On July 9, 2020, the New York Times published an article criticizing the investment app Robinhood. The author’s thesis was simple: Robinhood is bad because investors can lose money through it. The supporting claim was that such losses are because the app’s quirky interface felt like a game, and therefore all financial losses were the app’s fault. Naturally, the conclusion was that such platforms must be shut down by the appropriate regulators. The story fits into a broader anti-capitalism narrative.
Robinhood is an American investment and trading app which allows users to purchase stocks without needing to go through a traditional broker and pay traditional fees. Robinhood has been so successful at disrupting the brokerage market that other direct customer-to-market platforms such as Charles Schwab, TE Ameritrade, and E-Trades have all dropped their fees to zero in an effort to compete. As commentators at Motley Fool observed, “Why does Robinhood even exist today?” The commentators even stated that the app’s “barebones” interface should make it unpopular with consumers, which is rather opposite the New York Times’ view.
The primary objection to Robinhood, which has been singled out from among the other platforms mentioned, is that there is no handholding of customers. Part of the agreement for use is that customers read, research, and decide for themselves; the company bears no responsibility for the decisions its users make. While this policy has allowed Robinhood to operate at lower cost than their competitors, detractors cite the lack of oversight as the root of investor problems. For example, the author of the NYT piece blamed Robinhood for the suicide of a user who appeared to have killed himself in response to losing money. To be fair, the author acknowledged the asininity of blaming the app: “Robinhood does not force people to trade, of course.” The reality is that individuals willingly sign up to Robinhood because it offers a service they need or desire.
In 2017, a group of Yale University psychological researchers established that when people are forced to evaluate their precise feelings toward economic inequality, unfairness, not inequality, was the source of discontent. In the context of economic unfairness exacerbating economic inequality, policy researcher and politician David Willetts wrote a book, which is now slightly dated, titled The Pinch: How the Baby-Boomers Took Their Children’s Future – and Why They Should Give It Back. The thesis of the book is that the Keynesian model has failed even the Baby Boomers, who were intended to be the first beneficiaries, and policymakers should stop trying to make Keynesian economics work.
As part of the subsidiary discussion, Willetts added that post-World War II financial infrastructure, such as high brokerage fees and mandatory minimum opening amounts, has contributed to the financial retardation of generations succeeding the Baby Boomers. Due to a largely artificial economic boom, the Boomers were able to meet these “requirements” at a young age in comparison to both the Boomers’ own parents and later generations. Such onerous financial infrastructure is not the fault of the Boomers as such, but it is an example of economic unfairness that fuels discord. The development of fintech, which includes Robinhood and similar apps, has enabled sidestepping of burdensome, unrealistic infrastructure.
The NYT piece had a simmering contempt for capitalism and its features. There was an implicit assumption of deception: no one needs investments and inhabitants of capitalist societies are deluded into wanting them. When poor or less informed people are given access to the apparatus of capitalism, they lose because they lack the “proper” background to handle the tools wisely. Therefore, the safest course is to regulate such tools so that only those who can “afford” to lose money or have the “right” background have access to wealth building tools. Such a view truly is a form of capitalism for the few, not the many. When this occurs, the term is “oligarchy,” not capitalism.
In the name of protection and equality, commentators, such as the one of the NYT, promote ideas that would ensure economic unfairness. As there is a correlation between economic unfairness and discord, social and generational, one must ask: who benefits from ensuring that swaths of a population are locked out?
Mary Lucia Darst graduated from Columbia University with an MA in History and Literature. In addition to working as a writer and researcher, she is a filmmaker and active classical musician. She is a DPhil in Music student at the University of Oxford.