Kid is born with an entrepreneurial brain. His father is an engineer and thus the apple does not fall too far from the tree. He goes to school, while during his off hours doing just enough homework to pass his classes that he finds easy, he messes around in his father's workshop making gadgets. He goes to college but soon leaves to start a new business venture with another motivated classmate. He makes new gadgets to sell, and eventually after working his ass off, start turning a profit and grow a successful business. He makes a good living and creates jobs for others that can make a good living. This is the cycle and benefit of the productive economy.
Fast forward. The same upbringing and history, but the kid notes that making gadgets to sell has become much more challenging and less rewarding. The US has shed its manufacturing base and all the related economic infrastructure. American corporations have trained China and China has taken over the gadget-making economy. Meanwhile the US has layered taxes, regulations and restrictions on productive business seemingly bent on reducing the productive economy. The kid notes that his smart classmates are either pursuing tech careers or careers in investment finance... the rent-seeking, looting and gambling economy. The kid really likes problem-solving and games and becomes hooked in career as a stock trader. But he is feeding off the existing productive economy... which is in decline. He is not making new jobs; he is in fact working in an industry that cuts jobs with a goal of corporate primacy and profit maximization.
A system that encourages and rewards rent seeking, looting and gambling instead of productivity is a system in trajectory for collapse because it feeds off what has already been produced. Our smart people are playing virtual games instead of inventing, making, building, growing, fixing and selling real tangible products that people need and want. Eventually the cupboard will be empty and there will be nothing left to trade on.
Privately run lotteries were banned but States get to offer lottery bad bets "for education." States also get to tax tobacco after big settlements to not allow actual victims to sue for damages. Robinhood may have to pay politicians to look the other way as the little guy once again takes it in the shorts (pun unintentional).
In a sense, Robinhood is just another social media site, replete with dopamine hits. For many of these “players”, the psychological ramifications will outweigh the financial ones.
I say this as someone who uses Robinhood to manage quite a bit of money, though in a boring “hold index funds” sort of way. The platform is a massive improvement over older players like Fidelity and especially Vanguard, whose customer service should have Jack Bogle rolling in his grave.
Going back to the Freudian model of the human psyche, where it sits on a spectrum of Id/Ego/Superego.....the Id being inborn human drives and appetites without any breaks -- persons without a developed Ego giving them homeostasis in life are going to be sucked bigtime into the hyper-Id. Which manifests as gambling addiction, amongst many other possible variants.
Gambling businesses simply take advantage of this. Low-Ego humans do love that dopamine hit.
Interesting. I find Schwab perfectly fine, especially for index funds, but I’ve never used the Fidelity or Vanguard site. What’s especially good about Robinhood’s platform?
Schwab is okay but it can be a bit tedious. Robinhood is just simpler and provides a far better UX. I “actively” trade (eg buy some stuff every 2 weeks when I get paid) on both.
One example — Robinhood has a high yield cash sweep vehicle by default with a gold account.
With Schwab, you have to call and request your sweep be changed to SWVXX or manually buy it on the computer. You can’t buy it on either of their apps.
Another example, understanding my dividend income is far simpler on Robinhood. I get an email, a push notification, and I can go to the security and see the payments and reinvestment. With Schwab, I have to filter a list of activity, far more friction.
I’ve been trading on Robinhood for a few years now, but I’m in my 60s. I research stocks on a particular site where I have a paid membership, and if I see a winner (in my eye) I’ll put down some money.
I’m up quite a bit, but I also own precious metals as a hedge. Young people don’t think like that.
Robin Hood fairly aggressively markets options trading to start, but I haven’t seen much of that directed at me in a number of months. It is designed like a slot machine and the phone app is incredibly easy to use for trading, but there is no barrier to entry aside from a few simple steps that most any somewhat intelligent person can follow.
Unfortunately you are leaving important pieces out of this discussion. These apps HAVE democratized investing. It wasn't that long ago that you needed to go through gatekeepers, whether mutual funds, financial advisers, etc. (which always win with their cut, even if they manage your money terribly) Now you can directly own assets. This matters now more than ever in an inflationary environment where the federal government is doing everything it can to make people poorer - UNLESS you own assets. People who own assets benefit from inflation; people that do not suffer more. The more exposure to assets regular people can get, the better off they will be in the future. Ideally the federal government would just turn off the money printer (ha) but for THIS world, the real world, everyone will need to know how to invest to survive in the future.
Finance involves risk. Starting a business involves risk. Gambling involves risk. Most people start by naively thinking they can get rich quick. Some will become addicts, sure, but that's always been the case. But many of those people will lose money and learn from it. They'll realize that very few people are successful as active investors and most will eventually realize that the path to wealth is long term holding of high quality assets. They'll gamble less when they see they make more money by simply HODLing. Through this journey, as I have gone on myself, I've learned a LOT more about how the world and economy works, about how value is created, and all the psychological training that comes with taking risks and learning to find asymmetrical bets that make me feel less stressed about my positions. Your negative view of Robinhood is like thinking it wouldn't be good for teenage hearts and arms to be broken, that there isn't a necessary step on a developmental path there.
Prediction markets: I think this could be one of the best things to ever to happen to civilization. I say that prediction markets are where ideologies go to die. This couldn't come at a better time in our society, where ungrounded delusions increasingly take hold. I would love a world where people post not just their belief in something but what they are willing to stake financially on that belief - this will separate the wheat from the chaff. "Put your money where your mouth is". The worst thing about social media is zero cost statements and belief systems, whereas in the past in social groups, there would be some cost to sputtering insane nonsense. I'd like to see a world where Gavin Newsom has to put $10M of his own money on a prediction market claiming homelessness will go DOWN from his policies. He would never do it, the grift would be over. And that would be very good information for a voter to know - he's not willing to stake anything personal on his beliefs or policies. Because he's a serial liar. The reason prediction markets are so much better than journalism or "polling" is because people don't lie when they have a stake in the outcome. The power and usefulness of this socially is at present vastly underestimated.
Retirement accounts: In the past, talk about grift! There is nothing better for the consumer than individuals to have control over their retirement accounts, private or public. Even better would be to abolish social security entirely and put complete financial control in the hands of the consumer which would vastly outcompete the social security fund performance by merely dropping their money in an index fund and never looking at it for 40 years. David Friedberg does a great analysis of this.
If I imagine a world where the financial markets are gate kept by the wealthy who take a big cut of every retail portfolio as in the past, or a world where finger wagging Elizabeth Warrens do everything to "protect" all the Americans she believes are too stupid to know what is in their own best interest; or a world where INDIVIDUALS HAVE FREEDOM OVER THEIR FINANCIAL LIVES, some of whom will make terribly stupid mistakes and spend their kids college fund on a lark on some sports bet, but many of whom will turn out far better than being financial minions of elites and government bureaucrats - I'd prefer the latter. If you were to talk to some retail investors that have gone on this journey themselves, you'd see this is one of the first times in history where regular people can actually become wealthy using the same systems that were formerly reserved for elites. I could certainly recommend some people to interview that would give you a much more balanced and accurate perspective on these issues, from a retail investor perspective. I dashed this off in just a few minutes off the top of my head, this information is not hard to find.
Not to be a jerk but you would not be saying this if the Federal Reserve had not been printing money like mad, inflating “markets”. The majority of “profits” are just monetary inflation. I don’t hate the players for playing the game, but do understand the game. If and when the music stops, a lot of real people are going to get hurt. Many more in the meantime.
I completely agree - the monetary system is broken. But in that broken system it’s better for the underclasses to have access to appreciating/inflationary assets than not.
As in many evaluations of risk, the lion's share of the article is spent on all the awful things that could happen when things go wrong. One must never forget to also evaluate the case where things go right. Thank you for filling in this blank.
I remember buying my first stock from etrade back in like 2002. Etrade wasn't new at the time. Lots of old school brokers allowed people to open accounts and buy whatever stocks they wanted to either from a website or automated telephone system.
By the time Robinhood came around the wall from the gatekeepers was already a relic of distant memory.
Sure, there are downsides to all investing. I myself use Robinhood and have traded options and crypto and even the prediction markets. I’m not the guy getting up at 6am to place bets on whether the market will go up or down 1%. I am an accredited investor so if I wanted to day trade I could but anyone who has said they are successful doing that is small. Investing isn’t easy and any real investor knows you don’t put all your eggs in one basket and never invest if you can’t afford to lose it. There is a downside to just about everything in life and investing involves risk but you can mitigate that risk by researching the companies you wish to put money into. Leverage investing is foolish. I like Robinhood because I have the control over my money. I don’t have a broker who I’d have to give fiduciary control over my account and the license to steal my money. It happens all the time. I’d rather trust myself. There are no get rich quick ways to make money.
Exactly. I'm quite poor, yet I've twice turned a 10 or 20 dollar option into over $1000, and have probably only lost $200~ or less on the ones that didn't hit. I just don't get carried away, I go for the ones I really believe in. (The first was a Brazilian index after Bolsanaro won his election, and the other was CleanSpark right before Bitcoin and the market plummtted in early November)
While all this may be true, the fact that RobinHood helped give douche bag short sellers a really bad case of ass-ache means it gets a little relief from me.
Trump called Wall Street, the biggest casino in the world which is about right although the city of London might disagree. Basically it allows the clever people to make money without working or creating wealth. Capitalism May have started out as a better alternative to the existing systems but now it's mostly just glorified gambling producing nothing and living off those who who do produce wealth or provide useful services. It takes a lot of indoctrination to get the population of workers to accept the minority of the parasite class living off them from around the world.
I gotta be honest, I don't see how this is any more of a casino than the regular stock market. Should only the rich be allowed to gamble because they know the government will hold a gun to the taxpayers' collective heads to cover their bad bets?
The rich dont gamble like this. Most of their wealth growth is in long term stock portfolios, physical assets like real estate, coins, art, precious metals, and so on. Sure they give money to brokers to play around with but they really do the boring stuff most of the time. People know about 10 year plans but throw them out at the next 25 dollars they can waste on an instant hit. Investing like a truly financially indpendent person is awfully boring, hence why these platforms nickel and dime the working class into poverty. Anyone who is working who complains about cost of living needs to add up gambling, trading, vaping, energy drinks, weed, takeout orders, designer coffees, and booze for their last 30 days. Those are the biggest leaks out there and are why people cant afford things.
Please do understand that the big players will be backstopped as the little people lose their shirts. That is the larger point here. The sheep will be fleeced if they allow it.
The answer is the time scale. Average hold time has dropped like a brick (or a bear market?) in the years since online trading, never mind easy game-like online trading, has become popular. Investors should be thinking in decades, not quarters or weeks or hours. Average holding time for a stock has dropped from 5 years to less than 6 months in the last decade or so. Do your research up front, then set it and forget it. Check every year or two. (Not that I actually do what I'm advocating, of course...)
It sounds like mixing it up with crypto and unrestricted options trading is more likely to turn it into a dopamine hit than dealing with a staid conventional brokerage that imposes some restrictions on whether you can do even relatively rational things like puts and calls. One could certainly do day-trading on Schwab, but the platform is not set up to encourage it, let alone to entice you to it.
I'm not against any of these financial instruments per se, but I think they're a sign of deep societal sickness. I suspect that many people get hooked because they're desperate and see no other hope to live a decent life without making some kind of outsized win via betting.
When parasites get too greedy they cause a health crisis in the host, as we saw in 2008.
I found a dead jackrabbit once whose ears were completely encrusted with ticks. They didn't kill the jackrabbit, but neither were they helping it to thrive.
I’d love to see where the bulk of active traders live and would not be too surprised if it disproportionately overlaps with States that legalized dope.
I am reminded of the old saying that it is hard to make things foolproof because fools are so ingenious. And also reminded of the comment attributed to JM Keynes, that the market can be irrational for longer than you have capital. There is a group of people who are very susceptible to gambling enough so as to be labelled gambling addicts. Such markets as here at least have the feature that on average, standard long market bets have a positive expected value. Whether some of the more complex bets do or not depends on those specific bets and their structure. This is as the author notes not a game to be played lightly without proper training and without serious discipline. But people can't be free unless they are also free to fail. I once had a shirt-tail relative explain to me how his "system" for picking stocks was an almost guaranteed winner and how I, with all my training and experience, was stupid. I tried to explain rationally where the flaws were in his "system'. He was both certain & arrogant in his ignorance. After about a 6 month run in which he did quite well, he got creamed in a very slight market change of direction. He doubled down and was almost wiped out. I never heard about his "system" again. As long as Robinhood are disclosing adequately (they may be skirting the edges here but there's no need to; there are plenty of fools), they are as the author notes not doing anything illegal. Immoral perhaps but not illegal.
I don’t understand why the CFTC hasn’t put an end to the sports betting loophole. I live in Texas where online gambling is illegal, but I can open the Kalshi app and bet on the Chargers Cowboys game that’s on right now.
The way in which gambling has proliferated all layers of society and become normalized for all age groups is one of the most troubling issues I see in our world today. It is the sort of thing that feels Biblical in nature in terms of the severity of the rot and the catastrophic results it will yield.
Live-service video games start children off by giving them the casino experience on their parents' dime. Teenagers and young adults evolve into Polymarket fanatics, throwing their disposable income at anything and everything that can be bet upon. And as we grow older, we find refuge in the arms of sports betting, tear-off tickets, the slot machine at the laundromat (!!!) and good old-fashioned casinos.
There is something to be said for moderation and I wouldn't try to tell a person they are not allowed to gamble with their own money. But the way in which gambling has crept its way into all aspects of our lives feels reckless at best and like a psychologist's painstakingly-designed business model at worst.
We simply are not equipped as a society to resist these things.
Thank you so much for this article. I learned so much. I have maybe a quarter of one share of one stock on Robinhood and have not gone any further down that rabbit for the fear of what you just wrote about happening to me. I will leave my gambling to my once a week lotto ticket.
Kid is born with an entrepreneurial brain. His father is an engineer and thus the apple does not fall too far from the tree. He goes to school, while during his off hours doing just enough homework to pass his classes that he finds easy, he messes around in his father's workshop making gadgets. He goes to college but soon leaves to start a new business venture with another motivated classmate. He makes new gadgets to sell, and eventually after working his ass off, start turning a profit and grow a successful business. He makes a good living and creates jobs for others that can make a good living. This is the cycle and benefit of the productive economy.
Fast forward. The same upbringing and history, but the kid notes that making gadgets to sell has become much more challenging and less rewarding. The US has shed its manufacturing base and all the related economic infrastructure. American corporations have trained China and China has taken over the gadget-making economy. Meanwhile the US has layered taxes, regulations and restrictions on productive business seemingly bent on reducing the productive economy. The kid notes that his smart classmates are either pursuing tech careers or careers in investment finance... the rent-seeking, looting and gambling economy. The kid really likes problem-solving and games and becomes hooked in career as a stock trader. But he is feeding off the existing productive economy... which is in decline. He is not making new jobs; he is in fact working in an industry that cuts jobs with a goal of corporate primacy and profit maximization.
A system that encourages and rewards rent seeking, looting and gambling instead of productivity is a system in trajectory for collapse because it feeds off what has already been produced. Our smart people are playing virtual games instead of inventing, making, building, growing, fixing and selling real tangible products that people need and want. Eventually the cupboard will be empty and there will be nothing left to trade on.
Privately run lotteries were banned but States get to offer lottery bad bets "for education." States also get to tax tobacco after big settlements to not allow actual victims to sue for damages. Robinhood may have to pay politicians to look the other way as the little guy once again takes it in the shorts (pun unintentional).
Yep, we get what we incentivize
There should be a "like but crying" button for posts like this. Or maybe just a "GOOD GOD!!!" button. WTF kind of collapse are we in for?!
Yes, this. Very well summarized.
Yes, but just think about all that dopamine….
In a sense, Robinhood is just another social media site, replete with dopamine hits. For many of these “players”, the psychological ramifications will outweigh the financial ones.
I say this as someone who uses Robinhood to manage quite a bit of money, though in a boring “hold index funds” sort of way. The platform is a massive improvement over older players like Fidelity and especially Vanguard, whose customer service should have Jack Bogle rolling in his grave.
Going back to the Freudian model of the human psyche, where it sits on a spectrum of Id/Ego/Superego.....the Id being inborn human drives and appetites without any breaks -- persons without a developed Ego giving them homeostasis in life are going to be sucked bigtime into the hyper-Id. Which manifests as gambling addiction, amongst many other possible variants.
Gambling businesses simply take advantage of this. Low-Ego humans do love that dopamine hit.
Just saying....
Interesting. I find Schwab perfectly fine, especially for index funds, but I’ve never used the Fidelity or Vanguard site. What’s especially good about Robinhood’s platform?
Schwab is okay but it can be a bit tedious. Robinhood is just simpler and provides a far better UX. I “actively” trade (eg buy some stuff every 2 weeks when I get paid) on both.
One example — Robinhood has a high yield cash sweep vehicle by default with a gold account.
With Schwab, you have to call and request your sweep be changed to SWVXX or manually buy it on the computer. You can’t buy it on either of their apps.
Another example, understanding my dividend income is far simpler on Robinhood. I get an email, a push notification, and I can go to the security and see the payments and reinvestment. With Schwab, I have to filter a list of activity, far more friction.
Fair; I can’t argue with either of those two criticisms.
I’ve been trading on Robinhood for a few years now, but I’m in my 60s. I research stocks on a particular site where I have a paid membership, and if I see a winner (in my eye) I’ll put down some money.
I’m up quite a bit, but I also own precious metals as a hedge. Young people don’t think like that.
Robin Hood fairly aggressively markets options trading to start, but I haven’t seen much of that directed at me in a number of months. It is designed like a slot machine and the phone app is incredibly easy to use for trading, but there is no barrier to entry aside from a few simple steps that most any somewhat intelligent person can follow.
Unfortunately you are leaving important pieces out of this discussion. These apps HAVE democratized investing. It wasn't that long ago that you needed to go through gatekeepers, whether mutual funds, financial advisers, etc. (which always win with their cut, even if they manage your money terribly) Now you can directly own assets. This matters now more than ever in an inflationary environment where the federal government is doing everything it can to make people poorer - UNLESS you own assets. People who own assets benefit from inflation; people that do not suffer more. The more exposure to assets regular people can get, the better off they will be in the future. Ideally the federal government would just turn off the money printer (ha) but for THIS world, the real world, everyone will need to know how to invest to survive in the future.
Finance involves risk. Starting a business involves risk. Gambling involves risk. Most people start by naively thinking they can get rich quick. Some will become addicts, sure, but that's always been the case. But many of those people will lose money and learn from it. They'll realize that very few people are successful as active investors and most will eventually realize that the path to wealth is long term holding of high quality assets. They'll gamble less when they see they make more money by simply HODLing. Through this journey, as I have gone on myself, I've learned a LOT more about how the world and economy works, about how value is created, and all the psychological training that comes with taking risks and learning to find asymmetrical bets that make me feel less stressed about my positions. Your negative view of Robinhood is like thinking it wouldn't be good for teenage hearts and arms to be broken, that there isn't a necessary step on a developmental path there.
Prediction markets: I think this could be one of the best things to ever to happen to civilization. I say that prediction markets are where ideologies go to die. This couldn't come at a better time in our society, where ungrounded delusions increasingly take hold. I would love a world where people post not just their belief in something but what they are willing to stake financially on that belief - this will separate the wheat from the chaff. "Put your money where your mouth is". The worst thing about social media is zero cost statements and belief systems, whereas in the past in social groups, there would be some cost to sputtering insane nonsense. I'd like to see a world where Gavin Newsom has to put $10M of his own money on a prediction market claiming homelessness will go DOWN from his policies. He would never do it, the grift would be over. And that would be very good information for a voter to know - he's not willing to stake anything personal on his beliefs or policies. Because he's a serial liar. The reason prediction markets are so much better than journalism or "polling" is because people don't lie when they have a stake in the outcome. The power and usefulness of this socially is at present vastly underestimated.
Retirement accounts: In the past, talk about grift! There is nothing better for the consumer than individuals to have control over their retirement accounts, private or public. Even better would be to abolish social security entirely and put complete financial control in the hands of the consumer which would vastly outcompete the social security fund performance by merely dropping their money in an index fund and never looking at it for 40 years. David Friedberg does a great analysis of this.
If I imagine a world where the financial markets are gate kept by the wealthy who take a big cut of every retail portfolio as in the past, or a world where finger wagging Elizabeth Warrens do everything to "protect" all the Americans she believes are too stupid to know what is in their own best interest; or a world where INDIVIDUALS HAVE FREEDOM OVER THEIR FINANCIAL LIVES, some of whom will make terribly stupid mistakes and spend their kids college fund on a lark on some sports bet, but many of whom will turn out far better than being financial minions of elites and government bureaucrats - I'd prefer the latter. If you were to talk to some retail investors that have gone on this journey themselves, you'd see this is one of the first times in history where regular people can actually become wealthy using the same systems that were formerly reserved for elites. I could certainly recommend some people to interview that would give you a much more balanced and accurate perspective on these issues, from a retail investor perspective. I dashed this off in just a few minutes off the top of my head, this information is not hard to find.
Not to be a jerk but you would not be saying this if the Federal Reserve had not been printing money like mad, inflating “markets”. The majority of “profits” are just monetary inflation. I don’t hate the players for playing the game, but do understand the game. If and when the music stops, a lot of real people are going to get hurt. Many more in the meantime.
I completely agree - the monetary system is broken. But in that broken system it’s better for the underclasses to have access to appreciating/inflationary assets than not.
As in many evaluations of risk, the lion's share of the article is spent on all the awful things that could happen when things go wrong. One must never forget to also evaluate the case where things go right. Thank you for filling in this blank.
Liked this comment Richard. A tad long as comment (smile) but is a valid and valuable response to the article. Thanks.
lol you wouldn’t be the first person to tell me my comments are long online and in real life, but so it goes
I remember buying my first stock from etrade back in like 2002. Etrade wasn't new at the time. Lots of old school brokers allowed people to open accounts and buy whatever stocks they wanted to either from a website or automated telephone system.
By the time Robinhood came around the wall from the gatekeepers was already a relic of distant memory.
Sure, there are downsides to all investing. I myself use Robinhood and have traded options and crypto and even the prediction markets. I’m not the guy getting up at 6am to place bets on whether the market will go up or down 1%. I am an accredited investor so if I wanted to day trade I could but anyone who has said they are successful doing that is small. Investing isn’t easy and any real investor knows you don’t put all your eggs in one basket and never invest if you can’t afford to lose it. There is a downside to just about everything in life and investing involves risk but you can mitigate that risk by researching the companies you wish to put money into. Leverage investing is foolish. I like Robinhood because I have the control over my money. I don’t have a broker who I’d have to give fiduciary control over my account and the license to steal my money. It happens all the time. I’d rather trust myself. There are no get rich quick ways to make money.
Exactly. I'm quite poor, yet I've twice turned a 10 or 20 dollar option into over $1000, and have probably only lost $200~ or less on the ones that didn't hit. I just don't get carried away, I go for the ones I really believe in. (The first was a Brazilian index after Bolsanaro won his election, and the other was CleanSpark right before Bitcoin and the market plummtted in early November)
While all this may be true, the fact that RobinHood helped give douche bag short sellers a really bad case of ass-ache means it gets a little relief from me.
Trump called Wall Street, the biggest casino in the world which is about right although the city of London might disagree. Basically it allows the clever people to make money without working or creating wealth. Capitalism May have started out as a better alternative to the existing systems but now it's mostly just glorified gambling producing nothing and living off those who who do produce wealth or provide useful services. It takes a lot of indoctrination to get the population of workers to accept the minority of the parasite class living off them from around the world.
I gotta be honest, I don't see how this is any more of a casino than the regular stock market. Should only the rich be allowed to gamble because they know the government will hold a gun to the taxpayers' collective heads to cover their bad bets?
The rich dont gamble like this. Most of their wealth growth is in long term stock portfolios, physical assets like real estate, coins, art, precious metals, and so on. Sure they give money to brokers to play around with but they really do the boring stuff most of the time. People know about 10 year plans but throw them out at the next 25 dollars they can waste on an instant hit. Investing like a truly financially indpendent person is awfully boring, hence why these platforms nickel and dime the working class into poverty. Anyone who is working who complains about cost of living needs to add up gambling, trading, vaping, energy drinks, weed, takeout orders, designer coffees, and booze for their last 30 days. Those are the biggest leaks out there and are why people cant afford things.
Please do understand that the big players will be backstopped as the little people lose their shirts. That is the larger point here. The sheep will be fleeced if they allow it.
The answer is the time scale. Average hold time has dropped like a brick (or a bear market?) in the years since online trading, never mind easy game-like online trading, has become popular. Investors should be thinking in decades, not quarters or weeks or hours. Average holding time for a stock has dropped from 5 years to less than 6 months in the last decade or so. Do your research up front, then set it and forget it. Check every year or two. (Not that I actually do what I'm advocating, of course...)
It sounds like mixing it up with crypto and unrestricted options trading is more likely to turn it into a dopamine hit than dealing with a staid conventional brokerage that imposes some restrictions on whether you can do even relatively rational things like puts and calls. One could certainly do day-trading on Schwab, but the platform is not set up to encourage it, let alone to entice you to it.
Gamblers…
I'm not against any of these financial instruments per se, but I think they're a sign of deep societal sickness. I suspect that many people get hooked because they're desperate and see no other hope to live a decent life without making some kind of outsized win via betting.
When parasites get too greedy they cause a health crisis in the host, as we saw in 2008.
I found a dead jackrabbit once whose ears were completely encrusted with ticks. They didn't kill the jackrabbit, but neither were they helping it to thrive.
That’s an excellent metaphor for much of the financial sector.
I’d love to see where the bulk of active traders live and would not be too surprised if it disproportionately overlaps with States that legalized dope.
I’m pretty sure they live in their parent’s basement ;)
In CA, NY and IL where many Gen Z & Millennials reside.
I am reminded of the old saying that it is hard to make things foolproof because fools are so ingenious. And also reminded of the comment attributed to JM Keynes, that the market can be irrational for longer than you have capital. There is a group of people who are very susceptible to gambling enough so as to be labelled gambling addicts. Such markets as here at least have the feature that on average, standard long market bets have a positive expected value. Whether some of the more complex bets do or not depends on those specific bets and their structure. This is as the author notes not a game to be played lightly without proper training and without serious discipline. But people can't be free unless they are also free to fail. I once had a shirt-tail relative explain to me how his "system" for picking stocks was an almost guaranteed winner and how I, with all my training and experience, was stupid. I tried to explain rationally where the flaws were in his "system'. He was both certain & arrogant in his ignorance. After about a 6 month run in which he did quite well, he got creamed in a very slight market change of direction. He doubled down and was almost wiped out. I never heard about his "system" again. As long as Robinhood are disclosing adequately (they may be skirting the edges here but there's no need to; there are plenty of fools), they are as the author notes not doing anything illegal. Immoral perhaps but not illegal.
I don’t understand why the CFTC hasn’t put an end to the sports betting loophole. I live in Texas where online gambling is illegal, but I can open the Kalshi app and bet on the Chargers Cowboys game that’s on right now.
Probably lobbyists.
The way in which gambling has proliferated all layers of society and become normalized for all age groups is one of the most troubling issues I see in our world today. It is the sort of thing that feels Biblical in nature in terms of the severity of the rot and the catastrophic results it will yield.
Live-service video games start children off by giving them the casino experience on their parents' dime. Teenagers and young adults evolve into Polymarket fanatics, throwing their disposable income at anything and everything that can be bet upon. And as we grow older, we find refuge in the arms of sports betting, tear-off tickets, the slot machine at the laundromat (!!!) and good old-fashioned casinos.
There is something to be said for moderation and I wouldn't try to tell a person they are not allowed to gamble with their own money. But the way in which gambling has crept its way into all aspects of our lives feels reckless at best and like a psychologist's painstakingly-designed business model at worst.
We simply are not equipped as a society to resist these things.
This was the overriding message I was trying to get across. Thank you!
Thank you so much for this article. I learned so much. I have maybe a quarter of one share of one stock on Robinhood and have not gone any further down that rabbit for the fear of what you just wrote about happening to me. I will leave my gambling to my once a week lotto ticket.
Where Are The Customers’ Yachts? is the perennial Wall Street refrain. Conventional brokers are no different and no better