16 ms·

Pandemic Villains: Robinhood

141 points by haltingproblem 6y ago

jpm_sd 6y ago
Related: Kodak Is Relevant Again, or "The stock market is a video game that people play on their phones" https://www.bloomberg.com/opinion/articles/2020-07-30/kodak-is-relevant-again https://www.bloomberg.com/opinion/articles/2020-07-30/kodak-...
- kevin_thibedeau 6y ago
  That never made sense since the bulk of Kodak's chemical manufacturing prowess was spun off decades ago into Eastman Chemical.
madamelic 6y ago
"Why aren't more millenials financially savvy" "LOL. Look at those dummies trading stocks". I stopped reading when I realized this was a hit piece against Robinhood when they brought up the leverage bug. It wasn't Robinhood's fault, it's not like they told the user to do it. If anyone is to blame for the amount of dumb stock plays, it is Wall Street Bets (/r/wallstreetbets). --- Also the reason young people flooded the market when the pandemic hit wasn't that we suddenly had time (not entirely at least), it was the many saw the market as overheated and not worth the price. When stocks took a 30%+ dip in March, it was basically free money to buy them combined with the fact we could get in to huge share prices with fractional shares. Once again, I have to say: Millienials and Gen Z are much smarter than they are given credit for. Gen X+ should be asking themselves why they are making choices that Millenials and younger refuse to.
- mataug 6y ago
  I agree, some of the accusations against Robinhood sound like the accusations against car manufacturers for causing car crashes. Sure, car manufacturers do need to implement safety measures to the best of their ability, and this only occurred after govt introduced regulations requiring it. Similarly we would need regulations for leveling the playing field for fintech apps, but its unfair to place all the blame on just Robinhood.
  - madamelic 6y ago
    I am not sure if they always had it but, by default you cannot access options trading. You have to seek it out, read a short document then click "Yes" or something similar. To get margin trading you again have to seek it out and know specifically what you are looking for and pay them $4.99 / month. I am not sure if they always had those behind opt-ins but I can't imagine a platform allowing margin trading on free accounts.
- nkozyra 6y ago
  I don't think Robinhood had fractional share trading in March, did they?
  - madamelic 6y ago
    Hm. I did look this up, I could've sworn they had it longer. It looks like fractional shares released in Dec 2019. https://blog.robinhood.com/news/2019/12/12/fractional-shares-and-more-new-ways-to-invest https://blog.robinhood.com/news/2019/12/12/fractional-shares...
  - raziel2701 6y ago
    It was slowly rolled out, some users had it. Now I think everyone gets it.
- vsareto 6y ago
  >When stocks took a 30%+ dip in March, it was basically free money to buy them In March, people were speculating a world-wide depression due to the pandemic and hoarding toiletries. People who saw it as free money were, uh, incredibly optimistic.
  - madamelic 6y ago
    I traded on the thesis of "I don't care, I'll wait". I mean, either money becomes worthless to have or the stock market goes back up. To me, it seems the upside of _not_ trading is much smaller than the upside of betting that the market will go back up eventually like it has every time so far. I have a very tiny (10 shares) amount in cruise lines. The shares were $150 / share pre-COVID, I bought them for $30 / share. So my downside is $300 (minus tax benefits) but my upside is $1,200 (minus taxes). Nothing changed about those companies except having to weather the pandemic. I even made $70 on call options in a week for the same company. Definitely not trying my luck again but it was an education.
    - vsareto 6y ago
      >I mean, either money becomes worthless to have or the stock market goes back up. It could have just remained low for a long period, and you may have been forced to cash out to stay off the street depending on how much you put up. No one was able to predict it in March.
      - ghiculescu 6y ago
        Given he put up $300 I doubt it's a real concern.
        vsareto 6y ago
        People putting up money they can afford to lose just don't care about the risk, but that risk-free attitude is somehow getting into mainstream investing advice.
  - recursive 6y ago
- wavefunction 6y ago
  You say that the market was overheated but then you say you bought in at the dip because it was free money but what if the market was still overheated at the dip? I wouldn't be so smug about such a simplistic strategy and YOLOing your meager savings away as a generation.
  - tarboreus 6y ago
    I bought on the dip, and if it dipped more I would have bought more. I'm not that bullish on cash right now, two dips would actually have been better, but needed to hedge on the eventuality you described.
- penagwin 6y ago
  So you're saying we shouldn't trade leveraged options on margin based on what side of the yard a dog does it's business on? /s
- zarkov99 6y ago
  If you can get past being offended by the tone, this is a good article and it is on the side of the younger traders. It is unreasonable to expect 20 year olds, of any generation, to resist gambling disguised as investing, especially in the middle of stock bubble, when the full array of engagement tricks, honed to perfection by the likes of FB, Twitter, etc, is used to keep them trading. Unless you really know what you are doing, and very few do, this is not a domain were low friction is always a good thing.
  - mrDmrTmrJ 6y ago
    Do you have data that 'trading' is how the app is being used? Does anyone? I find the article frustrating because it doesn't have data to prove it's core assertion. Full disclosure, I've been using Robinhood, for a several years, to buy small amounts of stocks or ETFs I want, with limit orders, when volatility drives the price down. Everything I buy I intend to hold for a *long time. And I really appreciate that they offer low fees, in % terms, on small orders. So it allows me to gain experience as an investor, not trader.
    - zarkov99 6y ago
      There is only so much order flow they could get if most people did what you do. The fact that the have been down in high volatility days indicates to me there is plenty of trading going on.
- tptacek 6y ago
  Picking and timing stocks is not "financially savvy".
- sharadov 6y ago
  Have you seen the Robinhood interface, it's gamified to the extreme, and you expect 20 year olds to be mature enough to resist temptation?
  - Miner49er 6y ago
    Yes? I've been using Robinhood since I was 20ish. You really think 20 year olds are that immature? They are just as capable of making smart financial decisions as someone older. Additionally, when you are young, your financial decisions should be riskier. It's actually the smart thing to do.
    - xboxnolifes 6y ago
      I think it should be mentioned that "risker" in this context generally means "a diversified, growth-focused, stock portfolio", and not "all in bets on a few stocks picked from /r/wallstreetbets".
      - Miner49er 6y ago
        I'm not sure I agree. I generally agree with Buffett on it: "diversification is protection against ignorance. It makes little sense if you know what you are doing." If a person is willing to spend time learning some the basics of finance, and learning about different companies, I think they would be fine with just picking a few stocks. They just need to be watched carefully. As they start to have more capital, they should look to diversify and look to take on less risk. Plus, everyone wants different things. Many on /r/wallstreetbets see gambling on the stock market as a way to improve their lives, and I don't think it is the worst option. A risky stock investment is better than wasting money on a sports car or something. In general, I think when you are very young a very risky investment is not a bad thing. As long as the money isn't needed for other things.
        madamelic 6y ago
        Plus no one says you have to be 100% conservative. I do dumb stock purchases but I also own shares of indexes. There is nothing wrong with a "YOLO" into a stock or option you believe in as long as you can afford losing it.
- babyshake 6y ago
  It seems that if the response of governments was different in terms of their monetary policy, the outcome could have been a global deflationary crisis. Instead, it appears that the there is instead a global inflationary crisis. But if you think it's good that the stocks go up, then it's not a crisis at all.
- m3kw9 6y ago
  Most of them are basically gambling, not investing. You talk to enough of them, they can’t tell why a stock goes up or down. They point to this double top or flag pattern and say yeah you need to buy now. They get “tips” from someone at a stock board and buy or sell. It’s very very close to what the late 99s look like. Robinhood helped them along for sure but is not all their fault
  - nemothekid 6y ago
    >Most of them are basically gambling, not investing. You talk to enough of them, they can’t tell why a stock goes up or down. To be fair, that's all of retail trading. Unless you are buying and holding a fund, then any sort of trading is gambling. The talking heads on CNBC are just as insightful as the kids on /r/wallstreetbets.
    - tertius 6y ago
      The word you're looking for is 'speculating'. I.e. gambling...
  - ivalm 6y ago
    Eh, the main problem with frequent trading is transaction costs (fees + bid/ask spread), if that cost is low then they are just increasing volatility (if anything) but not changing expectation (relative to a relevant basket of stock they are trading).
- nrmitchi 6y ago
  > I stopped reading when I realized this was a hit piece against Robinhood when they brought up the leverage bug. It wasn't Robinhood's fault, it's not like they told the user to do it. IIRC FINRA has regulations explicitly prohibiting this situation. In this situation Robinhood was either negligent in not verifying a trading regulation that explicitly exists, or was incompetent enough to not know about it. While blaming the user may apply in some way here, it is Robinhood's responsibility.
  - chewz 6y ago
    > I stopped reading when I realized this was a hit piece against Robinhood when they brought up the leverage bug. It wasn't Robinhood's fault, it's not like they told the user to do it. It might sound terribly naive these days but financial institutions shouldn't offer their clients products that do not suit clients needs. The caveat emptor rule could only be used in relations to other financial institutions not business or retail clients. After 1997 Asian financial crisis some exporters successfully challenged banks for being sold currency options (fairly simple instruments)...
- 1vuio0pswjnm7 6y ago
  What is the correct spelling of "millennial".
- UncleMeat 6y ago
  I got a recruiting email a while ago from Robinhood. They listed one metric: the number of times per day their typical user uses the app. That means they are optimizing for engagement. Just like how YouTube optimizing for engagement causes problems, so too will a trading platform.
umeshunni 6y ago
Matt Levine expressed this perfectly back in April The weird thing about the coronavirus crisis is that it simultaneously (1) caused a stock market crash and (2) eliminated most forms of fun. If you like eating at restaurants or bowling or going to movies or going out dancing, now you can’t. If you like watching sports, there are no sports. If you like casinos, they are closed. You’re pretty much stuck inside with your phone. You can trade stocks for free on your phone. That might be fun? It isn’t that fun, compared to either (1) what you’d normally do for fun or (2) trading stocks not in the middle of a recessionary crisis, but those are not the available competition. The available competition is “Animal Crossing” and “Tiger King.” Is trading stocks on your phone more fun than playing “Animal Crossing” or watching “Tiger King”? [..] I gather that for some people the answer is yes. If you believe the boredom thesis of the current retail rally, that is good news, because that thesis is basically countercyclical: The worse the economy is, the more bored investors will be. If stocks sell off because the coronavirus crisis is longer and worse than expected, there will be even fewer entertainment options and more people will turn, in desperation, to buying stocks on their phones. If someone finds a magic cure for the virus tomorrow, stocks will rally and all the new retail investors will happily sell into the rally at the top and go back to their other, more entertaining, entertainments.
- JakeTheAndroid 6y ago
  IDK if that is a perfect take at all. Sports plowed on, new shows, movies, and games were released. The only thing I see that went down was the available investments that could be made. If you are an investor you are going to have a hard time investing into companies because there aren't going to be a lot of physical companies being founded and you'll see a decrease in internet companies being founded. Also, starting a business would be seen as risky with the unclear future of the pandemic and its impact on the economy. This is why we seen stock and real estate investments rise. You add that to the fed rate cuts, and these are basically the only two mainstream investments that can be made. Most investors into stocks aren't individuals like you and me who would otherwise go out dancing or go to bars. While there was a surge of individual investments, the bigger firms are attributed for creating the huge waves in the markets. Do you think that Warren Buffet/Berkshire decide to invest in retail stocks because he was bored due to not being able to go out clubbing? And when he buys stocks in something it outpaces what the entirety of WSBs does in puts/calls. And thats just one firm. So, I find it hard to believe that the lack of entertainment (which was only really an issue at the very beginning of the pandemic, as baseball/basketball/football all carried on and plenty of games/shows/movies have come out) is the cause here.
haltingproblem 6y ago
Robinhood is the Instagram of stock trading. Can we really knock the founders of Robinhood for making stock trading so seamless and addictive and amping up the gamification to its highest level. The legacy brokerages have been guilty of turning stock trading into entertainment for years, thankfully just poorly. CNBC for the most part is entertainment. If anything the legacy brokerages like IB/Schwab/Etrade were incompetent in not making the jump on usability and offering innovations like fractional trading widely. How does one slow down Robinhood to make speculative trading less attractive - make their UI worse? Stop innovations like fractional trading? I feel we as a civilization have uncorked a financial poison pill in the innovations of Robinhood. We will just have to ingest and process it to move forward, there is no way to go back. There will be a price to way in lost savings and lives.
- folkhack 6y ago
  > I feel we as a civilization have uncorked a financial poison pill in the innovations of Robinhood. We will just have to ingest and process it to move forward, there is no way to go back. There will be a price to way in lost savings and lives. Just look at the toxicity of /r/wallstreetbets if you're looking for the cracks in the wall. Also: https://www.forbes.com/sites/sergeiklebnikov/2020/06/17/20-year-old-robinhood-customer-dies-by-suicide-after-seeing-a-730000-negative-balance/?sh=15c8ecb51638 https://www.forbes.com/sites/sergeiklebnikov/2020/06/17/20-y...
  - _iyig 6y ago
    How is r/wallstreetbets toxic? As someone who doesn’t day-trade, I still subscribe for the memes and self-aware jokes. It’s one of the few remaining large subreddits with tons of creative energy and no drama or politics. And as someone who doesn’t day-trade, the “loss porn” regularly posted to r/wallstreetbets has firmly convinced me to stick with index funds.
    - jdhn 6y ago
      >the “loss porn” regularly posted to r/wallstreetbets has firmly convinced me to stick with index funds Same here. I know that I'm neither smart enough nor willing to dedicate time to micromanaging my portfolio. Index funds/ETFs are the way to go, and I only invest in individual stocks (no options/puts for me) if they catch my eye and the research of others has a positive outlook.
tptacek 6y ago
Naturally, Taibbi manages to feature PFOF in this article, a benign practice common to retail brokerages (who do not in fact specialize in order execution, but rather, mostly, in being able to pick up the phone or run a website). Complete with a citation to Michael Lewis' ludicrous "Flash Boys". Meaning even when he picks a legitimate target --- Robinhood, which is a gambling application disguised as a personal finance tool, is richly deserving --- he still manages to flub it.
- drawkbox 6y ago
  Well sure PFOF alone is not that much of a competitive gain, though it will put you above most investors to have it that is why hedge funds like Citadel, Virtu, and Wolverine buy this info. Those guys are doing things with that data for sure because Robinhood has scale/volume in lower skilled investors. It isn't cheap, funds has to have a massive cash to even afford the data. Robinhood has PFOF AND low skill investors in volume, so the amount of prediction of moves is a combination of data and their users. They also recommend stocks and market these to users that are less skilled, this is in unison with online forums like wallstreetbets and more. Robinhood can move the market on stocks they want and compare volume/direction they are pushing and predict the volume/direction from others with that. Robinhood's name seems small fish, but they are a whale that other whales feed off of and those whales bring schools of small fish in uniform to them to play off of and eat. Robinhood buyers/partners make moves based on all of those data points and the result is almost like stealing candy from kids. This is especially true on stocks they themselves push/recommend or are pushing funding to, partner companies or companies also funded by who funded them. It seems like "democratic" markets but is actually so choreographed it is a more authoritarian/fixed market due to the sheer volume and type of investor. Since Robinhood only sells data, and so many competitors are popping up, it has to be massively lucrative in more ways than just the first step, but supporting deeper investments is probably a key aspect of the plan.
  - tptacek 6y ago
    I don't know how to respond to this comment, since it's orthogonal to my understanding of PFOF (and for that matter the understanding of people like Matt Levine). Market makers don't buy retail order flow to get an edge over retail investors. They seek it out because it's safer to trade with --- retail investors, unlike hedge funds, tend not to follow up their 100-share orders with huge numbers of subsequent hundred-share orders. Safer means cheaper. Market makers chop up the cost savings with brokerages, which is where the payment comes from. What rings true to me --- for whatever that's worth to you --- is that Robinhood influences its user behavior in ways that are bad for its users and generally good for the firms who execute its trades. Of course, that's true of anything that gets users trading more, which, of course, is something users should not be doing. Robinhood is bad! It's just not bad due the conspiracy theory Taibbi invokes. What's frustrating is that he's been saying this for awhile, and he's had plenty of time to investigate and build some understanding of how the market is structured. Matt Levine can explain it, entertainingly, to a lay person in just a paragraph or two. Taibbi simply doesn't care, and counts on you not caring either.
ipnon 6y ago
Robinhood provides commission free trades on fractional shares for practically all worldwide publicly traded equities in literally the palm of my hand. To paraphrase Uncle Ben, "with great convenience comes great responsibility." If you shoot yourself in the foot you don't blame the gun store.
- dehrmann 6y ago
  Is Robinhood the market maker for fractional share sales, or do they outsource that to someone? Someone has to hold a real share to make it work. There's a decent amount of regulation around making sure retail investors don't get taken advantage too much when making normal trades, but I could see there being a larger bid/ask spread with fractional shares and market makers taking advantage of that.
dehrmann 6y ago
I tend to agree that Robinhood treats investing like a game and connects people with investments they aren't really suited for, but "pandemic villain" makes it sound like they took advantage of the pandemic. They just had the right entertainment product at the right time; "villain" implies more intent than was actually there.
strict9 6y ago
>If you have an urgent question, like for instance thinking you owe three-quarters of a million dollars, too bad: Robinhood’s chief feedback option is email, with response times of up to a week. This is true for most offerings in which you, the user, is the product. You spend time or money and if something goes wrong good luck trying to get it resolved, much less speak with a human that can actually resolve it. You can lose your gmail account without warning or reason and essentially the keys to your entire online life. Or in the case of this poor soul, experience an unintended side effect of a poorly designed UI in a financial trading app that makes things seem much worse than they actually are. And in these dire situations, corporations make it as difficult as possible to reach a human to resolve it. We should all be ashamed that this is what scalability usually means.
tfehring 6y ago
I see no problem with unsophisticated people trading stocks on their phones, because one consequence of markets being efficient (or close to efficient) is that it’s really hard to underperform the market consistently. Just as hard as outperforming the market consistently, in fact. They’re wasting their time, but time you enjoy wasting is not wasted, etc. I don’t really feel the same way about options though. I don’t have a great explanation as to why. But options and the associated leverage are a totally distinct issue from picking individual stocks - options trading by retail investors is just gambling even if the underlying is SPY and not a psilocybin penny stock or whatever.
- scott00 6y ago
  It's actually quite easy to underperform the market if you make a lot of trades and cross the spread when you do it. Which is exactly the behavior that all retail brokerages are incentivized to encourage.
- fullshark 6y ago
  It's easy to underperform if you buy options that can go to zero on an incredibly short time horizon.
- tryptophan 6y ago
  Nope, not true. A very small fraction of stocks account for a large majority of the return of an index. If you miss these few in your portfolio, you will under-perform. It's not 50:50 whether or not you over-perform or under, its more like 1:50(over a significant period of time).
  - tfehring 6y ago
    Yeah the distribution of returns isn't symmetrical, but the expected return is still equal to the market return. You could make the argument that that means that expected utility is lower because of decreasing marginal utility, but I'm not confident enough in my understanding of others' utility functions to make that claim.
- caeril 6y ago
lcfcjs 6y ago
There will always be people who hate companies that disrupt an entire industry. Robinhood has made stock investing accessible to everyone. I have sympathy for the man who killed himself, (and perhaps there should be some warnings in the app?) but if you get into a car crash would you blame the car manufacturer?
jboggan 6y ago
Disappointed that this didn't include the extended downtimes during the February/March crash and rebound.
darth_avocado 6y ago
Remember the time kids, when you had to pay Etrade or Vanguard or one of these leeches a fee of $20 to execute each trade, even when you wanted to sell your position that was losing money? That meant locking out an entire population of people from financial prosperity because they couldn't afford $40 worth of commissions each time they bought and sold a stock. I'm sorry but Robinhood has been fulfilling it's name. It's not perfect, but without it, you'd all still be getting squeezed by these brokerages.
anonu 6y ago
Robinhood is a gambling platform. The SEC should regulate it as such.
- ll931110 6y ago
  So same as ETrade, Schwab, TDAmeritrade, Vanguard, Fidelity, etc.?
  - anonu 6y ago
    RobinHood is not comparable to these other guys. There's a difference between investing and punting/speculating. Two of those differences is through your user UX and the education you provide the average retail investor. RobinHood's mobile first view - sure its great - but its more geared towards the gamification of trading versus actually building wealth.
    - ll931110 6y ago
      So how exactly do you write laws differentiating them?
- s5300 6y ago
  >>looks at your bio Lols "Ok boomer"
dyeje 6y ago
I don't see anything that makes me think Robinhood is villainous. Sure they have poor customer support and UX designed for engagement, just like every other major consumer tech firm.
fullshark 6y ago
Stocks have positive expected returns (and if they don't in aggregate the gov't/fed will work overtime to make sure they do) and gambling has negative expected returns. Perhaps society should be encouraging the proles to put their money in the stock market instead of in casinos / lottery tickets / daily fantasy sports. Also looking at the stock market the last year, a product that makes it easier for retail investors to buy stock after the pandemic hit is a big win for those investors is it not? The order flow issues don't really matter to most retail investors and they shouldn't.
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baron816 6y ago
Sort of tangential: is there a reason why Robinhood et al don’t have a “build your own index fund” tool? I’d really like to pick my own basket of stocks, then invest in them all with a “single” buy according to my weights.
- PascLeRasc 6y ago
  M1 Finance does exactly this, check them out.
- jperras 6y ago
  Likely due to the regulatory difficulty in then brokering fractional share purchases. If your "index fund" includes a few stocks that have large share prices (e.g. TSLA, AMZN), then to buy a single "share" of your fund would require quite a bit of capital. I don't believe the retail level investors that Robinhood targets are quite at that level.
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gnicholas 6y ago
> In that meeting, he [Ashton] reportedly gushed about the company’s potential by comparing it to gambling websites. Kutcher put out a statement that he was “not insinuating that Robinhood is a gambling platform,” but rather referring to the company’s “current growth metrics.” Yikes.
- jtdev 6y ago
  Kutcher seems to inject himself into investing culture in the sleaziest most classless ways... reminds me of when Kutcher was chumming around with WeWork’s egomaniac founder. Guy is a vaporware PowerPoint deck in sneakers.
legerdemain 6y ago
> These harmless-looking eggheads... Isn't "egghead" supposed to be a hurtful name for someone who is bald? Neither of the founders looks bald.
- avrionov 6y ago
  Egghead is used instead of nerd or dork here: https://en.wikipedia.org/wiki/Egghead https://en.wikipedia.org/wiki/Egghead
jdhn 6y ago
This really just feels like a smear. Robinhood has been instrumental in crushing fees for trading individual stocks (a year ago Vanguard charged $7 per trade if your account didn't have enough money, and now it's $0), and is an incredibly user friendly way to get involved in investing. Seriously, compare Robinhood's UI to anybody else (Schwab, IB, Vanguard), and they absolutely crush it. If you're starting off and don't have enough money to open an account with a legacy broker (I believe Vanguard requires $3k to open a Roth, not sure about their regular accounts), Robinhood makes it incredibly easy to start building a portfolio with a small pool of money (say $1k). I feel like Taibbi had an axe to grind against Robinhood or else he would have tried to separate the "bad" (puts, options, a sense of gambling) vs the good (low barrier to entry, easy to buy what you want, etc).
- paulgb 6y ago
  Robinhood has been criticized a bunch for taking payment for order flow, but I've yet to see someone actually make a quantitative case that if you make an $x trade you will lose $y on average because of PFOF. The argument instead always relies on a zero-sum figuring that if someone else is willing to pay for the order flow it must be costing you somehow, but that's not really how it works.
  - bcherny 6y ago
    That’s not the problem with making money off order flow. The problem is that it fundamentally misaligns incentives: while Robinhood makes money the more people transact (and is the reason its fee structure and UX incentivize transacting), it’s not in peoples’ financial best interest to transact as often as possible.
    - cwyers 6y ago
      But that's true of brokers that charge customers per trade too: they too are incentivized for customers to trade more.
      - bcherny 6y ago
smsm42 6y ago
Read the article, couldn't understand why they are villains. OK, so there's a case where a guy misunderstood his financial statement and killed himself. This is profoundly sad but surely doesn't make RH villains - they didn't intend this outcome and they didn't even make the data particularly hard to understand, it's just a sad coincidence which sometimes happens when thousands of people interact in millions of ways. Fish long enough, and you'll find something weird and something bad happening. The other claim is that RH runs their order flow through brokerages which has the right of first trade on the trades RH users do. I don't see how that hurts RH users - by the time they made the trade, they already agreed on a price, and unless something nefarious happens like somebody foolishly sending no-limit market price orders and somebody else exploiting those to close deals with wildly out-of-market prices (which I saw no evidence of, that's just the only way I can think of this can be hurtful for the RH clients), I still fail to see the villainy. So TLDR of it all is that they are villains because a) one guy killed himself after misreading a financial statement, b) they work with HFT companies and c) they have notifications (oh noes, no non-villainous trading software would ever do that!). That's it. Weak sauce, I say. P.S. And what this has to do with the pandemic? Just to make it more nefarious by somehow implying they are profiteering from the pandemic, without providing any proof except temporary coincidence?
runawaybottle 6y ago
Whenever I go buy something at a typical grocery/deli in my city there is always one consistent customer - scratch off and lotto players. Any Deli owner will tell you this is part of their holy trinity of guaranteed business, beer, lotto, cigarettes (now vapes). It literally makes up half their revenue. Robinhood is like a modern day scratch off, the underlying market exists in your local deli already. It’s not long term value investing, it’s a dream of winning big on any given day.
- jariel 6y ago
  This is quite a brilliant way to put it. Except the target market is not 'working class' it's the equally unaware 'young urbanites with decent jobs who should know better'.
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jariel 6y ago
The worst part is the branding. Their narrative/coolaid is that they were part of the 'Occupy Wall Street' movement and wanted to do something about it! Couching their very otherwise standard trading scheme into woke credentials, bringing an entire generation of woke youth literally right into the system they ostensibly lamented. 'Overthrow the Imperium by ... joining the Imperium and losing all your money to them!' Like WeWork, We Charity etc., it just reeks of hypocrisy. I'm of the belief that most traders are in fact caught up in the more superfluous aspects of trading, the 'belief' that they have some ability/skill/insight when really the are mostly in way over the heads, fish being handed over to sharks for easy money. That's obviously not entirely the case, but to a great extent. Who in heaven's name is trading complex options instruments on their smartphone ... my gosh. The $0 fee merely encourages active trading, which is a hallmark of most bad trading strategies. It mixes the worst aspects of gambling, with the worst aspects of hyper capitalism (the assumption that trading/investing is inherently positive) and the worst aspect of woke branding (playing on progressive credentials without any material action to that effect). And CNN has done how many full PR pieces on these guys? If their name was "Make Quick Cash Now with BIG LOANS for Hyper Trading, Insert Credit Card Here" - then I think it would all be much more transparent and fair.
beshrkayali 6y ago
I think many people saying that this feels like smear are mainly saying this because they themselves have negative personal feelings against Matt (one of the few good journalists left imho.) It's somewhat ironic to praise Robinhood's UI as "good experience" when the article itself is criticizing this same experience for how it's designed to be addictive, essentially turning investing into a game. Matt is not the first to make this point [1] [2]. To be clear, I don't mind praising certain features of Robinhood or even the idea of making it accessible to start investing small. I don't blame Robinhood even for this because they're not forcing anyone to trade. But dismissing this entire article and very valid criticism against Robinhood just because of your feelings on Taibbi is a bit much. The last couple of paragraphs seem like an appropriate tldr: > If and when IPO money comes, Robinhood will be on its way to becoming a finance version of Facebook: a free platform that keeps a sea of customers engaged with a hyper-stimulating user experience, while making money selling intelligence about those customers’ behaviors to expert wealth extractors on the other end. > It’s the perfect mousetrap, among other things because of its name. “That’s the other thing,” says Brewster. “They call it Robin Hood.” Instead of stealing from the rich and giving to the poor, the American version takes in the young and sells them to computer-powered hedge funds; this Robin Hood is the house that always wins. If there’s a more brilliant metaphor for capitalism in the Covid age, it’s hard to imagine. [1] https://www.cnbc.com/2020/08/21/robinhood-is-having-a-moment-users-should-be-careful.html https://www.cnbc.com/2020/08/21/robinhood-is-having-a-moment... [2] https://www.bloomberg.com/news/features/2020-10-22/how-robinhood-s-addictive-app-made-trading-a-covid-pandemic-pastime https://www.bloomberg.com/news/features/2020-10-22/how-robin...
zaptheimpaler 6y ago
Yes, let's take away one of the few remaining tools to grow your wealth available to everyone under the guise of protecting the public. They cut commissions to 0 industry wide and taught a generation about stock markets and options, which was previously knowledge reserved mostly for wall street. Imagine if we had access to VC level deals too, like $50k in an early round of doordash that is now worth $80M? Why should we want to go in the opposite direction? The line between gambling and investing is very very fuzzy. We’ve even seen recent stories of people gaming literal lotteries to tilt the scales towards a win. You cannot ban a tool that one person uses for gambling without also banning others who use that same tool for investing. I’m sorry but I’d rather have those tools than have them taken away because someone else is irresponsible with them.

Related: Kodak Is Relevant Again, or "The stock market is a video game that people play on their phones" https://www.bloomberg.com/opinion/articles/2020-07-30/kodak-is-relevant-again https://www.bloomberg.com/opinion/articles/2020-07-30/kodak-...

kevin_thibedeau 6y ago
That never made sense since the bulk of Kodak's chemical manufacturing prowess was spun off decades ago into Eastman Chemical.

madamelic 6y ago

"Why aren't more millenials financially savvy" "LOL. Look at those dummies trading stocks". I stopped reading when I realized this was a hit piece against Robinhood when they brought up the leverage bug. It wasn't Robinhood's fault, it's not like they told the user to do it. If anyone is to blame for the amount of dumb stock plays, it is Wall Street Bets (/r/wallstreetbets). --- Also the reason young people flooded the market when the pandemic hit wasn't that we suddenly had time (not entirely at least), it was the many saw the market as overheated and not worth the price. When stocks took a 30%+ dip in March, it was basically free money to buy them combined with the fact we could get in to huge share prices with fractional shares. Once again, I have to say: Millienials and Gen Z are much smarter than they are given credit for. Gen X+ should be asking themselves why they are making choices that Millenials and younger refuse to.

mataug 6y ago
I agree, some of the accusations against Robinhood sound like the accusations against car manufacturers for causing car crashes. Sure, car manufacturers do need to implement safety measures to the best of their ability, and this only occurred after govt introduced regulations requiring it. Similarly we would need regulations for leveling the playing field for fintech apps, but its unfair to place all the blame on just Robinhood.
- madamelic 6y ago
  I am not sure if they always had it but, by default you cannot access options trading. You have to seek it out, read a short document then click "Yes" or something similar. To get margin trading you again have to seek it out and know specifically what you are looking for and pay them $4.99 / month. I am not sure if they always had those behind opt-ins but I can't imagine a platform allowing margin trading on free accounts.
nkozyra 6y ago
I don't think Robinhood had fractional share trading in March, did they?
- madamelic 6y ago
  Hm. I did look this up, I could've sworn they had it longer. It looks like fractional shares released in Dec 2019. https://blog.robinhood.com/news/2019/12/12/fractional-shares-and-more-new-ways-to-invest https://blog.robinhood.com/news/2019/12/12/fractional-shares...
- raziel2701 6y ago
  It was slowly rolled out, some users had it. Now I think everyone gets it.
vsareto 6y ago
>When stocks took a 30%+ dip in March, it was basically free money to buy them In March, people were speculating a world-wide depression due to the pandemic and hoarding toiletries. People who saw it as free money were, uh, incredibly optimistic.
- madamelic 6y ago
  I traded on the thesis of "I don't care, I'll wait". I mean, either money becomes worthless to have or the stock market goes back up. To me, it seems the upside of _not_ trading is much smaller than the upside of betting that the market will go back up eventually like it has every time so far. I have a very tiny (10 shares) amount in cruise lines. The shares were $150 / share pre-COVID, I bought them for $30 / share. So my downside is $300 (minus tax benefits) but my upside is $1,200 (minus taxes). Nothing changed about those companies except having to weather the pandemic. I even made $70 on call options in a week for the same company. Definitely not trying my luck again but it was an education.
  - vsareto 6y ago
    >I mean, either money becomes worthless to have or the stock market goes back up. It could have just remained low for a long period, and you may have been forced to cash out to stay off the street depending on how much you put up. No one was able to predict it in March.
    - ghiculescu 6y ago
      Given he put up $300 I doubt it's a real concern.
      - vsareto 6y ago
        People putting up money they can afford to lose just don't care about the risk, but that risk-free attitude is somehow getting into mainstream investing advice.
- recursive 6y ago
wavefunction 6y ago
You say that the market was overheated but then you say you bought in at the dip because it was free money but what if the market was still overheated at the dip? I wouldn't be so smug about such a simplistic strategy and YOLOing your meager savings away as a generation.
- tarboreus 6y ago
  I bought on the dip, and if it dipped more I would have bought more. I'm not that bullish on cash right now, two dips would actually have been better, but needed to hedge on the eventuality you described.
penagwin 6y ago
So you're saying we shouldn't trade leveraged options on margin based on what side of the yard a dog does it's business on? /s
zarkov99 6y ago
If you can get past being offended by the tone, this is a good article and it is on the side of the younger traders. It is unreasonable to expect 20 year olds, of any generation, to resist gambling disguised as investing, especially in the middle of stock bubble, when the full array of engagement tricks, honed to perfection by the likes of FB, Twitter, etc, is used to keep them trading. Unless you really know what you are doing, and very few do, this is not a domain were low friction is always a good thing.
- mrDmrTmrJ 6y ago
  Do you have data that 'trading' is how the app is being used? Does anyone? I find the article frustrating because it doesn't have data to prove it's core assertion. Full disclosure, I've been using Robinhood, for a several years, to buy small amounts of stocks or ETFs I want, with limit orders, when volatility drives the price down. Everything I buy I intend to hold for a *long time. And I really appreciate that they offer low fees, in % terms, on small orders. So it allows me to gain experience as an investor, not trader.
  - zarkov99 6y ago
    There is only so much order flow they could get if most people did what you do. The fact that the have been down in high volatility days indicates to me there is plenty of trading going on.
tptacek 6y ago
Picking and timing stocks is not "financially savvy".
sharadov 6y ago
Have you seen the Robinhood interface, it's gamified to the extreme, and you expect 20 year olds to be mature enough to resist temptation?
- Miner49er 6y ago
  Yes? I've been using Robinhood since I was 20ish. You really think 20 year olds are that immature? They are just as capable of making smart financial decisions as someone older. Additionally, when you are young, your financial decisions should be riskier. It's actually the smart thing to do.
  - xboxnolifes 6y ago
    I think it should be mentioned that "risker" in this context generally means "a diversified, growth-focused, stock portfolio", and not "all in bets on a few stocks picked from /r/wallstreetbets".
    - Miner49er 6y ago
      I'm not sure I agree. I generally agree with Buffett on it: "diversification is protection against ignorance. It makes little sense if you know what you are doing." If a person is willing to spend time learning some the basics of finance, and learning about different companies, I think they would be fine with just picking a few stocks. They just need to be watched carefully. As they start to have more capital, they should look to diversify and look to take on less risk. Plus, everyone wants different things. Many on /r/wallstreetbets see gambling on the stock market as a way to improve their lives, and I don't think it is the worst option. A risky stock investment is better than wasting money on a sports car or something. In general, I think when you are very young a very risky investment is not a bad thing. As long as the money isn't needed for other things.
      - madamelic 6y ago
        Plus no one says you have to be 100% conservative. I do dumb stock purchases but I also own shares of indexes. There is nothing wrong with a "YOLO" into a stock or option you believe in as long as you can afford losing it.
babyshake 6y ago
It seems that if the response of governments was different in terms of their monetary policy, the outcome could have been a global deflationary crisis. Instead, it appears that the there is instead a global inflationary crisis. But if you think it's good that the stocks go up, then it's not a crisis at all.
m3kw9 6y ago
Most of them are basically gambling, not investing. You talk to enough of them, they can’t tell why a stock goes up or down. They point to this double top or flag pattern and say yeah you need to buy now. They get “tips” from someone at a stock board and buy or sell. It’s very very close to what the late 99s look like. Robinhood helped them along for sure but is not all their fault
- nemothekid 6y ago
  >Most of them are basically gambling, not investing. You talk to enough of them, they can’t tell why a stock goes up or down. To be fair, that's all of retail trading. Unless you are buying and holding a fund, then any sort of trading is gambling. The talking heads on CNBC are just as insightful as the kids on /r/wallstreetbets.
  - tertius 6y ago
    The word you're looking for is 'speculating'. I.e. gambling...
- ivalm 6y ago
  Eh, the main problem with frequent trading is transaction costs (fees + bid/ask spread), if that cost is low then they are just increasing volatility (if anything) but not changing expectation (relative to a relevant basket of stock they are trading).
nrmitchi 6y ago
> I stopped reading when I realized this was a hit piece against Robinhood when they brought up the leverage bug. It wasn't Robinhood's fault, it's not like they told the user to do it. IIRC FINRA has regulations explicitly prohibiting this situation. In this situation Robinhood was either negligent in not verifying a trading regulation that explicitly exists, or was incompetent enough to not know about it. While blaming the user may apply in some way here, it is Robinhood's responsibility.
- chewz 6y ago
  > I stopped reading when I realized this was a hit piece against Robinhood when they brought up the leverage bug. It wasn't Robinhood's fault, it's not like they told the user to do it. It might sound terribly naive these days but financial institutions shouldn't offer their clients products that do not suit clients needs. The caveat emptor rule could only be used in relations to other financial institutions not business or retail clients. After 1997 Asian financial crisis some exporters successfully challenged banks for being sold currency options (fairly simple instruments)...
1vuio0pswjnm7 6y ago
What is the correct spelling of "millennial".
UncleMeat 6y ago
I got a recruiting email a while ago from Robinhood. They listed one metric: the number of times per day their typical user uses the app. That means they are optimizing for engagement. Just like how YouTube optimizing for engagement causes problems, so too will a trading platform.

umeshunni 6y ago

Matt Levine expressed this perfectly back in April The weird thing about the coronavirus crisis is that it simultaneously (1) caused a stock market crash and (2) eliminated most forms of fun. If you like eating at restaurants or bowling or going to movies or going out dancing, now you can’t. If you like watching sports, there are no sports. If you like casinos, they are closed. You’re pretty much stuck inside with your phone. You can trade stocks for free on your phone. That might be fun? It isn’t that fun, compared to either (1) what you’d normally do for fun or (2) trading stocks not in the middle of a recessionary crisis, but those are not the available competition. The available competition is “Animal Crossing” and “Tiger King.” Is trading stocks on your phone more fun than playing “Animal Crossing” or watching “Tiger King”? [..] I gather that for some people the answer is yes. If you believe the boredom thesis of the current retail rally, that is good news, because that thesis is basically countercyclical: The worse the economy is, the more bored investors will be. If stocks sell off because the coronavirus crisis is longer and worse than expected, there will be even fewer entertainment options and more people will turn, in desperation, to buying stocks on their phones. If someone finds a magic cure for the virus tomorrow, stocks will rally and all the new retail investors will happily sell into the rally at the top and go back to their other, more entertaining, entertainments.

JakeTheAndroid 6y ago
IDK if that is a perfect take at all. Sports plowed on, new shows, movies, and games were released. The only thing I see that went down was the available investments that could be made. If you are an investor you are going to have a hard time investing into companies because there aren't going to be a lot of physical companies being founded and you'll see a decrease in internet companies being founded. Also, starting a business would be seen as risky with the unclear future of the pandemic and its impact on the economy. This is why we seen stock and real estate investments rise. You add that to the fed rate cuts, and these are basically the only two mainstream investments that can be made. Most investors into stocks aren't individuals like you and me who would otherwise go out dancing or go to bars. While there was a surge of individual investments, the bigger firms are attributed for creating the huge waves in the markets. Do you think that Warren Buffet/Berkshire decide to invest in retail stocks because he was bored due to not being able to go out clubbing? And when he buys stocks in something it outpaces what the entirety of WSBs does in puts/calls. And thats just one firm. So, I find it hard to believe that the lack of entertainment (which was only really an issue at the very beginning of the pandemic, as baseball/basketball/football all carried on and plenty of games/shows/movies have come out) is the cause here.

haltingproblem 6y ago

Robinhood is the Instagram of stock trading. Can we really knock the founders of Robinhood for making stock trading so seamless and addictive and amping up the gamification to its highest level. The legacy brokerages have been guilty of turning stock trading into entertainment for years, thankfully just poorly. CNBC for the most part is entertainment. If anything the legacy brokerages like IB/Schwab/Etrade were incompetent in not making the jump on usability and offering innovations like fractional trading widely. How does one slow down Robinhood to make speculative trading less attractive - make their UI worse? Stop innovations like fractional trading? I feel we as a civilization have uncorked a financial poison pill in the innovations of Robinhood. We will just have to ingest and process it to move forward, there is no way to go back. There will be a price to way in lost savings and lives.

folkhack 6y ago
> I feel we as a civilization have uncorked a financial poison pill in the innovations of Robinhood. We will just have to ingest and process it to move forward, there is no way to go back. There will be a price to way in lost savings and lives. Just look at the toxicity of /r/wallstreetbets if you're looking for the cracks in the wall. Also: https://www.forbes.com/sites/sergeiklebnikov/2020/06/17/20-year-old-robinhood-customer-dies-by-suicide-after-seeing-a-730000-negative-balance/?sh=15c8ecb51638 https://www.forbes.com/sites/sergeiklebnikov/2020/06/17/20-y...
- _iyig 6y ago
  How is r/wallstreetbets toxic? As someone who doesn’t day-trade, I still subscribe for the memes and self-aware jokes. It’s one of the few remaining large subreddits with tons of creative energy and no drama or politics. And as someone who doesn’t day-trade, the “loss porn” regularly posted to r/wallstreetbets has firmly convinced me to stick with index funds.
  - jdhn 6y ago
    >the “loss porn” regularly posted to r/wallstreetbets has firmly convinced me to stick with index funds Same here. I know that I'm neither smart enough nor willing to dedicate time to micromanaging my portfolio. Index funds/ETFs are the way to go, and I only invest in individual stocks (no options/puts for me) if they catch my eye and the research of others has a positive outlook.

tptacek 6y ago

Naturally, Taibbi manages to feature PFOF in this article, a benign practice common to retail brokerages (who do not in fact specialize in order execution, but rather, mostly, in being able to pick up the phone or run a website). Complete with a citation to Michael Lewis' ludicrous "Flash Boys". Meaning even when he picks a legitimate target --- Robinhood, which is a gambling application disguised as a personal finance tool, is richly deserving --- he still manages to flub it.

drawkbox 6y ago
Well sure PFOF alone is not that much of a competitive gain, though it will put you above most investors to have it that is why hedge funds like Citadel, Virtu, and Wolverine buy this info. Those guys are doing things with that data for sure because Robinhood has scale/volume in lower skilled investors. It isn't cheap, funds has to have a massive cash to even afford the data. Robinhood has PFOF AND low skill investors in volume, so the amount of prediction of moves is a combination of data and their users. They also recommend stocks and market these to users that are less skilled, this is in unison with online forums like wallstreetbets and more. Robinhood can move the market on stocks they want and compare volume/direction they are pushing and predict the volume/direction from others with that. Robinhood's name seems small fish, but they are a whale that other whales feed off of and those whales bring schools of small fish in uniform to them to play off of and eat. Robinhood buyers/partners make moves based on all of those data points and the result is almost like stealing candy from kids. This is especially true on stocks they themselves push/recommend or are pushing funding to, partner companies or companies also funded by who funded them. It seems like "democratic" markets but is actually so choreographed it is a more authoritarian/fixed market due to the sheer volume and type of investor. Since Robinhood only sells data, and so many competitors are popping up, it has to be massively lucrative in more ways than just the first step, but supporting deeper investments is probably a key aspect of the plan.
- tptacek 6y ago
  I don't know how to respond to this comment, since it's orthogonal to my understanding of PFOF (and for that matter the understanding of people like Matt Levine). Market makers don't buy retail order flow to get an edge over retail investors. They seek it out because it's safer to trade with --- retail investors, unlike hedge funds, tend not to follow up their 100-share orders with huge numbers of subsequent hundred-share orders. Safer means cheaper. Market makers chop up the cost savings with brokerages, which is where the payment comes from. What rings true to me --- for whatever that's worth to you --- is that Robinhood influences its user behavior in ways that are bad for its users and generally good for the firms who execute its trades. Of course, that's true of anything that gets users trading more, which, of course, is something users should not be doing. Robinhood is bad! It's just not bad due the conspiracy theory Taibbi invokes. What's frustrating is that he's been saying this for awhile, and he's had plenty of time to investigate and build some understanding of how the market is structured. Matt Levine can explain it, entertainingly, to a lay person in just a paragraph or two. Taibbi simply doesn't care, and counts on you not caring either.

ipnon 6y ago

Robinhood provides commission free trades on fractional shares for practically all worldwide publicly traded equities in literally the palm of my hand. To paraphrase Uncle Ben, "with great convenience comes great responsibility." If you shoot yourself in the foot you don't blame the gun store.

dehrmann 6y ago
Is Robinhood the market maker for fractional share sales, or do they outsource that to someone? Someone has to hold a real share to make it work. There's a decent amount of regulation around making sure retail investors don't get taken advantage too much when making normal trades, but I could see there being a larger bid/ask spread with fractional shares and market makers taking advantage of that.

dehrmann 6y ago

I tend to agree that Robinhood treats investing like a game and connects people with investments they aren't really suited for, but "pandemic villain" makes it sound like they took advantage of the pandemic. They just had the right entertainment product at the right time; "villain" implies more intent than was actually there.

strict9 6y ago

>If you have an urgent question, like for instance thinking you owe three-quarters of a million dollars, too bad: Robinhood’s chief feedback option is email, with response times of up to a week. This is true for most offerings in which you, the user, is the product. You spend time or money and if something goes wrong good luck trying to get it resolved, much less speak with a human that can actually resolve it. You can lose your gmail account without warning or reason and essentially the keys to your entire online life. Or in the case of this poor soul, experience an unintended side effect of a poorly designed UI in a financial trading app that makes things seem much worse than they actually are. And in these dire situations, corporations make it as difficult as possible to reach a human to resolve it. We should all be ashamed that this is what scalability usually means.

tfehring 6y ago

I see no problem with unsophisticated people trading stocks on their phones, because one consequence of markets being efficient (or close to efficient) is that it’s really hard to underperform the market consistently. Just as hard as outperforming the market consistently, in fact. They’re wasting their time, but time you enjoy wasting is not wasted, etc. I don’t really feel the same way about options though. I don’t have a great explanation as to why. But options and the associated leverage are a totally distinct issue from picking individual stocks - options trading by retail investors is just gambling even if the underlying is SPY and not a psilocybin penny stock or whatever.

scott00 6y ago
It's actually quite easy to underperform the market if you make a lot of trades and cross the spread when you do it. Which is exactly the behavior that all retail brokerages are incentivized to encourage.
fullshark 6y ago
It's easy to underperform if you buy options that can go to zero on an incredibly short time horizon.
tryptophan 6y ago
Nope, not true. A very small fraction of stocks account for a large majority of the return of an index. If you miss these few in your portfolio, you will under-perform. It's not 50:50 whether or not you over-perform or under, its more like 1:50(over a significant period of time).
- tfehring 6y ago
  Yeah the distribution of returns isn't symmetrical, but the expected return is still equal to the market return. You could make the argument that that means that expected utility is lower because of decreasing marginal utility, but I'm not confident enough in my understanding of others' utility functions to make that claim.
caeril 6y ago

lcfcjs 6y ago

There will always be people who hate companies that disrupt an entire industry. Robinhood has made stock investing accessible to everyone. I have sympathy for the man who killed himself, (and perhaps there should be some warnings in the app?) but if you get into a car crash would you blame the car manufacturer?

jboggan 6y ago

Disappointed that this didn't include the extended downtimes during the February/March crash and rebound.

darth_avocado 6y ago

Remember the time kids, when you had to pay Etrade or Vanguard or one of these leeches a fee of $20 to execute each trade, even when you wanted to sell your position that was losing money? That meant locking out an entire population of people from financial prosperity because they couldn't afford $40 worth of commissions each time they bought and sold a stock. I'm sorry but Robinhood has been fulfilling it's name. It's not perfect, but without it, you'd all still be getting squeezed by these brokerages.

anonu 6y ago

Robinhood is a gambling platform. The SEC should regulate it as such.

ll931110 6y ago
So same as ETrade, Schwab, TDAmeritrade, Vanguard, Fidelity, etc.?
- anonu 6y ago
  RobinHood is not comparable to these other guys. There's a difference between investing and punting/speculating. Two of those differences is through your user UX and the education you provide the average retail investor. RobinHood's mobile first view - sure its great - but its more geared towards the gamification of trading versus actually building wealth.
  - ll931110 6y ago
    So how exactly do you write laws differentiating them?
s5300 6y ago
>>looks at your bio Lols "Ok boomer"

dyeje 6y ago

I don't see anything that makes me think Robinhood is villainous. Sure they have poor customer support and UX designed for engagement, just like every other major consumer tech firm.

fullshark 6y ago

Stocks have positive expected returns (and if they don't in aggregate the gov't/fed will work overtime to make sure they do) and gambling has negative expected returns. Perhaps society should be encouraging the proles to put their money in the stock market instead of in casinos / lottery tickets / daily fantasy sports. Also looking at the stock market the last year, a product that makes it easier for retail investors to buy stock after the pandemic hit is a big win for those investors is it not? The order flow issues don't really matter to most retail investors and they shouldn't.

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baron816 6y ago

Sort of tangential: is there a reason why Robinhood et al don’t have a “build your own index fund” tool? I’d really like to pick my own basket of stocks, then invest in them all with a “single” buy according to my weights.

PascLeRasc 6y ago
M1 Finance does exactly this, check them out.
jperras 6y ago
Likely due to the regulatory difficulty in then brokering fractional share purchases. If your "index fund" includes a few stocks that have large share prices (e.g. TSLA, AMZN), then to buy a single "share" of your fund would require quite a bit of capital. I don't believe the retail level investors that Robinhood targets are quite at that level.

deleted 6y ago

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gnicholas 6y ago

> In that meeting, he [Ashton] reportedly gushed about the company’s potential by comparing it to gambling websites. Kutcher put out a statement that he was “not insinuating that Robinhood is a gambling platform,” but rather referring to the company’s “current growth metrics.” Yikes.

jtdev 6y ago
Kutcher seems to inject himself into investing culture in the sleaziest most classless ways... reminds me of when Kutcher was chumming around with WeWork’s egomaniac founder. Guy is a vaporware PowerPoint deck in sneakers.

legerdemain 6y ago

> These harmless-looking eggheads... Isn't "egghead" supposed to be a hurtful name for someone who is bald? Neither of the founders looks bald.

avrionov 6y ago
Egghead is used instead of nerd or dork here: https://en.wikipedia.org/wiki/Egghead https://en.wikipedia.org/wiki/Egghead

jdhn 6y ago

This really just feels like a smear. Robinhood has been instrumental in crushing fees for trading individual stocks (a year ago Vanguard charged $7 per trade if your account didn't have enough money, and now it's $0), and is an incredibly user friendly way to get involved in investing. Seriously, compare Robinhood's UI to anybody else (Schwab, IB, Vanguard), and they absolutely crush it. If you're starting off and don't have enough money to open an account with a legacy broker (I believe Vanguard requires $3k to open a Roth, not sure about their regular accounts), Robinhood makes it incredibly easy to start building a portfolio with a small pool of money (say $1k). I feel like Taibbi had an axe to grind against Robinhood or else he would have tried to separate the "bad" (puts, options, a sense of gambling) vs the good (low barrier to entry, easy to buy what you want, etc).

paulgb 6y ago
Robinhood has been criticized a bunch for taking payment for order flow, but I've yet to see someone actually make a quantitative case that if you make an $x trade you will lose $y on average because of PFOF. The argument instead always relies on a zero-sum figuring that if someone else is willing to pay for the order flow it must be costing you somehow, but that's not really how it works.
- bcherny 6y ago
  That’s not the problem with making money off order flow. The problem is that it fundamentally misaligns incentives: while Robinhood makes money the more people transact (and is the reason its fee structure and UX incentivize transacting), it’s not in peoples’ financial best interest to transact as often as possible.
  - cwyers 6y ago
    But that's true of brokers that charge customers per trade too: they too are incentivized for customers to trade more.
    - bcherny 6y ago

smsm42 6y ago

Read the article, couldn't understand why they are villains. OK, so there's a case where a guy misunderstood his financial statement and killed himself. This is profoundly sad but surely doesn't make RH villains - they didn't intend this outcome and they didn't even make the data particularly hard to understand, it's just a sad coincidence which sometimes happens when thousands of people interact in millions of ways. Fish long enough, and you'll find something weird and something bad happening. The other claim is that RH runs their order flow through brokerages which has the right of first trade on the trades RH users do. I don't see how that hurts RH users - by the time they made the trade, they already agreed on a price, and unless something nefarious happens like somebody foolishly sending no-limit market price orders and somebody else exploiting those to close deals with wildly out-of-market prices (which I saw no evidence of, that's just the only way I can think of this can be hurtful for the RH clients), I still fail to see the villainy. So TLDR of it all is that they are villains because a) one guy killed himself after misreading a financial statement, b) they work with HFT companies and c) they have notifications (oh noes, no non-villainous trading software would ever do that!). That's it. Weak sauce, I say. P.S. And what this has to do with the pandemic? Just to make it more nefarious by somehow implying they are profiteering from the pandemic, without providing any proof except temporary coincidence?

runawaybottle 6y ago

Whenever I go buy something at a typical grocery/deli in my city there is always one consistent customer - scratch off and lotto players. Any Deli owner will tell you this is part of their holy trinity of guaranteed business, beer, lotto, cigarettes (now vapes). It literally makes up half their revenue. Robinhood is like a modern day scratch off, the underlying market exists in your local deli already. It’s not long term value investing, it’s a dream of winning big on any given day.

jariel 6y ago
This is quite a brilliant way to put it. Except the target market is not 'working class' it's the equally unaware 'young urbanites with decent jobs who should know better'.

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jariel 6y ago

The worst part is the branding. Their narrative/coolaid is that they were part of the 'Occupy Wall Street' movement and wanted to do something about it! Couching their very otherwise standard trading scheme into woke credentials, bringing an entire generation of woke youth literally right into the system they ostensibly lamented. 'Overthrow the Imperium by ... joining the Imperium and losing all your money to them!' Like WeWork, We Charity etc., it just reeks of hypocrisy. I'm of the belief that most traders are in fact caught up in the more superfluous aspects of trading, the 'belief' that they have some ability/skill/insight when really the are mostly in way over the heads, fish being handed over to sharks for easy money. That's obviously not entirely the case, but to a great extent. Who in heaven's name is trading complex options instruments on their smartphone ... my gosh. The $0 fee merely encourages active trading, which is a hallmark of most bad trading strategies. It mixes the worst aspects of gambling, with the worst aspects of hyper capitalism (the assumption that trading/investing is inherently positive) and the worst aspect of woke branding (playing on progressive credentials without any material action to that effect). And CNN has done how many full PR pieces on these guys? If their name was "Make Quick Cash Now with BIG LOANS for Hyper Trading, Insert Credit Card Here" - then I think it would all be much more transparent and fair.

beshrkayali 6y ago

I think many people saying that this feels like smear are mainly saying this because they themselves have negative personal feelings against Matt (one of the few good journalists left imho.) It's somewhat ironic to praise Robinhood's UI as "good experience" when the article itself is criticizing this same experience for how it's designed to be addictive, essentially turning investing into a game. Matt is not the first to make this point [1] [2]. To be clear, I don't mind praising certain features of Robinhood or even the idea of making it accessible to start investing small. I don't blame Robinhood even for this because they're not forcing anyone to trade. But dismissing this entire article and very valid criticism against Robinhood just because of your feelings on Taibbi is a bit much. The last couple of paragraphs seem like an appropriate tldr: > If and when IPO money comes, Robinhood will be on its way to becoming a finance version of Facebook: a free platform that keeps a sea of customers engaged with a hyper-stimulating user experience, while making money selling intelligence about those customers’ behaviors to expert wealth extractors on the other end. > It’s the perfect mousetrap, among other things because of its name. “That’s the other thing,” says Brewster. “They call it Robin Hood.” Instead of stealing from the rich and giving to the poor, the American version takes in the young and sells them to computer-powered hedge funds; this Robin Hood is the house that always wins. If there’s a more brilliant metaphor for capitalism in the Covid age, it’s hard to imagine. [1] https://www.cnbc.com/2020/08/21/robinhood-is-having-a-moment-users-should-be-careful.html https://www.cnbc.com/2020/08/21/robinhood-is-having-a-moment... [2] https://www.bloomberg.com/news/features/2020-10-22/how-robinhood-s-addictive-app-made-trading-a-covid-pandemic-pastime https://www.bloomberg.com/news/features/2020-10-22/how-robin...

zaptheimpaler 6y ago

Yes, let's take away one of the few remaining tools to grow your wealth available to everyone under the guise of protecting the public. They cut commissions to 0 industry wide and taught a generation about stock markets and options, which was previously knowledge reserved mostly for wall street. Imagine if we had access to VC level deals too, like $50k in an early round of doordash that is now worth $80M? Why should we want to go in the opposite direction? The line between gambling and investing is very very fuzzy. We’ve even seen recent stories of people gaming literal lotteries to tilt the scales towards a win. You cannot ban a tool that one person uses for gambling without also banning others who use that same tool for investing. I’m sorry but I’d rather have those tools than have them taken away because someone else is irresponsible with them.