Why the Wall Street Elite Hate Robinhood (NASDAQ: HOOD)
Robinhood (NASDAQ: HOOD) went public last week.
It was the worst debut ever for an IPO of its size.
Those who despise Robinhood took great joy in its failure of a debut. Of course, many of those who hate on Robinhood are the Wall Street elite and regulatory henchmen who don’t want “regular people” getting access to the same trough of gambling chips that they’ve had for decades.
Don’t get me wrong. Robinhood, as its name suggests, is not some bastion of liberation for the “have-nots.” The fact that Robinhood restricted trading after a couple meme stocks went berserk shows that those who pull the strings over there are not altruistic types. In other words, when things get too hot, the big hedge funds and institutional money will always call the shots.
Still, Robinhood has changed the game by essentially gamifying investing and trading.
As someone who’s worked in the world of finance for nearly 30 years, I am no fan of this kind of gamification, as it trivializes the risk that comes with investing. Some regulators have even gone so far as to call Robinhood’s platform a gambling platform. But really, isn’t that what investing is anyway for most people?
Sure, if you’re on the inside, your risk is always limited. Make no mistake: Institutional money doesn’t typically lose because it knows what’s going to happen before the rest of the retail investment world.
But if you’re just a regular retail investor with a few bucks to invest, the truth is, when you invest in a stock, you’re gambling. You’re making a bet on something that may or may not pan out, oftentimes due to things you have no control over. Certainly the fallout from COVID is a perfect example.
Sure, you may do your due diligence and think you know everything there is to know about the company in which you’re investing. But what you don’t know is what’s going on during closed-door meetings. You don’t know if there are shorts gearing up to launch an attack. You don’t know if a pandemic is going to hit and fuck everything up or if a terrorist attack is going to hit an oil pipeline or if the cost of food is going to skyrocket because of droughts or floods.
Of course, your odds of making money on a stock are likely better than your odds of winning at blackjack in Vegas. But every single time you make an investment, you are taking a risk. That’s just how it is.
So if a bunch of millennials want to take a risk on meme stocks or whatever kind of shady algorithm is telling these folks to buy or sell a stock, why does anyone care? If they spent a thousand bucks on lottery tickets every year, no one would care.
The bottom line is that, love it or hate it, Robinhood figured out how to make money by helping less sophisticated investors play the stock market. And while I’m sure plenty of people have lost a lot of money on the Robinhood platform, there are also plenty who have made money.
So yeah, I don’t buy for one second that regulators or old-school Wall Street types give a shit about these folks putting themselves in a situation where they’re risking their hard-earned money. They just don’t like these people coming in and inadvertently creating obstacles to those who have been gaming the system for decades. Sure, it’s fine for them to do it, but when Robinhood wants to give other people the opportunity to try to game the system, it’s a problem.
Now, I have no idea how this stock will perform going forward. And while I have no intention of buying it or even using the platform, I actually hope Robinhood continues to help a new generation of investors try to make some coin too, albeit in a very unconventional way.
Not only does it help those folks who weren’t born into money get a shot at making some, but it’s a giant "fuck you" to a system that has long benefited from making sure that you never get an invite to the party.
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