor with my employer for money. In turn, the company takes what I make and sells that for more money. The company is who is truly "making money out of money". The less they pay me and/or the more they sell, the more money they make. If you do not have sufficient capital to begin with, you cannot make more money out of money (i.e. you cannot generate wealth)
    - shajznnckfke 6y ago
      When the company makes money, that’s actually the company’s shareholders making money. If it’s a public company, you can be one of those shareholders by investing in the stock market.
      - EarthIsHome 6y ago
        I assume the largest shareholders have the most money. I work for close to min wage; if they raised my wage, the shareholders will get less money off of the work I do. What I'm trying to get at is that if you already have wealth, you can turn that wealth into more wealth. But people who do not have tens of thousands of dollars a year to "invest", they cannot become wealthy. This is why I say apps like RH or other "investment" apps or the lottery prey on poorer people. They lower the barrier of entry where we spend what little we have on the dream of becoming wealthy, when in reality, it is our wealth being taken from us.
fossuser 6y ago
There’s a lot that can be better here and Robinhood’s approach to getting a foothold has been smart. I use Fidelity for everything, but their software is mediocre at best. I hear vanguard is worse. The regular banks are ten times worse than fidelity for basic actions. Other startups that have tried to make this better (Simple Bank comes to mind, but there are a couple of others) typically sell out or only focus on basic banking which is not helpful. Robinhood has better software and is positioning themselves to be a serious player long term.
- jjeaff 6y ago
  I think vanguard is perfect for the type of investor they attract. I probably log in to my vanguard 2 or 3 times a year. It is set to autodraft from my bank account and buy index funds every month and reinvest the dividends. So it is set it and forget it. A slick interface and UI team that is trying to figure out ways to increase user engagement is just asking for your users to get in there and gamble away their retirement savings.
  - bisrig 6y ago
    Agree completely. I think Vanguard's UI is trying to send the message "if you're logging in you're doing it wrong".
    - lukewrites 6y ago
      I agree with you both. I'd be worried if Vanguard suddenly became like Robinhood. There's a new version of the Vanguard app on the App Store called "Beacon" that includes a very useful visual overhaul (account balances & performance are front and center) but keeps that wonderful Vanguard focus on, well, staying the course and not much else.
- toomuchtodo 6y ago
  I have Fidelity as well and prefer their iOS app (at a glance asset overview) and Active Trader Pro Mac client (options trading) to Robinhood. Different tools for different tastes.
twostorytower 6y ago
Robinhood also has their feet wet in crypto, with the potential to compete in Coinbase (a multi-billion dollar company of their on, which I hear is profitable) in a serious way if they wanted to.
whatok 6y ago
Robinhood cannot easily expand its product base because a majority of their current revenue is from selling order flow. Most of the products you listed as well as other seemingly easy to offer products are going to be tough to sell to someone because there's no easy way to offer free/cheap transactions. It's very tough to convert a non-paying customer base to a paying one. Additionally, at least for mortgages and bonds, I don't see how Robinhood would ever be able to be competitive in either of those spaces.

by sna1l 6y ago

EarthIsHome 6y ago

The investors are preying on their users who think that they are investing. I'm not 100% familiar but doesn't this app allow you to re-invest your paper gains without actually having anything material? [0] We're all told to invest, so it's only natural for millennials/GenZ/etc to want to do that. Everything costs money, so if you can "make more money out of the money you already have", then that's quite appealing. As if creating money out of money makes any mathematical sense. I think in the end, all these "investment" apps are really just shuffling money from users. How else can you "make" money without taking money from someone else? Maybe someone who's used RH could chime in. [0]: https://www.forbes.com/sites/sergeiklebnikov/2020/06/17/20-year-old-robinhood-customer-dies-by-suicide-after-seeing-a-730000-negative-balance/#7a4dc5be1638 https://www.forbes.com/sites/sergeiklebnikov/2020/06/17/20-y...

outworlder 6y ago
> I'm not 100% familiar but doesn't this app allow you to re-invest your paper gains without actually having anything material I can't parse this sentence. You can 'reinvest' non-settled funds. This is the definition for any margin account. "Paper gains" is usually in the context of paper trading, which the app doesn't allow. So this doesn't make sense. Your link is not working for me, but the case for that customer was a lack of understanding, he didn't really owe 730k. It was a temporary balance. Which is the kind of thing you need to understand if you are trading options. > We're all told to invest, so it's only natural for millennials/GenZ/etc to want to do that. Everything costs money, Robinhood is mostly used for 'gambling'. If you want to invest, you should open a boring account in Vanguard, setup automatic deposits in VSTAX or similar (or manually on VTI), but otherwise forget about it. That's investing. Playing around with short term market fluctuations is either trading or gambling. > so if you can "make more money out of the money you already have", then that's quite appealing. And yet that's what people do. If you are not doing the same, you are doing yourself a disservice. This concept doesn't only exist in stocks. For instance, take a savings account. It appreciates over time. The reasons why are left as an exercise to the reader. > As if creating money out of money makes any mathematical sense. But it does. It's not about money creation, it's about wealth. Wealth is being created all the time. This is why the long term market tendency is always up. The moment we stop creating new things is the moment this will stop. Since you are on Hacker News, read this, by Paul Graham: http://www.paulgraham.com/wealth.html http://www.paulgraham.com/wealth.html > I think in the end, all these "investment" apps are really just shuffling money from users. How else can you "make" money without taking money from someone else? Congratulations. You have discovered trading. Someone buys, someone else sells. Note that this is only a zero sum in the short term.
throwaway5792 6y ago
Are you familiar with how stock markets work?
shajznnckfke 6y ago
> Everything costs money, so if you can "make more money out of the money you already have", then that's quite appealing. As if creating money out of money makes any mathematical sense. Do you have a job? Does your employer make money? Aren’t they “making money out of money” by paying you? The use of capital to generate wealth is one of the basic features of our society.
- EarthIsHome 6y ago
  Let's dig a little deeper into this. You're exactly right that they are making money out of money by using me. But me, myself.. I am not making money out of money. I do not have enough money to make more money out of what I have. I get money by exchanging my labor with my employer for money. In turn, the company takes what I make and sells that for more money. The company is who is truly "making money out of money". The less they pay me and/or the more they sell, the more money they make. If you do not have sufficient capital to begin with, you cannot make more money out of money (i.e. you cannot generate wealth)
  - shajznnckfke 6y ago
    When the company makes money, that’s actually the company’s shareholders making money. If it’s a public company, you can be one of those shareholders by investing in the stock market.
    - EarthIsHome 6y ago
      I assume the largest shareholders have the most money. I work for close to min wage; if they raised my wage, the shareholders will get less money off of the work I do. What I'm trying to get at is that if you already have wealth, you can turn that wealth into more wealth. But people who do not have tens of thousands of dollars a year to "invest", they cannot become wealthy. This is why I say apps like RH or other "investment" apps or the lottery prey on poorer people. They lower the barrier of entry where we spend what little we have on the dream of becoming wealthy, when in reality, it is our wealth being taken from us.

fossuser 6y ago

There’s a lot that can be better here and Robinhood’s approach to getting a foothold has been smart. I use Fidelity for everything, but their software is mediocre at best. I hear vanguard is worse. The regular banks are ten times worse than fidelity for basic actions. Other startups that have tried to make this better (Simple Bank comes to mind, but there are a couple of others) typically sell out or only focus on basic banking which is not helpful. Robinhood has better software and is positioning themselves to be a serious player long term.

jjeaff 6y ago
I think vanguard is perfect for the type of investor they attract. I probably log in to my vanguard 2 or 3 times a year. It is set to autodraft from my bank account and buy index funds every month and reinvest the dividends. So it is set it and forget it. A slick interface and UI team that is trying to figure out ways to increase user engagement is just asking for your users to get in there and gamble away their retirement savings.
- bisrig 6y ago
  Agree completely. I think Vanguard's UI is trying to send the message "if you're logging in you're doing it wrong".
  - lukewrites 6y ago
    I agree with you both. I'd be worried if Vanguard suddenly became like Robinhood. There's a new version of the Vanguard app on the App Store called "Beacon" that includes a very useful visual overhaul (account balances & performance are front and center) but keeps that wonderful Vanguard focus on, well, staying the course and not much else.
toomuchtodo 6y ago
I have Fidelity as well and prefer their iOS app (at a glance asset overview) and Active Trader Pro Mac client (options trading) to Robinhood. Different tools for different tastes.

twostorytower 6y ago

Robinhood also has their feet wet in crypto, with the potential to compete in Coinbase (a multi-billion dollar company of their on, which I hear is profitable) in a serious way if they wanted to.

whatok 6y ago

Robinhood cannot easily expand its product base because a majority of their current revenue is from selling order flow. Most of the products you listed as well as other seemingly easy to offer products are going to be tough to sell to someone because there's no easy way to offer free/cheap transactions. It's very tough to convert a non-paying customer base to a paying one. Additionally, at least for mortgages and bonds, I don't see how Robinhood would ever be able to be competitive in either of those spaces.