Robinhood Is a Menace to Democracy and the Real Economy
Unlike the old hero, the new $35 billion firm needs to be outlawed
Unlike the old hero, the new $35 billion firm needs to be outlawed
If you ever find yourself in Nottingham, England, make your way to a pub called Ye Olde Trip To Jerusalem. Built in 1189 as a watering hole for crusaders on their way to slaughter and be slaughtered in the Middle East, the Trip is a magnificent cave-like pub built straight into the rock under Nottingham Castle.
Apparently, it’s where Robin Hood liked to drink. When word reached the Sheriff that the Hood was in town, he’d come storming down the hill, but Robin and his merry men would always escape through the underground brewery tunnels and take off down the river.
That’s the story, anyway.
It’s been around eight hundred years since Robin Hood tales first appeared, and we still love them because they’re so delicious. Robbing the rich to help the poor? Fighting for justice and dethroning tyrants? What’s not to love?
One of the many problems with modern corporatism is that it has zero respect for words, meaning, or stories, and is willing to hijack anything to make a dollar. Like Jeff Bezos, the world’s richest man, buying the rights to the Lord of the Rings so he can pornify it for a buck.
And in a twist of irony, the new Robinhood really does need to be outlawed.
Tomorrow, the hyper-addictive day-trading platform Robinhood will go public on the NASDAQ in what is sure to be a massive IPO — they’re aiming for a valuation as high as $35 billion.
Many of the Robinhood shares will be purchased on Robinhood by Robinhood users. But I’m hoping that wise and ethical readers will avoid this toxic company because of its myriad crimes against the commons:
Robinhood addicts users
“We generate a ludicrous amount of trades in $1 to $5 stocks. Because we’re free, we’re the only place where you can day trade stuff like that.” — Baiju Bhatt, co-CEO
Rather than acting like a traditional stock purchase app, Robinhood uses gamification to addict users like it’s Candy Crush… lots of color, free stocks in the shape of lottery tickets, emoji push notifications, one-click trading for instant gratification, etc… at one point they even had confetti showers, and challenges that require users to tap the app as many as 1000Xs per day.
The casino-like interface has essentially become a platform for day-traders, even though the vast majority of day-traders lose money. Consider:
Day traders account for just 1.6% of all profitable traders.
Excessive trading is likely triggered by addiction.
Robinhood’s target market is HENRYs — high earners, not yet rich. By addicting them to making trades all day long, Robinhood gleans regular profits even if day-trading doesn’t serve a user’s best interests in the long-term.
(This is yet another reason why we need a financial transaction tax — to grind out high-velocity brokers and eradicate day trading.)
Robinhood helps hedge funds
“If you’re not paying for the product, then you are the product.”
Perhaps nowhere is this more true than on Robinhood’s incredibly costly “free” trading platform. Don’t let them confuse you: RH users are not RH customers.
So how does Robinhood make money? The same way all companies in the menace economy make money — by selling customer data to the highest bidder. (Looking at you, Facebook.)
In the case of Robinhood, the most valuable customer data is order flow. Robinhood doesn’t execute trades — it sells them on to high-velocity market makers who take their cut and also use the data to trade against users.
That’s right: Massive tax-evading hedge funds and money-hungry market makers — the real customers — pay Robinhood to essentially spy on their users by sending them their orders. Payment for order flow was popularized by Bernie Madoff, and it’s illegal in the UK. And it’s how Robinhood earns the majority of its revenue, and it absolutely screws the little guy in the long run.
There is also concern among regulators that average investors are being duped on best prices for stocks as Citadel Securities [itself a massive powder keg of potential societal problems, with Senator Elizabeth Warren saying they play a “quiet by critical role” in wild stock swings] and others get an advanced look at prices. — Yahoo Finance
Remember GameStop? And AMC? Macy’s? Kiss? Dillard’s? BlackBerry?Tootsie Rolls? Robinhood users tried to save these companies, and their own brokerage firm turned on them, saved the hedge funds, suspended trading on thirteen stocks, and sunk the share price of these companies. This is market manipulation and breach of fiduciary duty — it’s no wonder users filed a federal class-action lawsuit.
Not only does Robinhood enrich wildly corrupt hedge funds, the IPO will further enrich some of the most powerful firms on the planet — its pre-IPO investors include Sequoia Capital, Kleiner Perkins, CapitalG, NEA, Thrive Capital, Index Ventures, New Enterprise Associates, Andreessen Horowitz, and Google Ventures.
Robinhood says their mission is to “level the financial playing field,” but they’re literally doing the exact opposite.
Robinhood hurts the little guy
What happens when billion-dollar hedge funds buy data on competing unsophisticated everyday traders?
Eventually, they crush them.
Just like a casino, the house always wins.
If a giant hedge fund can run your trading data through their algorithms and machine learning software, it’s only a matter of time before they can manipulate and capitalize on your trading patterns — patterns which users might not even be consciously aware of.
How is this not a form of insider trading?
The hard fact is that stock market crashes have been linked to suicide — which is exactly what happened to Alexander Kearns, a 20-year-old who took his life after the Robinhood app seemed to be saying he’d lost $730,000.
Robinhood is a criminal enterprise
The company breaks the law constantly. And they know it — the word “fine” appears in their IPO documents 47 times.
They almost seem proud to be on the wrong side of the law. Less than 48 hours after getting served the biggest fine in Finra history, they filed to go public.
Their trading symbol? HOOD. As in, hoodlum.
They’ve also paid an SEC fine, lost a case in Massachusetts, and are currently under investigation by almost every federal and state agency in the nation.
Once Robinhood IPOs, it will have a $2 billion war-chest for “regulatory overrun” — in other words, to fight democracy, consumer protections, and ultimately the commons, much like another massive predator company, Airbnb.
Robinhood is anti-democratic
The public company plans to have a two-tier stock structure, with insiders like the co-founders and their billionaire backers holding shares that have ten times the voting power of shares sold to regular people.
Rather than letting all shareholders — the owners of the company — decide democratically how they want their business to operate, the powers want to maintain their dictatorial control.
(This is yet another reason why we need democratic stockholder voting rights for all companies.)
Robinhood distorts real value
“Dogecoin accounted for 34% of Robinhood’s cryptocurrency transaction-based revenue in Q1 2021.” — Scott Galloway
Meme stocks are a major problem. They throw the notion of real value right out the window, focusing user attention solely on price (will it go up or down?) instead of value (what are its saleable assets, profits or losses, long-term competitive advantages?)
Now throw the ultimate valueless “asset” — cryptocurrency — into the Robinhood trading mix, and all of a sudden an “investment” like Bitcoin, which has no actual underlying value, is suddenly “worth” more than most of the companies that actually house, clothe, feed, and power the world.
Do you know what Warren Buffett does all day? He reads dozens of newspapers, hundreds of books, and thousands of company prospectus documents. He studies, he learns, he understands. He calculates a company’s valuation based on hard metrics.
Robinhood doesn’t teach its millions of first-time users sound investment technique. Investing shouldn’t be an emotional, high-frequency, greed-fueled adrenaline-rush.
Robinhood is extractive, not contributive
Rather than equipping users to start businesses and become contributing members to society, Robinhood is training a new generation of predominately young men to passively extract value from the productive economy.
Rather than taking our yearlong lockdown to help create Amazon competitors, Airbnb killers, Facebook destroyers, and thousands of sustainable circular-economy eco-businesses, Robinhood simply enabled users to leverage their stimulus checks on margin and plough them into stock price pumps, further enriching the world’s richest people at a moment of global suffering unseen since WWII.
So what app should we use instead of Robinhood?
I have a radical idea.
How about we all use… nothing.
How about we stop passively extracting money off of other people’s time, talent, skills, efforts, creativity, and time?
This, of course, is a wildly unpopular position.
People love unearned money.
But easy money is hard on the soul.
And it’s even harder on people who don’t have our capital/credit advantages.
Let’s be brutally honest: There’s no such thing as “putting your money to work for you” — you just put other people to work for you instead.
We need a global economy where people can’t passively exploit each other.
Value-creators — the actual workers — deserve 100% of the value they create.
Vulture capitalists, corporate overlords, offshore hedge funds, corrupt multinational banks, and addicted Robinhood gamblers don’t deserve anything from society’s hardest-working people.
In the ideal economy, people would live off their work earnings and retire off their savings. No extracting from others — not even government-approved pyramid-scheme pension funds. Earn → save → spend.
How can we make this a reality?
We need to ban for-profit extractiong corporations.
(There, I said what no one in Congress could ever dare utter.)
Don’t worry, people can still make a great living with other, fairer structures:
In addition to making a good living, we’d see a reversal in the decline of democracy, less inflation, more economic fairness, and even a climate turnaround, because there would no longer be an elite extractor class.
Because isn’t passive corporate profit the ultimate inefficiency?
Until we ban passive value extraction, the gap between the rich and poor will continue to grow. Elites will continue to colonize countries, collapse the planet, devalue our money, and enrich themselves at the expense of the rest of us.
Sadly, Robinhood is just teaching a new generation to perpetuate the cycle.
That’s why we need to outlaw Robinhood.
And then go after the rest of the merry men.