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Comment by andrewzah | Hacker News Reader

So robinhood's crime was... making it easier to trade?

"After funding his account with $15,000 in credit card advances, he began spending more time on the app."

"As he repeatedly lost money, Mr. Dobatse took out two $30,000 home equity loans so he could buy and sell more speculative stocks and options, hoping to pay off his debts. "

"with whom he has three children"

Nothing Robinhood (or anything else) has will cure financial stupidity. Furthermore, anyone who -still- uses robinhood after their various crashes is asking for trouble. I've had zero issues with TD Ameritrade.

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It didn't just make it easier to trade, it systematically gamified trading through UX design including confetti graphics when someone makes a trade. It's basically using casino-like mechanisms to trick people into treating their money like monopoly currency.

It's plain unethical and ridiculous that 20 year olds with no steady income get access to highly leveraged financial instruments that can ruin them for life.

Twenty years is young, but is there a particular age at which someone should be "allowed" to lose money playing with stocks / options? If the minimum age for opening an account if 18, should we put further restrictions on saying, for example, you can only sell puts when above 21? There are only so many restrictions we as a society can place before it starts severely infringing on personal freedom.

If we agree that being able to own shares in companies is a worthwhile public good, that doesn't necessarily mean that options and other derivatives hold the same value to society.

Many options trades have an expected loss of nearly 100% - the same cant be said of holding stocks. Society has decided its OK to own houses, which certainly can decline in value, but outlaw ponzi schemes that for a substantial number of people are virtually guaranteed to wipe out their investment.

I don't think an age restriction is appropriate, other than 18/21/25, or some other reasonable definition of adult. But, I think it would be sensible to only allow options trades up to a certain percent of one's provable net worth - lets say 10% below $100k, 100% over $1M, or something like that.

>It's plain unethical and ridiculous that 20 year olds with no steady income get access to highly leveraged financial instruments that can ruin them for life.

None of these instruments can ruin a 20 year old for life. Worst case is 7 years of trashed credit from a bankruptcy.

You might have missed the story of the 20 year old that killed himself as a result of Robinhood: https://www.forbes.com/sites/sergeiklebnikov/2020/06/17/20-y...

None of the financial instruments did that. That person didn't even have actual debt, just one leg assigned on a spread that would have been resolved by the end of the weekend.

A healthy person wouldn't kill themselves in that situation. I don't think it's fair to say he killed himself as a result of Robinhood.

That's a pretty damn bad "worst case"

If it wasn't robin hood it would have been something else. It takes a certain addictive personality to keep doubling down and doubling down.

Not necessarily. There aren't really that many frictionless ways to gamble hundreds of thousands of dollars on your phone. People, especially young people, may make stupid, reckless decisions, but those decisions are often harder to get into and limited in scope and damage.

And I have no defense for the "something else"s -- casino gambling exploits people in exactly the same way: https://www.theatlantic.com/magazine/archive/2016/12/losing-...

Cash advance on credit card and you can gamble on whatever you want. The cash advance on the credit card is the dangerous part.

You could even cash advance on a credit card, buy a car, and wreck it and be in the same financial situation as you would if you gambled it away on robinhood.

trading is ok as long as the experience is convoluted and looks ugly? only people with a certain amount of wealth should be permitted to use aesthetically-pleasing interfaces? not sure what you're advocating for here.

They're advocating for protecting people from themselves.

Which is kind of terrifying for a country with democratic input. If people can't be trusted with their own money, why should they be trusted to decide who controls the American nuclear arsenal?

I don't totally disagree. But, at some point, "let people make whatever stupid decisions they want to make" turns into we should also be able to kick those stupid people into the gutter and abandon them.

I mean, yeah. It does. The fundamental assumption of all democracies are that the people are competent enough to govern themselves.

Ultimately, I'm not sure a free society, a welfare state, and universal suffrage can all co-exist in the long term.

I think any two could survive, but all three seem like a longshot.

I'm actually having trouble figuring out which two I'm rooting for.

Actually they’re advocating for protecting people from predatory corporations that adversarially target and exploit their customers with weaponized psychology, bit of a difference

In a democracy, the people (and their legitimately elected representatives) are also allowed to structure markets and decide on what business practices are and are not allowed

>>Which is kind of terrifying for a country with democratic input. If people can't be trusted with their own money, why should they be trusted to decide who controls the American nuclear arsenal?

With this analogy, I think you inadvertently supported the opposite argument: the nuclear arsenal itself is not democratically controlled. Rather, we elect someone who controls it (with several layers of checks and balances).

What's the check on the president hitting the button?

Is it just the willingness for military officials to follow the order? I'm pretty sure the president doesn't have to consult with congress or the supreme court before doing this.

To be fair, before he moved the money to Robinhood (which could be routed to lottery tickets or Vegas or Bitcoin or a drug habit), he received "$15,000 in credit card advances".

Makes you wonder about the risk management practices and incentives of that particular credit card company.

I've oddly never thought of it that way, but I guess I already knew that this method of trading isn't really a serious way to trade.

The entire stock market is just one big, gamified casino. It’s completely decoupled from the actual performance of any company. I do agree that they should not be letting people that don’t know what they are doing get access to margin trading and leveraged instruments though. That can be disastrous.

Should Las Vegas do a financial background check on someone before they are allowed to enter a casino?

Casinos and financial markets are two industries regulated very differently from each other

This analogy makes no sense. You can't lose more than you brought to Vegas. When trading, you can.

Famous example: https://www.investopedia.com/articles/investing/121515/how-s...

It bears mentioning that this is extremely uncommon situation.

I have both RobinHood account and IBKR and I don't see how I could do an unhedged short.

As a retail investor, the only way I see to short is via options and there you can only loose 100%.

It also bears mentioning that an average result in Vegas is: you loose.

Benchmark returns for stock market is S&P 500 which is 8-15% yearly return (over multiple years, depending on how good the economy is during those years).

And the chances of doing better are higher than chances of loosing money.

Can you not gamble with a credit card in vegas?

It looks like the person in your example was selling a call, which has potentially unlimited losses - that was a rather poor decision on his part. There are much safer methods of making "the same bet".

Gambling is a random game designed to extract money from people. The stock market is a math game that doesn't care if you gain or lose.

You can not directly use a credit card to gamble in Vegas. You can however get a cash advance at the ATM or the Cashier's Cage for a fee, so indirectly yes.

You definitely can lose more than you brought to Vegas

https://www.caesars.com/casino-credit

How much does a Vegas casino let the average person gamble that they don't already have?

So many of these stories involve highly-leveraged options stuff, reminiscent of stuff that even my schoolbook US history summation of the Great Depression described as super-dangerous.

They do have that money tho. The example given was a guy how took out cc advances and pulled equity. The casino doesn't care if you show up with a pocket full of cash from cc advances.

> How much does a Vegas casino let the average person gamble that they don't already have?

Do people not just gamble on credit? I highly doubt casinos care about the average person's financials, as long as the money ends in their pockets.

I see no difference between the stock market and gambling, sure there's "smart strategies" to the stock market but at the end of the day it's the same result for anyone with a gambling addiction to either.

The difference is that in a casino you loose on average.

In stock market, you win on average.

Not to mention that stock market is much more a game of skill than game of chance (as is most of casino games).

I did very well in stock market and I don't feel like I'm gambling. I recognize there is risk and I lost money on some investments but I can usually pin point the reason I lost. It's not random.

Modern trading of the kind RobinHood provides is gambling. So is buying insurance. There are sometimes good reason to trade or buy insurance.

And most people who buy insurance, have a good reason to make that gamble. But many people who trade, certainly through RobinHood, have no reason to trade beyond gambling.

Robinhood's crime is that they make it easier (and some claim addictive) to gamble.

It's a textbook NYT hit piece. Catchy misleading title, but there's no substance. Robinhood did nothing wrong. This man clearly has a gambling addiction.

I hate hit pieces, Robinhood actually provides a REAL opportunity for poor people with aptitude and high risk tolerance a way out of poverty!

Agreed, some degree of personal responsibility is needed in the case of addictive behavior. Robinhood in that aspect (gamification) falls into the same category as gambling, and the only difference is that is that it comes from the Bay Area as opposed to Vegas or AC.

By that definition: does Strava and Duolingo fall into the same category as gambling?

Those are both highly gamified apps.

So maybe let's not play loose with meaning of words.

Gambling means 1 of 2:

"play games of chance for money; bet."

Investing is not a game of chance. I'm not making investing decisions randomly.

"take risky action in the hope of a desired result."

Investing could be gambling according to this definition (there are risky investment strategies) but on average investing in U.S. stock market is not risky.

If you abstain from doing risky things, you can have 8-15% yearly return by putting all your money in S&P 500 tracking stock.

And if you want to blame someone for people's risky investing, blame https://www.reddit.com/r/wallstreetbets/ (1.3 million people reading stories like "$35k -> $1.25 in 4 months") not Robinhood for making an easy to use stock trading app.

Trading options is gambling. It is.

Just because TDAmeritrade has a very spartan UX doesn't mean people haven't made very stupid trades on it.

You are right, but Options trading isn't available to people with less than $5k deposits on Robinhood and I think same is true with margins.

Robinhood is more agressive when it comes to margin calls, that actually protects inexperienced investors.

Yeah. That's not Robinhood's fault. That's just a gambling addiction.

Which is part of why gambling is as regulated as it is. Robinhood has made trading so easy that it is effectively a gambling platform that doesn't have to adhere to gambling laws.

I wouldn't blame robin hood. It's not like the TD ameritrade app is any more difficult to blow your money with, yet they are getting a pass in this thread due to them being the institution and robinhood being a new and popular face.

gambling is regulated at the state level almost exclusively, which is almost impossible for the financial markets over the last century.

and in the financial markets, the federal government already has classist gatekeeping regulations because "poor people are dumb, rich people are smart", which should all be abolished

the finger pointing at Robinhood is based on ignorance of the entire sector.

to elaborate, federal financial regulatory gatekeeping is more about "not-rich people have life altering consequences", but to get over those hurdles and make your own choices is based on a baseless wealth and intelligence gap.

and of course, the observation that not-rich people have plenty of ways to lose their money in systems with negative expected value, so why apply that to financial systems with positive expected value.

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