Overwhelming research that shows that the average investor cannot pick stocks, cannot learn from their mistakes, and cannot recover their money once obliterated.1 And yet, there is no shortage of apps that let you trade stocks and crypto from the familiar and comfortable cliff ledge of your smartphone.
While it lasted, this past decade-long bull run has convinced many a investor that their stock picks are, more or less, destined to only march upwards. And many a startup has been eager to latch onto this trend; where there is demand, supply will follow.
With a polished user interface with fancy candlestick charts, it is easy to fool people into thinking they can learn how to trade stocks. People tend to mistake their gains, if any, as evidence of their superior sense of market timing or unique industry knowledge. But this hubris is not attributable to skill, but rather to sheer luck that the past ten years were marked by near-zero interest rates that favored speculation.
Eliminating trading fees, a move that intuitively ought to help retail investors, also induces people to trade stocks more frequently. And the more people trade, the more they tend to lose.2 Hyper-gamification has turned financial apps into cleverly disguised slot machines that place heavy emphasis on real-time gains and losses. This, and the shallow in-app company “research” offerings bring about the worst human behaviors when it comes to investing. In fact, I feel silly even using the word investing, because many of the platforms that advertise themselves as an investing app are really designed and built for trading.
Let me cherrypick one app in particular: Robinhood. It advertises itself as “democratizing finance,” but Robinhood instead dramatizes finance by fooling the public into thinking they can become consistently successful traders. Seeing designers get excited over Robinhood’s user interface is a modern-day equivalent of 1960s designers fawning over Marlboro’s TV commerciais.
I would go so far as to say that Robinhood has probably destroyed more of its users’ wealth than it has created. Which, given its namesake, is ironic.