Recognizing Robinhood

The 21st-century digitization of traditionally brick & mortar financial services (think TurboTax, Mint, Quickbooks) not only accelerated after the ’08 crisis, but dissipated further and further down the institutionally-backed supply chain; from corporations then to small businesses and then finally to individuals.

Seemingly overnight, the average working American had access to faster and easy-to-use financial tools and structures.

2013: Enter Robinhood, a beautifully designed, commission-free, no minimum, fractional/options trades friendly, all-the-rage mobile app. All the characteristics of the app ultimately allowed the income threshold for traders drop significantly. The result? Robinhood’s total addressable market (TAM) skyrockets.

More noticeably, Robinhood’s UX centers around positive reinforcement for short-term rewards structures. Think a gamified random free stock upon sign-up and free stocks for referrals to the platform. Push notifications, bright color schemes and the overall layout of the app created immensely successful interaction design, continuously increasing usage frequency. The result? Robinhood’s user base skyrockets.

A concept that I’ve been exposed to more and more recently is the fact that when I’m profiting off something that is free, whether financially or emotionally, I myself am the provider’s commodity in at least one capacity (e.g. data).

Robinhood is currently valued at over $11b, and it arbitrates the stock prices listed on its platform (though often by razor-thin margins that work wonders for it at scale). Where does this become problematic for the user?

When the platform bugs out during times of high volatility or removes stocks to at least control its internal market, and it can control its internal market. To quantify it a little bit, Robinhood houses accounts that average between $1000 and $5000 for over 13 million users.

Please be careful where you put your money and what your motivations are for your investments. Promises of easy fast cash tend to fall short, and the addictive nature of these prospects and the user experience significantly increase these kinds of companies’ power over your outcomes. Ultimately, we can’t forget that Robinhood profits off the small guy staying small and the big guy staying big.

Please take the time to consult a friend or family member who works in finance before making any big moves with your investments, especially if you are already holding in Robinhood, and don’t forget about short-term cap gains tax!