After ignoring the chatter for months I finally decided to check out Robinhood.
I get the appeal.
It’s clear that the app is designed to appeal to younger users.
It’s a beautiful, snappy, and downright alive-feeling application that looks equally good on mobile or desktop. As you move around in it, the numbers for your investments and for the various stocks are in constant motion.
When you take an action, you see results instantly, and you’re constantly being shown information that you might want to take action on. Basically, the app is fun, the app is exciting, and yeah—the app is addicting.
Remind you of anything else?
That’s the problem.
The Top Movers section is a great example. When you see that some $2-dollar stock just jumped by over 70% it gives you the most dreaded of feelings—especially for a 20-something—FOMO.
That, combined with the entire interface being in constant flux creates this feeling that you’re missing out. It’s screaming at maximum volume:
Other people are making tons of money! Right this second! Using the same information that you are staring at right now! Do something!
The popular subreddit, /r/wallstreetbets, is a hilarious but cringy look at the n00b-investor scene, and it takes particular pleasure in making fun of Robinhood users.
They’re encouraging this through interface design, just like social media.
That’s all good fun, but encouraging novice investors to essentially become day traders is not a nice thing. While this might get more young people involved in investing, it might also sting them badly by prompting bad behavior.
Much of the best investing advice says to invest in solid stocks over the long-term, and to let it ride through the inevitable ups and downs—for years.
This all comes down to Decision Engineering, which Tristan Harris writes about extensively.
Robinhood’s focus on active engagement prods people to do the exact opposite of this, leading people to the often joked about, “Buying green and selling red”, which is the direct result of being exposed to FOMO-creating design cues.
In sum, Robinhood is dangerous because—like social media apps—it’s engineered to create a sense of urgency and action. Seasoned investors in their 30s, 40s, or 50s might be able to manage those urges, but plenty of people in that age group are addicted to social media for the same reasons. Young people with less life experience are even more vulnerable.
If you put a 20-something brain against a team of highly-paid AI specialists, it’s easy to pick the winner.
As Tristan Harris pointed out in The Social Dilemma within the context of social media, this is really your brain vs. the brains and AI weaponry of a massive team of AI specialists at Facebook, TikTok, etc.
And it’s no different at Robinhood. The creators of the app are trying to get people to trade on it. Period. That’s their goal. And they’re using all the same social media design trickery and AI to make it happen.
Younger people should be especially cautious.
So while I’m a huge fan of the Robinhood video game—yes, that’s how I see it—I don’t really recommend people use it for their main investing platform. If you’re trying to invest for the long-term it’s an interface that encourages the opposite. And if you’re a day trader it’s massively underpowered as a tool.
Robinhood to me, in its best possible light, is a way to get young people thinking about the future of their money. And that’s a good thing.
I just worry it’s like giving a Lamborghini and a 6-pack to a 17-year-old. Sure, it might teach them about seatbelts, but not in a good way.
- While I think the creation of social-media-like urgency is clearly dangerous for novice investors, I think the app does have its upsides. It turns investing into a game that can appeal to younger people who usually think about retirement far too late. The question is whether the interest it generates is counteracted by the harm it causes.
- This app really focuses the social media conversation because it’s another example of where you’re being presented something that appears overtly positive, but that ends up being toxic due to the incentives of the creators. That’s not a hit on Robinhood. It’s a hit on most companies that have growth and engagement as their primary mission, all else be damned.