Speaker 1: The legend of Robin Hood begins in the Sherwood forms,
Speaker 1: with rob and his merry men reappropriating taxes unjustly collected
Speaker 1: by the evil Sheriff of Nottingham. Yeah, ah, sorry, wrong,
Speaker 1: Robin Hood. The story of this robin Hood begins in
Speaker 1: New York City, where two recent Stanford graduates, Vladimir Tenev
Speaker 1: and Baju, bought toil Away, building software for high frequency
Speaker 1: traders on Wall Street. Inside their office, computer's home and
Speaker 1: keyboards click while outside. I'm here myself as a free individual,
Speaker 1: to humanize the markets and to make Wall Street here
Speaker 1: the sound of what democracy means. Inspired by the Occupy movement,
Speaker 1: to help bridge the economic divide and democratize finance, Tenefan
Speaker 1: Bott designed an app that let anyone access the stock
Speaker 1: market for free, and they named it after everyone's favorite
Speaker 1: egalitarian outlaw, Robin Hood. Welcome to Calling Bullshit, the podcast
Speaker 1: about purpose washing, the gap between what an organization says
Speaker 1: they stand for and what they actually do, and what
Speaker 1: they would need to change to practice what they preach.
Speaker 1: I'm your host, Time Montague, and I've spent over a
Speaker 1: decade helping organizations define what they stand for, their purpose
Speaker 1: and then help them to use that purpose to drive
Speaker 1: transformation throughout their business. Unfortunately, at a lot of institutions today,
Speaker 1: there's still a pretty wide gap between word and deed.
Speaker 1: That gap has a name bullshit. But, and this is important,
Speaker 1: we believe that bullshit is a treatable condition. So when
Speaker 1: our bullshit detector lights up, we're going to explore everything
Speaker 1: the organization should do to fix it. Robin Hood's purpose
Speaker 1: is to democratize finance for all. They say. Their aim
Speaker 1: is to make investing friendly, approachable, and understandable for newcomers
Speaker 1: and experts alike. Employing a business model called payment for
Speaker 1: order flow, robin Hood makes investing free to users and
Speaker 1: just as easy as downloading a game onto your phone.
Speaker 1: And the app doesn't just provide access to the traditional markets.
Speaker 1: In June, robin Hood leveled up to include commission free
Speaker 1: crypto trading, making bitcoin, ethereum, and other tokens available to
Speaker 1: just about anybody. However, as popularity and download numbers grew,
Speaker 1: so did criticism. Massachusetts regulators are accusing robin Hood of
Speaker 1: what they call aggressive tactics in marketing inexperienced investors, using
Speaker 1: gamification to manipulate those customers and failure to prevent outages
Speaker 1: on that trading platform this year. In one example, robin
Speaker 1: had allowed a Massachusetts user with no experience to make
Speaker 1: more than twelve thousand trades in just six months and
Speaker 1: to complaint this morning. The state highlights robin Hood's revenue
Speaker 1: model of payment for order flow. This is a key point.
Speaker 1: Payment for order flow is how robin hood makes money.
Speaker 1: Even though the app itself is free to users. Individual
Speaker 1: investors don't have to pay to trade because big trading
Speaker 1: houses called market makers give robin Hood a small amount
Speaker 1: of money for every single trade that's made on the app.
Speaker 1: The more you trade, the more money they make. That's
Speaker 1: the misalignment that drives the entire conundrum here. Robin Hood
Speaker 1: wants people to trade. It's absolutely in the worst interests
Speaker 1: of clients. The more you trade, the more likely you
Speaker 1: are to lose money. Study after study has shown that
Speaker 1: buy and hold is a much better investment strategy, and
Speaker 1: critics and lawmakers raised the red flag, saying robin Hood
Speaker 1: was designed more like a game in order to hook
Speaker 1: first time investors and then capitalize on their inexperience. Regulators
Speaker 1: also point to incentives like confetti popping up on screens
Speaker 1: after trades and offers for robin Hood customers who are
Speaker 1: more active on that app to move up on waitlists
Speaker 1: for new products. In an attempt to quell the backlash,
Speaker 1: robin Hood actually changed some of their graphics, but critics
Speaker 1: were unimpressed. It's absolutely gamification. They have leaderboards, you can
Speaker 1: win points, they have competitions on on on the site.
Speaker 1: The only thing that they've removed is that you don't
Speaker 1: get confetti now on your screen when your stock goes up.
Speaker 1: You know, the robin Hood's big claim to fame is
Speaker 1: that they've democratized access to finance, But I think they've
Speaker 1: democratized it the same way that Purdue democratized access to oxycontent.
Speaker 1: Simply making something easier to buy does not mean that
Speaker 1: it is there for a good idea to buy it.
Speaker 1: But robin Hood continued to allow anyone the freedom to
Speaker 1: buy whatever stock they pleased until the game stopped fiasco
Speaker 1: in early because being sort of built by the people
Speaker 1: who are doing it as a David versus Goliath thing, Right,
Speaker 1: So you have this army of small traders who are
Speaker 1: using a Reddit message board called Wall Street Bets, and
Speaker 1: they're putting pressure on the short sellers of game step.
Speaker 1: This looks like a move by an outfit called robin Hood,
Speaker 1: which is supposed to be taken from the rich and
Speaker 1: giving to the poor, and doing exactly the opposite. The
Speaker 1: action is so wild that t d amritraded robin Hood
Speaker 1: have restricted trading of these stocks. Traders on Rabbits sent
Speaker 1: the stock soaring this week, causing billions in losses for
Speaker 1: the hedge funds that been against the video game retailer stock,
Speaker 1: and today Wall Street decided enough wasn't enough. Declaring certain
Speaker 1: stocks off limits made the platform look ominously undemocratic, and
Speaker 1: while the app makes complex transactions frictionless, understanding those transactions
Speaker 1: can be really hard, especially for beginners. This lack of
Speaker 1: clarity can have terrible consequences. The most tragic of these
Speaker 1: occurred in twenty twenty when Alex Kerns, a college student
Speaker 1: from Illinois interested in investing, was granted approval by robin
Speaker 1: Hood to trade options, a very risky thing for even
Speaker 1: professional investors because of the interface. He mistakenly thought he
Speaker 1: owed seven hundred and thirty thousand dollars that he didn't have,
Speaker 1: and he wound up taking his own life. The note
Speaker 1: he left, said I had no clue what I was doing.
Speaker 1: The Financial Industry Regulatory Authority said that robin Hood had
Speaker 1: quote failed to exercise due diligence for years. When approving
Speaker 1: options trades, they find robin Hood seventy million dollars, the
Speaker 1: biggest fine in the authority's history. This and a lawsuit
Speaker 1: by Alex Kern's family were finally settled just before robin
Speaker 1: Hood went public in the summer of one. Robin Hood
Speaker 1: says their purpose is to democratize finance for all, to
Speaker 1: make investing friendly, approachable, and understandable for newcomers and experts alike.
Speaker 1: But he's making investing free through an app the same
Speaker 1: as democratization. It feels like gamifying the stock market is
Speaker 1: almost making it too easy. Researching this further, I found
Speaker 1: just the person to help me understand the intersection of gamification, investing,
Speaker 1: and gambling. So I called him up. Folks, I am
Speaker 1: excited to introduce Dr Devin Mills. Devin, thanks for being here,
Speaker 1: and uh, welcome to calling bullshit. It's great to be
Speaker 1: with you, Tie. So before we get into robin Hood,
Speaker 1: I'd love it if you could just tell us a
Speaker 1: little bit about your background. And the work that you do. Sure. Sure, so.
Speaker 1: I'm an assistant professor at Texas Tech University in the Community,
Speaker 1: Family and Addiction Sciences department. My research is on non
Speaker 1: substance use disorders, primarily video gaming and gambling, and with
Speaker 1: regards to gambling, I also look at cryptocurrency trading and
Speaker 1: risk taking behaviors in the financial markets, looking at it
Speaker 1: from the behavioral side of things, trying to understand exactly
Speaker 1: how people can become obsessed with it, how people can
Speaker 1: start to internalize more of a problematic trading pattern. M fascinating. Okay,
Speaker 1: would you take a run at defining that word for us? Gamification? Sure?
Speaker 1: I think the simplest way of defining it is to
Speaker 1: employ game design to an area that doesn't necessarily have games.
Speaker 1: You could not say that we're gamifying the NFL, for instance,
Speaker 1: the NFL football is a game that wouldn't necessarily so
Speaker 1: that wouldn't work. But gamifying learning in a way that
Speaker 1: is something that education has done. And my understanding is
Speaker 1: that's kind of the roots of gamification has been in
Speaker 1: the education domain, right and and so the point of
Speaker 1: it is to essentially make the subject matter stickier, more engaging,
Speaker 1: more uh, fun all of those things, getting someone interested
Speaker 1: in the topic area and making it more of a competition, um,
Speaker 1: giving someone an objective a quest. But there's also the
Speaker 1: gamification in terms of the rewards piece, and I think
Speaker 1: that's where a lot of the literature, a lot of
Speaker 1: the mainstream media has kind of focused more, especially as
Speaker 1: it as applies to some of these mobile applications. Is
Speaker 1: the idea of rewarding individuals for training behaviors, as applied
Speaker 1: to robin Hood in terms of badges and whatnot, kind
Speaker 1: of the Boy Scouts mentality of uh, keep on awarding
Speaker 1: individuals for their acts of service and their acts of knowledge. Yeah,
Speaker 1: let's turn to robin Hood. Would you say that the
Speaker 1: design of the robin Hood app is gamified? They used
Speaker 1: to have the confetti once you made a trade, um,
Speaker 1: whether that was selling or buying. I haven't seen a
Speaker 1: lot of rewards. It doesn't necessarily mean that individuals don't
Speaker 1: feel rewarded in some way, So confetti would be an
Speaker 1: example of a kind of gamified aspect of the app experience. Yeah,
Speaker 1: but I would also I think the the idea that
Speaker 1: that's the only way in which humans interpret a reward
Speaker 1: is kind of a misnomer, right when their portfolio is
Speaker 1: going up a hundred dollars two hundred dollars, or maybe
Speaker 1: it's going down two dollars. I think the human brain
Speaker 1: will interpret that as something to chase, something to continue.
Speaker 1: I wonder, like our human beings all equally susceptible to gamification,
Speaker 1: or are some people more likely to be seduced than others?
Speaker 1: I would say it usually depends on the task. If
Speaker 1: you are an individual who is completely averse to any
Speaker 1: risk whatsoever, the idea that gamification by itself could get
Speaker 1: you to do something that you wouldn't otherwise do I
Speaker 1: haven't seen any research to suggest that gamification is that strong.
Speaker 1: So you're an expert in gambling and gambling addiction, Robin
Speaker 1: Hood says that investing is not gambling. Um, but I've
Speaker 1: noticed that in some of your work you point out
Speaker 1: that there seems to be a correlation between investing, particularly
Speaker 1: investing through a smartphone, and risk taking behavior. So I
Speaker 1: wonder if you could unpack the relationship between gambling and investing.
Speaker 1: How are they different and how might they be the same.
Speaker 1: When we think about gambling, we immediately assign a level
Speaker 1: of risk. When we think about investing, we imply almost
Speaker 1: a strong chance of return, almost eclipsing this idea of risk. Yeah,
Speaker 1: it sounds responsible. I'm an investor or. Yeah. You have
Speaker 1: your friends saying well, that's a gamble versus well, that's
Speaker 1: an investment. You know, that has different ways in which
Speaker 1: we interpret that, But I I go back to the
Speaker 1: basic definition. Gambling is risking something of value, primarily money,
Speaker 1: on the chance of an outcome. Uh that should result
Speaker 1: in individuals earning more money in return. That's gambling. And
Speaker 1: so based on that definition, I find it really hard
Speaker 1: to see stock trading, crypto trading in particular, to not
Speaker 1: be some element of gambling. Now that being said, I
Speaker 1: do encourage people to take charge of their wealth. I
Speaker 1: encourage people to learn more about the stock market, but
Speaker 1: I also think there needs to be uh, some clarification
Speaker 1: on the terminology. In my mind, if you're buying stocks,
Speaker 1: you are gambling, but you're maybe gambling more responsibly or
Speaker 1: less responsibly, and that's a variation of investing. One of
Speaker 1: the other aspects of the app is that it makes
Speaker 1: investing social. Does that make the app stickier? So I
Speaker 1: would I would go back to our gamification question. Do
Speaker 1: they have to have a gamification piece if so many
Speaker 1: people are going to be bragging about it, sharing their gains,
Speaker 1: sharing their losses on Wall street bets. If there's a
Speaker 1: strong enough social community, does it have to have rewards
Speaker 1: in order to increase participation? I think right now the
Speaker 1: research isn't there yet, but generally speaking, when we look
Speaker 1: at motivation in other areas, we see that the social
Speaker 1: component is very very strong. Right. It seems to me
Speaker 1: that people who who enjoy the feeling of risk, uh,
Speaker 1: would be more likely to become addicted by gambling. Is
Speaker 1: that doesn't right? Definitely? Yeah. You have to be interested
Speaker 1: with uncertainty, you have to be okay with that, you
Speaker 1: have to enjoy the rush. There's a little bit of
Speaker 1: research on the fear of missing out. That idea as
Speaker 1: well is quite prevalent. We've started to play with this
Speaker 1: concept of individuals feeling like they're missing out on the
Speaker 1: rewards that other people are experiencing, and that seems to
Speaker 1: be contributing also to individuals taking greater and greater risks
Speaker 1: and trading more problematically than they otherwise would. And so
Speaker 1: that would be you know, again, the sort of social
Speaker 1: aspect of it. You have you're doing it in public,
Speaker 1: and you're watching other people presumably either make or not
Speaker 1: make money, and and you kind of are judging your
Speaker 1: own um success or failure against that of others. Like
Speaker 1: that's got to have an effect on on the stickiness
Speaker 1: of the platform for certain people. Definitely. Yeah, And this
Speaker 1: is something I'm just thinking about in the midst of
Speaker 1: our conversation. Is the idea that is this social piece
Speaker 1: adding to individuals experience of FOMO. So it's amplifying their
Speaker 1: FOMO and that's what's contributing to their greater risk taking
Speaker 1: on the app um. So there there's definitely a role.
Speaker 1: There's definitely a cycle that I can I can see
Speaker 1: from a theoretical perspective. Um, and I'm not exactly sure
Speaker 1: what breaks that cycle. Yeah, And robin Hood says, so
Speaker 1: I'm just gonna quote there from their purpose. They say
Speaker 1: their purposes to democratize finance for all. We believe that
Speaker 1: everyone should have access to the financial markets. So we've
Speaker 1: built robin Hood from the ground up to make investing friendly, approachable,
Speaker 1: and understandable for newcomers and experts alike. And if you
Speaker 1: have a great purpose, and we think robin Hood's purpose
Speaker 1: sounds great, is you have to actually do it right.
Speaker 1: And one of the actions that they could take is
Speaker 1: do a better job of educating people. Are there other
Speaker 1: things that you think robin Hood could or should do
Speaker 1: to make the app align better with their purpose and
Speaker 1: and not be as potentially dangerous. I do. I think
Speaker 1: there's ways in which to have a cool off period
Speaker 1: if someone is trading quite erratically. Uh. Robin Hood has
Speaker 1: and just like any other brokerage out there, has access
Speaker 1: to a ton of data on their interesting and how
Speaker 1: they trade. And this has been something that actually I'm
Speaker 1: borrowing from the gambling literature. Right now, we have quite
Speaker 1: a few tech companies developing applications that can track how
Speaker 1: individuals are gambling, how many bets they're making per minute,
Speaker 1: are they escalating, are they acting in a very erratic way.
Speaker 1: Robin Hood has to be acting in good faith with
Speaker 1: regards to protecting its consumer versus protecting its business um
Speaker 1: and so that needs to be uh, something that needs
Speaker 1: to be drawn out. Binance actually supposedly I don't have
Speaker 1: a Binance account, but they have on their website a
Speaker 1: responsible trading platform, and they do have some of these
Speaker 1: pop ups that say, you know, we're seeing that you're
Speaker 1: elevating your risk, you're increasing your risk position. Uh, you're
Speaker 1: trading quite a radically, you're buying quite a bit. Maybe
Speaker 1: it's time to chill out, basically, to take a break. Uh.
Speaker 1: They do actually put holds on people's accounts. Uh, definitely,
Speaker 1: based upon whether or not they're over there, over extended exactly.
Speaker 1: And finance is a crypto platform, So let's talk about
Speaker 1: crypto because you can buy crypto now on the robin
Speaker 1: Hood app as well. Do you see investing in crypto
Speaker 1: as more similar to gambling than traditional investing since the
Speaker 1: value of cryptocurrency is in most cases based more on
Speaker 1: faith than on any kind of hard asset. Crypto does
Speaker 1: not have a fundamental asset. There's a lot of belief.
Speaker 1: The short answer is cryptocurrency trading is gambling. Is gambling? Right, Yeah,
Speaker 1: Just again, in the spirit of fairness, UM, we should
Speaker 1: point out that and I think you mentioned this earlier on,
Speaker 1: but I just want to make sure we get this
Speaker 1: on the record that to be fair to robin Hood,
Speaker 1: they have responded in at least one tangible way to
Speaker 1: the accusations that they are gamified. You know, before the
Speaker 1: I P O one, they replaced the confetti with some
Speaker 1: kind of new animation, and what they said about it
Speaker 1: was the confetti distracted from the goal of the app,
Speaker 1: which is to make regular people, everyday folks who have
Speaker 1: been kept out of the market feel like they can
Speaker 1: participate and feel like they're being positively reinforced for taking
Speaker 1: steps in their financial life. So, you know, people people
Speaker 1: noticed the confetti, people didn't like the confetti. They have
Speaker 1: addressed the confetti. How meaningful a change would you say
Speaker 1: that is you feel like that's enough? I would say
Speaker 1: that it is start to better serving their consumer, recognizing
Speaker 1: that it wasn't in the mission. It wasn't actually increasing
Speaker 1: or the democrazation. It was adding more maybe fun to it.
Speaker 1: I don't know how many people really cared about the confetti,
Speaker 1: um right, and so it hasn't changed much. I think
Speaker 1: when I'm looking at their statement to democratize finance for all,
Speaker 1: I would love if they also not just democratize it,
Speaker 1: but increase knowledge. Yes, And I think once you go
Speaker 1: down that road, you're starting to really protect consumers and
Speaker 1: you're starting to increase and democratize finance for everybody totally.
Speaker 1: And you made the point about the gamification of education.
Speaker 1: You could gamify that aspect of the app and make
Speaker 1: it so essentially to unlock different layers of features, you
Speaker 1: had to demonstrate certain levels of of knowledge. Right, essentially
Speaker 1: you have to take a quiz in order to unlock
Speaker 1: the options feature or the margin feature. Um, you would
Speaker 1: you that people would work at internalizing that information, remembering it,
Speaker 1: understanding it, and applying it. And uh, I completely agree.
Speaker 1: It would actually do a much better job of helping
Speaker 1: them achieve their their stated purpose, which is, you know,
Speaker 1: to my mind, a really good one. I think that's great.
Speaker 1: And I was also just thinking you why not you know,
Speaker 1: create something like a diversification quotient that a simple trader
Speaker 1: can look and say, well, how diversified am I? Oh look,
Speaker 1: here's a number up here. What does this number mean?
Speaker 1: Or what about a risk quotation? How risky have I
Speaker 1: been trading? How risky is my is my overall portfolio?
Speaker 1: How how open am I? That's one of the reasons
Speaker 1: why people join these brokerages is ordered to gain access
Speaker 1: to some of this information. And to your point, they've
Speaker 1: got tons of data. They have tons of data about
Speaker 1: people like you, and if it were an anonymised, right,
Speaker 1: they would they would know when you're showing signs of
Speaker 1: getting yourself in trouble and they should flag that to you. Um. Yeah,
Speaker 1: So it seems like there's much more that they could
Speaker 1: be doing as I as I really think about it, Um, Devin,
Speaker 1: we have a tool on the show we call the
Speaker 1: BS score, and what we're trying to do is measure
Speaker 1: the gap between word. Indeed, our scale goes from zero
Speaker 1: to one hundred, zero being the best, zero bs on
Speaker 1: being the worst. Total BS. So robin Hood says their
Speaker 1: purpose is to democratize finance for all and that they
Speaker 1: believe that everyone should have access to the finale financial markets.
Speaker 1: So they've built robin Hood from the ground up to
Speaker 1: make investing friendly, approachable, and understandable for newcomers and experts alike.
Speaker 1: What score would you give them? Um, I'm gonna give
Speaker 1: it a fifty five out of possible one. I look
Speaker 1: at their mission statement and I see that the democratization
Speaker 1: it really has nothing in their about necessarily keeping people
Speaker 1: safe from harm or educating people, trying to just make
Speaker 1: sure it's accessible, uh, and democratizing making sure everyone has
Speaker 1: access to these markets. It seems like that's something that
Speaker 1: robin Hood has accomplished, but that's not necessarily without some consequences.
Speaker 1: I want more from robin Hood. I think robin Hood
Speaker 1: could be a great company that really doesn't just open
Speaker 1: the doors, but also sits people down and says, here's
Speaker 1: how you can do this more effectively, here's how we
Speaker 1: can make you more effective in your trading. It's something
Speaker 1: that I think robin Hood could actually achieve um and
Speaker 1: be really fire its namesaked, really trying to build people up.
Speaker 1: So that's where I see it as it stands right now. Yeah,
Speaker 1: I love the thoughtfulness of that score. And I want
Speaker 1: to thank you for being being on the show and
Speaker 1: taking the time today. Thank you very much, Hi, It's
Speaker 1: been great, So to be fair. Gamification doesn't take away
Speaker 1: a person's free will or absolve them of responsibility for
Speaker 1: or decisions. But robin Hood still turns the stock market
Speaker 1: into a dangerous game, and given their business model, they
Speaker 1: don't have any incentive to change. The more I learned,
Speaker 1: the more concerned I am about the harm that robin
Speaker 1: Hood can do. But we're not here to just curse
Speaker 1: the darkness. It's important to light a few candles as well,
Speaker 1: so we'll get into some ideas to fix robin Hood
Speaker 1: right after the break, Folks, it is time to talk
Speaker 1: about actions that robin Hood could take to better do
Speaker 1: their purpose of democratizing finance for all joining me today,
Speaker 1: we have two extremely qualified experts. First up, I'm really
Speaker 1: excited to introduce Hailey Sacks. Hailey, thanks for joining us
Speaker 1: and welcome to calling bullshit. Thank you so much for
Speaker 1: having me. I'm excited to call bullshit and Haley for
Speaker 1: the listeners. Could you tell us a little bit about
Speaker 1: your background. Yes, So, I'm Haley, otherwise known as Mrs
Speaker 1: dow Jones, and I was the first financial influencer fantastic,
Speaker 1: and I want to introduce Charles road Blood. Charles, thank
Speaker 1: you for joining us today and tell us a little
Speaker 1: bit about your background as well. Sure, I'm a chartered
Speaker 1: financial analyst. I work with the American Association of Individual
Speaker 1: Investors AI and among the things I've created there as
Speaker 1: our prison wealth blooding processes is really about taking your
Speaker 1: goals and having those drive all of your savings and
Speaker 1: investing decisions. Okay, so let's jump right into some ideas. Charles,
Speaker 1: I'm gonna ask you to go first. In two months,
Speaker 1: or less. What's the one thing that you would change
Speaker 1: about robin Hood to better do their story? Well, I
Speaker 1: think they need to focus on long term investing, and
Speaker 1: given that they're an app based broker um, I think
Speaker 1: it'd be great if they could actually gamify the process
Speaker 1: of long term investing, give points or give rewards to
Speaker 1: people who set up automatic deposits, to people who pick
Speaker 1: an allocation and stick with it. And there's things they
Speaker 1: can do like great leaderboards. Uh, this person's increased their
Speaker 1: automatic contribution, this person has gone x days without looking
Speaker 1: at their portfolio balance, a little things like that which
Speaker 1: would really encourage people to think about investing for long
Speaker 1: term and most importantly gets them in the habit of
Speaker 1: not being reactive and not constantly wanting to trade and
Speaker 1: turn over their portfolios. Hmm. I think that's a really
Speaker 1: interesting idea. Haley, what do you think about that idea?
Speaker 1: I'm like enthusiastically nodding. You guys can't see because the podcast,
Speaker 1: but that's pretty much my dream app. Yeah. I guess
Speaker 1: the only question I have about that is is sort
Speaker 1: of um business model? Right? Because right now they make
Speaker 1: money using some and called payment for order flow, So
Speaker 1: the more you trade, the more money they make. Essentially,
Speaker 1: it would definitely be a seismic shift about the revenues
Speaker 1: come from payment for order flow and most of that
Speaker 1: from options and from crypto. So it would require a
Speaker 1: big shift and their business model. But I think it's
Speaker 1: questionable how sustainable their business model is right now, given
Speaker 1: that we're already saying trading volumes dropped because the market's
Speaker 1: been down. Yeah, I agree, it doesn't feel sustainable all right,
Speaker 1: So great idea. Thank you, Charles Haley, your turn. What's
Speaker 1: the one thing you would tell uh CEO of lad
Speaker 1: ten of to do differently to get robin Hood back
Speaker 1: on track. You mentioned at the beginning of this that
Speaker 1: robin Hood is here to make investing easy and democratize it,
Speaker 1: and it almost feels like right now they've given everyone
Speaker 1: the ingredients to cook with, but with no cookbook. And
Speaker 1: so I would really like to see them and force
Speaker 1: uh financial literacy course or some sort of quazz that
Speaker 1: you have to go through before you tread um, just
Speaker 1: to ensure that their users actually understand what they're doing.
Speaker 1: We all want to be intuitive cooks, we all want
Speaker 1: to be intuitive investors, but you know, rarely does it
Speaker 1: actually work out. Yeah, I hear that and and agree.
Speaker 1: So all right, it's it's my turn, and maybe not surprisingly,
Speaker 1: I am hunting in in similar ground with with my idea.
Speaker 1: You two are the experts, obviously, but you know, Robin
Speaker 1: Hood says their goal is to make investing friendly, approachable,
Speaker 1: and understandable, and my biggest beef with them is that
Speaker 1: they've made investing friendly and approachable, but they've done a
Speaker 1: pretty terrible job of making it understandable. So my idea
Speaker 1: is to de gamify the investing aspect and instead gamify
Speaker 1: the education part of the app and make it so
Speaker 1: I earned points for reading and passing quizzes to unlock
Speaker 1: functionality in the app, and don't just drop me in
Speaker 1: the deep end, right, make a point system that creates
Speaker 1: friendly competition among users and kind of encourages me to
Speaker 1: be the smartest and wisest investor, so, you know, hopefully
Speaker 1: making learning to invest well both social and interesting. Part
Speaker 1: of the education could also explain the business model to people,
Speaker 1: which right now is you know, currently buried in the
Speaker 1: terms of service, so people actually understand that there's no
Speaker 1: such thing as free, that that that that actually the
Speaker 1: app because of its business model is encouraging them to
Speaker 1: do things that are not necessarily good for them as investors.
Speaker 1: I actually don't mind if they keep the ability for
Speaker 1: people to invest like willie nilly, as long as it's
Speaker 1: just really clear. But I don't need them to h
Speaker 1: to change their business model, like I want them to
Speaker 1: add to it. And then if you choose not to
Speaker 1: do that, like you said that, it's like very clear
Speaker 1: in Layman's terms. Okay, here are the risk that you're taking. Yeah,
Speaker 1: it just seems like transparency. Yeah, right, So I just
Speaker 1: want to add I get curious. I sent up for
Speaker 1: Robin Hood, I guess earlier this year last year, and
Speaker 1: I got approved the trade options probably within five minutes.
Speaker 1: And I understand options, but they had no idea who
Speaker 1: I was. And you know, if I was a novice
Speaker 1: and more talking about education, I would have no idea
Speaker 1: how deep will pull I'm walking into blindfolded. And I
Speaker 1: think people are signing up and during social media or something,
Speaker 1: they think, oh, let me go buy options on game Stop,
Speaker 1: not having any understanding of what exactly it is they're buying,
Speaker 1: much less the risk involved. Yeah, I was I was
Speaker 1: reading uh just this morning, just to to you know,
Speaker 1: kind of refresh my memory about the young man who
Speaker 1: he was trading options and um, the app told him
Speaker 1: that he owed seven thirty thou dollars at the end
Speaker 1: of some trade, and and in in a note that
Speaker 1: he sent to his parents, he pointed out that he
Speaker 1: didn't have a clue how to you know, trade options
Speaker 1: or what that actually even meant. And so in some
Speaker 1: cases the results are are literally deadly. Yeah, it's extremely
Speaker 1: a risk, especially when you start talking about margin debt.
Speaker 1: That's where people can really lose a lot of money
Speaker 1: versus that they just you just use a cash account,
Speaker 1: then whatever is in any account, if that's gone, that's got,
Speaker 1: that's gone, it's gone, right. But this case, you're basically
Speaker 1: gambling on a credit card. And I think it's difficult
Speaker 1: because people think, oh, well, this is going to be
Speaker 1: the trade that gets me out, and so then they
Speaker 1: keep trying and trying. And I mean it's a tale
Speaker 1: as old as time. Um that that makes me wonder.
Speaker 1: I'd love to hear what both of you to about
Speaker 1: about crypto. Like crypto in particular feels like it's in,
Speaker 1: like it's out at the edge of speculative um for
Speaker 1: for investors how do you view that space. I think
Speaker 1: that it's okay to be excited about cryptot to think
Speaker 1: it's cool, But that doesn't mean that you have to
Speaker 1: like make bitcoin your whole personality. Don't go all in Charles,
Speaker 1: what's you're taking. I think the blockchain technology has a
Speaker 1: lot of interesting a lot of upside, But I think
Speaker 1: it's important to separate crypto from blockchain, and crypto itself
Speaker 1: is a currency. I still can't go in my local
Speaker 1: grocery store with bitcoin or ethere um and buy a
Speaker 1: loaf of bread, and so there's a huge network effect
Speaker 1: that crypto has to overcome. But whereas you look at blockchain,
Speaker 1: we see JP Morgan's actually working with it too, spirit transactions.
Speaker 1: There are a few other areas that I'd love to
Speaker 1: explore with you, but I wanted to start out with
Speaker 1: something that's Scott gallow Way said he said some funny
Speaker 1: and mean things about about Robin Hood. Yeah. One thing
Speaker 1: he said is I believe these guys are mendacious. Fox.
Speaker 1: The company's mission to democratize finance for all is similar
Speaker 1: to Pablo Escobar saying his mission was to democratize cocaine
Speaker 1: um and and you know, humor aside. This idea that
Speaker 1: he's poking at, that that democratizing something is automatically good
Speaker 1: is deeply questionable. I would say, yeah it is. And
Speaker 1: I'll make an analogy here. I'm running at the Chicago Marathon,
Speaker 1: and my time will be against some of the best
Speaker 1: marathon runners in the world, and obviously my time will
Speaker 1: be much slower, but that doesn't harm me. Why walk
Speaker 1: in the wall street. I'm taking my knowledge against everybody
Speaker 1: else involved, and there's a bunch of very skilled people
Speaker 1: with a lot more data and a lot more speed,
Speaker 1: uh the average individual investor, And so individual investors really
Speaker 1: have to play that long term discipline game to have
Speaker 1: an advantage. But Robin Hood encourages this fast trading, this
Speaker 1: concert turnover, which is exactly the wrong thing an individual
Speaker 1: investor should do. Yeah, I mean, that's it's a very
Speaker 1: interesting point. There are not a lot of situations where
Speaker 1: to use another sort of sports analogy, like where you
Speaker 1: play against professionals right out of the gate. You know,
Speaker 1: in football, there's peewee football, and then there's grade school
Speaker 1: football and high school football and college football, and then
Speaker 1: there's the NFL. But in investing, like they tell you
Speaker 1: to strap on a helmet and you're playing against NFL
Speaker 1: players right out of the gate, playing against professionals. But
Speaker 1: like in golf you would have the handicap. In investing,
Speaker 1: you can also have a handicap. It's called not picking
Speaker 1: individual stocks, right, Yeah, And I think a lot of
Speaker 1: people don't really know that. So just another another area
Speaker 1: of inquiry, you know, robin hood is is racking up,
Speaker 1: you know, a bunch of data about each individual user.
Speaker 1: One other idea that occurred to me was just what
Speaker 1: if the app told me what my risk profile was
Speaker 1: as an investor, right and and told me literally you're
Speaker 1: in the red, or you're in the yellow, or you're
Speaker 1: in the green in terms of the risk that you're
Speaker 1: taking based on your investing behavior. Robin Hood could reach out.
Speaker 1: There's these behavioral sciences, whether it's Richard Taylor who won
Speaker 1: the Nobel Prize, marriage statman, Robert Schiller. Um, I'm sure
Speaker 1: they would have some great ideas about how to use
Speaker 1: the data to actually create a more sustainable, better app.
Speaker 1: But again it's a shift in business models to shift
Speaker 1: in thinking. Uh where you know, robin Hood, despite what
Speaker 1: they say, uh, they're all really is to maximize profits
Speaker 1: and not worry about what they're breaking. Um. And it
Speaker 1: is that culture of let's not worry what we break. Uh,
Speaker 1: that can cause a lot of damage. Do other of
Speaker 1: you have any thoughts on the name Robin Hood? You know,
Speaker 1: Robin Hood's namesake was a thief with a twist. He
Speaker 1: stole from the rich and gave to the poor. Does
Speaker 1: the Robin Hood app live up to that story? I'd
Speaker 1: say it's the opposite. And you just look at their
Speaker 1: SEC documents. Um. I mean they're primary source of revenue
Speaker 1: is running orders through market makers, so they're taking the
Speaker 1: orders placed by small investors and out of every trade,
Speaker 1: they're directing it to specific market makers versus trying to
Speaker 1: seek the absolute best execution price. And the investors training
Speaker 1: Robin Hood's platform are paying for that, so they're not
Speaker 1: they're doing exact opposite. Yeah. Yeah, that's a little dark.
Speaker 1: Actually it's GDS. Obviously it's so misleading from a marketing perspective.
Speaker 1: I'm like, well done, Sadly, somebody somebody smart. Yeah, I
Speaker 1: could say Mr Burns in the background. Excellent, Yes, it's excellent. Um,
Speaker 1: you both are extremely knowledgeable investors and you've both touched
Speaker 1: on this a little bit, but I'd love for you
Speaker 1: to both just off the tops of your heads, what
Speaker 1: is a responsible smart way for a for an inexperienced
Speaker 1: investor to enter the investing game, um, in a way
Speaker 1: that gives them the best chance of of Actually, you know,
Speaker 1: I don't even know whether it's winning the game, but
Speaker 1: but doing well not getting hurt. Okay, go, I'll go first. UM.
Speaker 1: I would say, someone who's working at a company offers
Speaker 1: a four oh one k, set it up, UM. If
Speaker 1: you don't really have strong knowledge of allocation chances are
Speaker 1: the default allocations a target date fun. They're very good
Speaker 1: default option if you don't know what you're doing, And
Speaker 1: every year increase how much you're contributing, even it's just
Speaker 1: ten more, keep increasing it, keep saving as much as
Speaker 1: you can, UM. And then I'll pass along the advice
Speaker 1: Jack Bobe gave to me once, don't look at your
Speaker 1: account for thirty or forty years. And then when you do,
Speaker 1: have a doctor on call, because you might faint when
Speaker 1: you see how big the balance is. That's great, love it, Okay, Hayley.
Speaker 1: I agree. I think like starting with your four O
Speaker 1: onek matches obviously the best way to have a guaranteed
Speaker 1: two hundred as to return UM on your investment. I
Speaker 1: also think that what's really important for beginner investors is
Speaker 1: to know why they're investing, because it's obviously a sacrifice.
Speaker 1: We would love to all, like, you know, just spend, spend, spend, spend, spend.
Speaker 1: I love spending money. It's very fun. You should try it.
Speaker 1: But but knowing knowing why I'm not having a story
Speaker 1: in my mind, a clear idea of why I can't
Speaker 1: do something makes it a lot easier UM and sort
Speaker 1: of gets you aligned with yourself. I think in a
Speaker 1: really powerful way. M hm. And I think for someone
Speaker 1: starting out, just that's what your goals are. List what
Speaker 1: you're going to allocate to and list how much you're
Speaker 1: gonna save. You can use your notes app on your phone,
Speaker 1: and that simple process holds you more accountable, but it
Speaker 1: also gives you that clarity, so you're not trying to
Speaker 1: keep it all on your head, and whenever you're nervous,
Speaker 1: you can always go back to those RT notes. Oh
Speaker 1: I'm saving for vacation, I'm saving for retirement. Just being
Speaker 1: able to look at that and have that reminder when
Speaker 1: the market is really volatile, here's a big picture. It
Speaker 1: keeps you focused and it keeps you more disciplined. Right, alright,
Speaker 1: So are there any questions or topics that we haven't
Speaker 1: touched on that you think users of robin hood should
Speaker 1: know about? You know, I think the idea that robin
Speaker 1: Hood is going to make it easy for people to
Speaker 1: invest really doesn't make it easy because yes, commissions are waived,
Speaker 1: but then you still have to decide what to invest in,
Speaker 1: and just you know, not having that guidance and thinking
Speaker 1: people are gonna walk in and know exactly what they're
Speaker 1: gonna do, it just doesn't work. I would say that
Speaker 1: like investing should be really boring, um, and that like
Speaker 1: if you're getting your thrills from your portfolio and from
Speaker 1: your trades, and like you need new thrills and getting
Speaker 1: rich quick, Like if it seems too good to be true,
Speaker 1: it's probably too good to be true. And like, trust me,
Speaker 1: if you're hearing about it on like Twitter and the news,
Speaker 1: you're too late. Yes, Like the people who are actually
Speaker 1: having the crazy returns are so freaking early on this stuff,
Speaker 1: Like honey, you would know and if that was your
Speaker 1: like d n A and that's not me, that's not
Speaker 1: most people. So get real with your bad self, right.
Speaker 1: I just want to put hi saying. I think if
Speaker 1: you really had deserves to speculate, then segment your portfolio.
Speaker 1: Maybe not a person of portfolio is long term conservative,
Speaker 1: and then you have the small portion and whatever that
Speaker 1: small portion is realized. This is money that you're prepared
Speaker 1: to lose uma and if you lucky with it, great,
Speaker 1: Um you know, but if you don't, at least you're
Speaker 1: not harming yourselves. Yeah, that's that's great advice. It acknowledges
Speaker 1: human nature. We all like to you know, throw caution
Speaker 1: the windicationally, but if as so long as you're not
Speaker 1: betting the farm. So to wrap up, uh, we have
Speaker 1: a tool on this show that we call the BS scale.
Speaker 1: Zero is the best meaning zero BS and on is
Speaker 1: the worst total BS. So on that scale, what score
Speaker 1: would you both? Uh you to Robin Hood Hayley. Um,
Speaker 1: why don't you go first? Oh? Um? Well it's hard
Speaker 1: because like they are letting you it's not like they're
Speaker 1: like not letting you trade. So it's like they're not
Speaker 1: fully bullshit because they are doing what they say that
Speaker 1: they do. They're just like withholding information and uh, you know,
Speaker 1: profiting from compulsion, so I would say like sixty three. Yeah, Charles,
Speaker 1: you know I was gonna go a little bit higher.
Speaker 1: I'm gonna go probably, And I will say the reason
Speaker 1: I'm not even higher is I do think one thing
Speaker 1: they did do was they got the major brokerages to
Speaker 1: get the commissions down to zero. And while we can
Speaker 1: talk about paying for order flow, if you're an investor
Speaker 1: and you're making paycheck related contributions to your IRA or
Speaker 1: your roth IRA, UM, that's huge. Where maybe you're putting
Speaker 1: in fifty. I think if you average it out of
Speaker 1: page text, I think the limit for i RAS is
Speaker 1: like two a paycheck to be able to invest at
Speaker 1: two at no cost every pay period. Um, that's actually
Speaker 1: a big benefit, and I'll give Robin Hood credit for
Speaker 1: bringing that about. Unfortunately, they also unleashed a weapon of
Speaker 1: mass financial destruction with our gamifications. So that's why the
Speaker 1: Bullshop meter is rather high. Yeah, that resonates, and um,
Speaker 1: I think that's the that's the highest score that anyone
Speaker 1: has given them. But I follow your reasoning. So this
Speaker 1: was a great conversation. Charles and Haley. I want to
Speaker 1: thank you both for being on the show. Thank you
Speaker 1: thank you. Happy to invite it, folks, it is time
Speaker 1: to give robin Hood their official BS score. The key
Speaker 1: takeaway from me here is free is never really free.
Speaker 1: Free always comes at a price, and in this case,
Speaker 1: the price is being tossed into the deep end before
Speaker 1: you even know how to swim. Robin Hood is good
Speaker 1: at fooling unsuspecting newcomers into thinking investing is free and easy.
Speaker 1: It's free, but it ain't easy. You have almost immediate
Speaker 1: access to some very dangerous tools, and you're asked to
Speaker 1: compete against career professionals. You wouldn't let a teenager who
Speaker 1: had never touched a football play in the NFL, but
Speaker 1: that's what Robin Hood does with inexperienced investors every day.
Speaker 1: So I'm giving robin Hood a BS score of seventy.
Speaker 1: They've accomplished the democratization piece of their mission, and the
Speaker 1: app is certainly user friendly, but they have a long
Speaker 1: way to go to make investing more understandable. If they
Speaker 1: leaned into education by gamifying learning instead of trading, they
Speaker 1: might really be onto something. And Robin Hood, CEO of
Speaker 1: lad Tene, if you'd ever like to come on the
Speaker 1: show to discuss anything that we've talked about today. Please
Speaker 1: know that you have an open invitation if you're thinking
Speaker 1: about starting a purpose led business or beginning the journey
Speaker 1: of transformation to become one. Here are three things you
Speaker 1: should take away from this episode. One, language matters. Every
Speaker 1: word that robin Hood chose in their purpose should be
Speaker 1: there for a reason, and it should drive action. Democratize
Speaker 1: finance for all check. They do this by making it free.
Speaker 1: Make investing friendly, approachable, and understandable for newcomers and experts alike.
Speaker 1: Friendly and approachable, check and check understandable Nope, And when
Speaker 1: you're dealing with money, failing to make it understandable is dangerous.
Speaker 1: Choose every word in your purpose with care and make
Speaker 1: sure that you're prepared to back them up with action. Two,
Speaker 1: your purpose and your business model have to be aligned.
Speaker 1: Robin Hoods are aren't Trading on robin Hood is free,
Speaker 1: but free is not free. Their actual business model is
Speaker 1: to make money off of every trade you make through
Speaker 1: market makers. Trading too often is a bad habit, especially
Speaker 1: for beginners, but if you don't trade a lot, robin
Speaker 1: Hood doesn't make any money. That's why they gamify the
Speaker 1: experience to encourage you to trade. Worse, they don't explain
Speaker 1: that to you anywhere except in the terms of service.
Speaker 1: Make sure in your business your purpose aligns with the
Speaker 1: way that you make money. And three, be transparent. Like
Speaker 1: a lot of technology businesses today, robin Hood hides the
Speaker 1: questionable aspects of their business in their terms of service.
Speaker 1: That's just shitty and it makes people hate you. If
Speaker 1: you're feeling sheepish about some aspect of your business, first
Speaker 1: consider changing it, or at the very least, be really
Speaker 1: upfront about the way your product works, how you make money,
Speaker 1: and what users can and cannot expect from you. I
Speaker 1: want to thank our guests today, Devin Mills, Hailey Sacks,
Speaker 1: and Charles rope Blott. To learn more about how to
Speaker 1: invest wisely, check out the American Association of Individual Investors
Speaker 1: website at a A I I dot com or have
Speaker 1: a look at Hailey Sacks a k A Mrs dow
Speaker 1: Jones investment course. And a big thank you to James
Speaker 1: Royal for providing invaluable context for payment for order flow
Speaker 1: and other aspects of the robin Hood business model. And
Speaker 1: if you found this show worth investing in, subscribe to
Speaker 1: the Calling Bullshit podcast on the I Heart radio, app,
Speaker 1: Apple podcasts, or wherever you listen to people speaking to
Speaker 1: your ears. We'll be taking a break next week, but
Speaker 1: we'll be right back in your feed on November. Thanks
Speaker 1: to our production team Hannah Beal, Amanda Ginsburg, d S. Moss, Hailey, Pascalites,
Speaker 1: Parker Silzer, and Basil Soaper. Calling Bullshit was created by
Speaker 1: co Collective and it's toasted by me Time Montague. Thanks
Speaker 1: for listening.