Hacker News Reader

Comment by sna1l | Hacker News Reader

Regardless of how you feel about their marketing practices, it is clear that investors are investing in the customer base.

As Robinhood continues to grow, they can/will offer more and more products (mortgages, bonds, DAFs, etc), eventually becoming a one-stop shop for millennials/zoomers/whatever.

For example, currently if you want to invest in a crowdsourced real estate fund, you need to use something like Cadre/Crowdstreet. If RH can eventually support all these possible investment avenues, they will have a lot of room to grow in the retail space.

Given their current laissez-faire approach to investor education/responsibleness, the question will become whether this level of investing ease is good or bad.

View on HN

Robinhood cannot easily expand its product base because a majority of their current revenue is from selling order flow. Most of the products you listed as well as other seemingly easy to offer products are going to be tough to sell to someone because there's no easy way to offer free/cheap transactions. It's very tough to convert a non-paying customer base to a paying one. Additionally, at least for mortgages and bonds, I don't see how Robinhood would ever be able to be competitive in either of those spaces.

There’s a lot that can be better here and Robinhood’s approach to getting a foothold has been smart.

I use Fidelity for everything, but their software is mediocre at best. I hear vanguard is worse.

The regular banks are ten times worse than fidelity for basic actions.

Other startups that have tried to make this better (Simple Bank comes to mind, but there are a couple of others) typically sell out or only focus on basic banking which is not helpful.

Robinhood has better software and is positioning themselves to be a serious player long term.

I have Fidelity as well and prefer their iOS app (at a glance asset overview) and Active Trader Pro Mac client (options trading) to Robinhood. Different tools for different tastes.

Thanks - I'll check out the Mac Client.

The iOS app is okay, but I think it's extremely slow and a lot of things require the web UI (which has tons of buried menus and hard to find features).

Ah someone mentioned Active Trader, which I think is pretty decent. If you're trading a lot look into Interactive Brokers. I think they're still top of the line for publicly offered trading.

I'd say "simpler interface" rather than better software. Unless youve seen under the hood of Schwab/TD and Fidelity. I would expect, in some sense that Robinhood has cleaner aspects because of less legacy, but its also may be much less powerful and robust.

> I hear vanguard is worse

That might be by design. Vanguard is best used for funds(their index funds are nice).

They don't really want you actively trading or speculating (see quotes by the founder).

Tastyworks has better software for options. TD Ameritrade also has ThinkOrSwim which is pretty good overall. None of those can hold a candle to Robinhood's (perceived!) simplicity - even though I do think it's TOO simple.

I think 'too simple' is like what some search company CEO said to Larry Page about page rank being 'too effective' when Larry/Sergey were trying to license it to him before starting Google (people won't stay on the search portal to look at ads because they find their result too quickly).

It's a lame excuse. None of those old search companies exist anymore.

If you want to drive most users to just use index funds you can have great software that does that while also having great software that allows users to do everything else they may want to do (like have a checking account, wire money to other banks, automatically invest, etc.).

Having shitty software and then pretending it's 'by design' is just a lazy justification.

If Robinhood can build up a userbase by focusing on a neglected area they can expand and take over everyone. Their downward pressure on fees is already a win for users, if they're able to get through growing pains (unacceptable downtime/scale issues) I don't see why they can't be as big as Fidelity.

I don't know if their software is actually that good, but there's definitely an opening here for someone that can get a foothold.

> I think 'too simple' is like what some search company CEO said to Larry Page about page rank being 'too effective'

This is fine for search results. It is NOT fine for complex financial instruments where people can lose money.

There's only so much you can 'simplify'. In this particular case, you can only make the UI itself simpler and easier to understand and operate. They can't make options trading itself any simpler. In other words, they can't make the domain itself any simpler by just throwing UX at it.

Specifically, they can't make it any simpler by hiding information. The information is needed. This is why other trading platforms look 'busy'. Because trading options is not simple. Pretending that they are only lead to losses.

I think we probably actually agree more than we disagree on what we're talking about.

I agree simplicity that hides relevant information is not good.

My complaints about Fidelity are not that it's surfacing too much relevant information.

Some quick things:

- Fidelity has tons of menus that hide things in hard to find places.

- The UI is slow, and the actions are poorly designed. Want to wire money to someone else? That's hidden under transfer -> to bank account -> new bank account -> that I don't own. Everything they have is like this, buried and weirdly named.

- A link might load an entire different section of Fidelity unrelated to your actual account. Tons of spam on the front page about resources that are irrelevant or just trying to sell you some Fidelity crap.

- Want to buy a call option? Small modal pop up window that's hard to use.

I'm not arguing for simplicity by hiding relevant information, I'm arguing for good UX - focus on the stuff that matters and organize things in a way that is actually good for users.

> "This is why other trading platforms look 'busy'. Because trading options is not simple."

I think other platforms look busy not because they're showing relevant information, but because they're hacked together over years by people that previously relied on in-person traders and phone call support (and except for Vanguard, arguably scamming users via active trading fees). It's a mess of legacy systems and UI that doesn't have to get better because there aren't that many players and it's a hard market for competitors to enter.

HavenMoney (acquired by CreditKarma) had an approach to this I really liked, they basically did best practices for most people. Index funds, emergency savings, 401k handling - all automated. Something like this by default that also had a trading platform would be great. It'd also be cool if it always compared a user's active trading to what would have happened if they left their funds in a total market index.

We are not exactly disagreeing :)

The established companies can still be disrupted by great execution. There is potential there. Robinhood can still do great by having an elegant interface AND showing relevant data. Show the greeks, even if that means they will have to come up with fancier indicators.

For instance, Delta. Show me probability of profit instead, right in the list, as it is derived from delta. Show theta, even if you have to come up with a cartoon graphic to illustrate time decay. Show a flame when IV is high.

Suggest other strategies if the trade looks bad. Don't show that something is up 1500% just because there were no bids previously.

And so on.

Not trying to plug tastyworks, but their desktop interface is leaps and bounds ahead of what Robinhood does on either platform, and it is easier to understand too. What they have NOT figured out is how to get the same experience on mobile.

If Robinhood can figure that out, everyone else is in for a bad day (even with their horrible fills).

> HavenMoney (acquired by CreditKarma) had an approach to this I really liked, they basically did best practices for most people. Index funds, emergency savings, 401k handling - all automated.

This is great. Automated investing is the way to go - and can be surprisingly difficult to do. There are platforms that do similar things, at least for index funds, such as Betterment. But they tend to have higher fees than Vanguard.

I would choose Schwab over Robinhood any day of the week. I used robinhood and its data/metrics with stocks was extremely lacking and un-sophisticated. In addition order fulfilled timing was slow, I would never trade large amounts of stock with the app. Its all showy UI and bright colors. Which is fine as it seems to be getting alot of users using that method and the idea of "why use your Dads/Moms trading stock trading platform"?

> I would choose Schwab over Robinhood any day of the week

Don't you have to prove to them that you actually know something about options before they let you trade? Robinhood... you check a box.

Not really. You ask for level 1-4 options trading and they have you select from a dropdown how many years experience you have. It gets approved quickly. I've done this on TDA, IBKR, Merrill Edge.

All brokerages are like that. Back in the early 2000's, when I first enabled options trading, I had to fill out a paper form. This was also mostly just checking a box. If you could put a stamp on an envelope, you were qualified to trade options.

I have a Schwab account, but it really bothers me that they're constantly trying to push their services like financial planning or investment advisors. Even if you look for target-date funds they'll hide the index one and push the expensive active ones. Compared to their website Robinhood is calm and minimalist, at least in my opinion.

I think vanguard is perfect for the type of investor they attract. I probably log in to my vanguard 2 or 3 times a year. It is set to autodraft from my bank account and buy index funds every month and reinvest the dividends. So it is set it and forget it.

A slick interface and UI team that is trying to figure out ways to increase user engagement is just asking for your users to get in there and gamble away their retirement savings.

Agree completely. I think Vanguard's UI is trying to send the message "if you're logging in you're doing it wrong".

I agree with you both. I'd be worried if Vanguard suddenly became like Robinhood.

There's a new version of the Vanguard app on the App Store called "Beacon" that includes a very useful visual overhaul (account balances & performance are front and center) but keeps that wonderful Vanguard focus on, well, staying the course and not much else.

TD Ameritrade and thinkorswim (their client they bought out) are both quite good. But not great for novice investors, which is where Robinhood crushed them.

I think it's a net positive thing for people despite the doom and gloom stories we hear.

I don't know, Vanguard is pretty good for what its supposed to be used for. You can get money in and out real fast. Even very large sums of money. You can trade without waiting for full settlement and all that, to make all the proper large rebalancing trades quickly without losses. You can have all your retirement accounts in it and tax management and integration works well.

Their flows are all pretty smooth, you really don't need slick UI to make 3-4 trades a month at most.

Of course you do need slicker UI when you are essentially offering an online casino to your users. Nice colors, engaging UI, etc is important to keep your audience entertained and to have them roll the dice more often.

Robinhood also has their feet wet in crypto, with the potential to compete in Coinbase (a multi-billion dollar company of their on, which I hear is profitable) in a serious way if they wanted to.

The investors are preying on their users who think that they are investing. I'm not 100% familiar but doesn't this app allow you to re-invest your paper gains without actually having anything material? [0]

We're all told to invest, so it's only natural for millennials/GenZ/etc to want to do that. Everything costs money, so if you can "make more money out of the money you already have", then that's quite appealing. As if creating money out of money makes any mathematical sense.

I think in the end, all these "investment" apps are really just shuffling money from users. How else can you "make" money without taking money from someone else?

Maybe someone who's used RH could chime in.

[0]: https://www.forbes.com/sites/sergeiklebnikov/2020/06/17/20-y...

> I'm not 100% familiar but doesn't this app allow you to re-invest your paper gains without actually having anything material

I can't parse this sentence.

You can 'reinvest' non-settled funds. This is the definition for any margin account. "Paper gains" is usually in the context of paper trading, which the app doesn't allow. So this doesn't make sense.

Your link is not working for me, but the case for that customer was a lack of understanding, he didn't really owe 730k. It was a temporary balance. Which is the kind of thing you need to understand if you are trading options.

> We're all told to invest, so it's only natural for millennials/GenZ/etc to want to do that. Everything costs money,

Robinhood is mostly used for 'gambling'. If you want to invest, you should open a boring account in Vanguard, setup automatic deposits in VSTAX or similar (or manually on VTI), but otherwise forget about it. That's investing.

Playing around with short term market fluctuations is either trading or gambling.

> so if you can "make more money out of the money you already have", then that's quite appealing.

And yet that's what people do. If you are not doing the same, you are doing yourself a disservice.

This concept doesn't only exist in stocks. For instance, take a savings account. It appreciates over time. The reasons why are left as an exercise to the reader.

> As if creating money out of money makes any mathematical sense.

But it does. It's not about money creation, it's about wealth. Wealth is being created all the time. This is why the long term market tendency is always up. The moment we stop creating new things is the moment this will stop.

Since you are on Hacker News, read this, by Paul Graham: http://www.paulgraham.com/wealth.html

> I think in the end, all these "investment" apps are really just shuffling money from users. How else can you "make" money without taking money from someone else?

Congratulations. You have discovered trading. Someone buys, someone else sells.

Note that this is only a zero sum in the short term.

Are you familiar with how stock markets work?

> Everything costs money, so if you can "make more money out of the money you already have", then that's quite appealing. As if creating money out of money makes any mathematical sense.

Do you have a job? Does your employer make money? Aren’t they “making money out of money” by paying you?

The use of capital to generate wealth is one of the basic features of our society.

Let's dig a little deeper into this.

You're exactly right that they are making money out of money by using me. But me, myself.. I am not making money out of money. I do not have enough money to make more money out of what I have. I get money by exchanging my labor with my employer for money.

In turn, the company takes what I make and sells that for more money. The company is who is truly "making money out of money". The less they pay me and/or the more they sell, the more money they make.

If you do not have sufficient capital to begin with, you cannot make more money out of money (i.e. you cannot generate wealth)

When the company makes money, that’s actually the company’s shareholders making money. If it’s a public company, you can be one of those shareholders by investing in the stock market.

I assume the largest shareholders have the most money. I work for close to min wage; if they raised my wage, the shareholders will get less money off of the work I do.

What I'm trying to get at is that if you already have wealth, you can turn that wealth into more wealth. But people who do not have tens of thousands of dollars a year to "invest", they cannot become wealthy. This is why I say apps like RH or other "investment" apps or the lottery prey on poorer people. They lower the barrier of entry where we spend what little we have on the dream of becoming wealthy, when in reality, it is our wealth being taken from us.

> But people who do not have tens of thousands of dollars a year to "invest", they cannot become wealthy.

I agree with that - the average rate of return on capital is not high enough to turn a poor person into a rich person. At best it could help you retire after many years of labor.

> They lower the barrier of entry where we spend what little we have on the dream of becoming wealthy, when in reality, it is our wealth being taken from us.

If you make safe diversified investments in Robinhood, your money isn’t being taken away. It’s just going to accumulate slowly. Robinhood is a much better actor here than a shitty fund with 1% fee load, where a lot of workers are encouraged to save their money.

If you can do much better than the average rate of return, by starting your own company, or picking the right stocks through some special knowledge, you could actually get rich, but the odds are that you fail. Robinhood does harm by encouraging people to engage in this behavior.

How does a person become rich? You mentioned shareholders, so that's one example we can explore. They get richer off the work I do by selling what I make/provide for more than they pay me to make it.

If they paid me more and kept the exchange value of the produce/service the same, then the shareholders wouldn't profit as much while conversely giving me more money. By the shareholders exploiting my labor less, I can be richer.

If I have enough wealth, I could start a company as you suggest. I could be like the shareholders where I pay my employees as little as I can get away with and selling for as much as I can. This would help me and my shareholders turn money into more money.

But again, it is only through the exploitation of others that this is possible.

Another example of getting rich is owning property. If I have enough wealth, I could own not one, but two homes and charge rent to people who need a place to live. As they toil away at whatever job they're doing, I get this "passive income" that greatly increases my wealth while stunting wealth growth of my tenants.

We all want to be rich, but not all of us can be rich at the same time, otherwise, none of us would be rich. It's in the definition of being rich: to have more than others. But to have more than others, you have to exploit them.

And, tying this all back to your first comment describing one of the basic features of our society: using capital to generate wealth. You can imaging that this basic feature of our society makes it such that wealth clumps together. The more wealth you have, the easier it is to grow that wealth; it's like a positive feedback loop if you're into systems engineering or a massive object if you're into space. And having no money or no wealth is actively bad, and you can probably model a negative feedback loop of that, with the ultimate outcome of death (there's probably some good charts showing life expectancy vs wealth/class out there that illustrates this).

This is just an observation of the society we live in. It might be obvious to you, but it's cruel to me and many others who toil paycheck to paycheck living in fear of running out of the little money we have.

> If you make safe diversified investments in Robinhood, your money isn’t being taken away.

Sure, Say I invest $1200 over a year. How much would it "grow"?

Also, that's $120/month.. what if I need the $120 immediately and can't invest that much.

I guess my question is, How much money do you need for RH to be worthwhile?

I would probably not use Robinhood, but it's fairly common for people starting out to open an account and do a modest recurring purchase of some index fund or other "boring" fund with low management fees. It takes time but it does grow.

>Say I invest $1200 over a year. How much would it "grow"?

Depends on the investment and depends on the market. Figure a few percent, which isn't a lot but save $1,000/year and it starts to add up.

Investing presumes you already have money. This may not even be feasible for the majority of Americans; according to [0], 69% of Americans have less than $1,000 in savings.

Let's say that I can save $1200/year for 10 years with an interest rate of 8%... After 10 years, it would have grown by about $5k. Some CEOs make that much in a day or week off of the exploitation of their workers.

I would spend ten years, a whole decade!! And this assumes that it goes smoothly with no emergencies, no medical expenses, and wage growth keeps up with cost of living.. All these things that don't happen in real life. After all, everything that's required to live (the bare necessities) costs money, which eats away at my savings while making someone with already a lot of money even richer.

If you take reality into account, I think it's a pipedream for people of lower socioeconomic statuses to be able to climb the economic ladder into a higher class.

Again, I'm trying to illustrate how there's very little positive vertical movement for the majority of people.

[0]: https://www.gobankingrates.com/saving-money/savings-advice/a...

Yeah. So your investment has increased by 5k in the first 10 years. You only contributed $100 a month, which is doable for a lot of people, and go 5k for 'free'. In 20 years, it will have grown by 30k on top of your contributions. Again, assuming you never adjust your contributions.

Try the same calculation, but now with $500 a month.

Although 8% is optimistic, compound interest is really powerful.

It is indeed difficult to get ahead if you are paycheck to paycheck. It can be impossible if you can't even pay for your basic necessities.

But many people are not in that situation. They buy stuff they don't need. They buy new cars on credit - which is a depreciating asset with interest. They buy phones they also don't need - sometimes in multiple installments too.

Instead, try throwing anything extra you can scrape in investments. If you are aggressive about it, you can retire much earlier than you would be able to, normally.

> But many people are not in that situation. They buy stuff they don't need. They buy new cars on credit - which is a depreciating asset with interest. They buy phones they also don't need - sometimes in multiple installments too.

> Instead, try throwing anything extra you can scrape in investments. If you are aggressive about it, you can retire much earlier than you would be able to, normally.

Again, I don't think this is feasible for the majority of Americans, but let's push ahead with your premise that many people can scrape their way to an early retirement.

1) The length of time to accumulate that much wealth is really sad to me. Decades of living the one life you have as meek as possible under the hope of retiring early. Again, it's still a hope. Say you make $15/hr -> 1 year is $30k. After 20 years, you finally hit that $30k mark that takes you one year to make from wages. Idk man, that's super bleak to me. Obviously, the alternative to early retirement is that they work their lives away until they can't work anymore. For people who are not uberwealthy, early retirement requires a lowering of their lifestyles (I do understand that a lot of people find it fun or gamify it or find a way to validate cuts in their lifestyles). But they have to center their lives around it; it determines where they live, what you buy, what you wear, having kids, etc.

2). This is more of a question, but doesn't require answer.. just for thought provoking. Because these people are poor, are they not allowed to enjoy certain things like new phones, TV, entertainment? We've built our society to hold these things dear (save for the early retirement folks who have to actively ignore those pressures): We have ads that encourage spending, we talk about the American Dream... everything about our society encourages buying things, so I definitely understand why people do it. I'm guilty of it; one of the most exciting things is buying something. When things are so bleak, buying something feels good.. it hits that dopamine.

Both 1) and 2) are a consequence of the society we live in. It's easy to see 2), but a bit harder to see 1). If we had guaranteed necessities: food, housing, healthcare, etc, the early retirement folks wouldn't have to change their standard of living. The fact that poverty exists and that people struggle is an easily solvable problem with wealth distribution.

My point is, it doesn't have to be this way and that the pursuit of profit makes it this way. For just several handful of people to be as wealthy as they are, many magnitudes more of people have to live in poverty. We should be changing the system so that it benefits everyone, not try to find ways of survival within the system.

Your assumption that wealth is zero-sum is incorrect. If I run a homebuilding company, building ten homes with 10% profit margin so I can afford to keep a home for myself, I haven’t deprived anyone of that home. I used the price of nine homes to buy a bunch of wood, concrete, and human labor and turned those inputs into ten homes. It’s not zero sum - the amount of wealth in the world actually increased.

Nations with economies that encourage capital investment don’t just distribute wealth differently - they actually generate more wealth. It’s possible for everyone in that nation to be richer, if the government uses taxation to redistribute some of that wealth.

I'm not following your example on the homebuilding company. It all seems nebulous to me. Could you help clarify?

Where is the 10% profit coming from, and how are you able to afford a home for yourself from the ten that you built? Are you using the profit off the other 9 homes to fund your own home? (i.e. the profit is the 10th home?)

Maybe the root question to all that is: What do you mean by "the amount of wealth in the world actually increased?" I don't truly understand that.

The only way you have profit is by not paying the laborers their worth who built the homes. If you have a profit margin of 10% then you're paying your workers 10% less than what they should be getting paid.

Now, taxes and wealth redistribution sounds like a huge caveat to me. You tax the profits from the home building and redistribute it. Why bother with the whole home building thing in the first place? It seems like extra steps Why not just build and give people homes and skip the the intermediary step of money?

Another question for your homebuilding example: Why do you think you deserve a house for essentially free using your "profits" while other people have to pay for the house? What makes you better than them? (This is not directed at you, but the hypothetical homebuilder. If it's reading as adversarial, I don't mean for it to be.)

Your home building scenario with profit margins is a great example of how profit totally distorts motives so that the problem you're solving isn't meeting people's needs, but instead meeting the need of making more money. In the US, we have a housing problem. We have lots of homeless. We have the technology to build people homes (even efficient, dense housing), but since it's not profitable, it doesn't get done.

For anything like that to get done in our society, it must be profitable. You can see this in action with how much of our public services are struggling.

> Maybe the root question to all that is: What do you mean by "the amount of wealth in the world actually increased?" I don't truly understand that.

Simple: a home is worth more than the wood that was used to build it, and me and the laborers are better off working than sitting on our asses, if the government allows us all to get paid for our work. The amount of wealth in the world actually increases when somebody has the impetus to make things happen.

> The only way you have profit is by not paying the laborers their worth who built the homes. If you have a profit margin of 10% then you're paying your workers 10% less than what they should be getting paid.

If I don’t get paid for running the homebuilding company, nobody is going to bother building the home, so the home doesn’t get built. If we “skip the step” of paying me for organizing things, you just have a bunch of unused inputs. My organizing effort is also labor, and if there’s a mismatch in the supply of managers and hammerers, competitive pressures will adjust how much we each get paid. The role of money here is to balance supply and demand, so the things that get done are the things that other people need to get done. With money, the needs of society at large drive planning (there are externalities that should be corrected by the government through taxation to keep this functioning smoothly). Without money, only the desires of people with guns who can force others to work for free are taken into account.

As a whole, the US has plenty of homes for everyone, but in some regions densely building new homes is mostly illegal, so not enough homes are built. These are the regions where there is a homelessness crisis. Unfortunately the government is terrible at things like deciding how many homes there should be and getting them built, so when it controls the planning process, not enough homes get built where they are needed. Better to just let the developers build as many homes as there is demand for, and tax them to pay for housing for the homeless.

> a home is worth more than the wood that was used to build it

I agree with this part, but it doesn't address why, though. The house is worth more than its material costs because of labor costs.

> The role of money here is to balance supply and demand

I don't think the role of money is to balance supply and demand, it is to facilitate exchange between items of different exchange values. It is a tool that exists outside of capitalism.

> so the things that get done are the things that other people need to get done

I respectfully disagree here. I don't know where you live, but I guarantee you there's plenty of things that people need that need to get done that doesn't get done. I argue that in a capitalist system, what is most profitable gets done. In some cases, what gets done aligns with the needs of the people, but in many cases, the needs of the people are not met. I think it should be obvious that a capitalist system cannot distribute resources effectively if you look at this pandemic.

I agree that our governments are mishandling everything, but that doesn't have to be the case. A government has the most resources to determine how many homes get built... they just don't do it, because ultimately, it's not profitable.

Look at any city budget and see where most of the money is spent: it's spent on the police budget, not on things that need to get done for the people, like building homes, or providng healthcare, etc.

Here is a simple scenario to illustrate that extra money is not created. We are at a market, and you are selling wine to me, but sell it for more than the cost it took you to make it. I'm selling books, but also want to make a sell them for more than their cost tome, so I sell it to you for more than I paid for it. If everyone does this, then you can imagine all prices rising and falling together. If the extra money we received goes back into the market for other necessities, then we didn't really make a profit. Profit is created when money is removed from the system and accumulates and is hoarded.

I'm going to be logging off for now, but I've enjoyed this discussion.

Reply on news.ycombinator.com