April 21, 2021
Since the pandemic started, online investing has become more and more popular across all age groups. Robinhood, a simplified stock brokerage and digital investment platform founded by CEO Vlad Tenev, has specifically targeted the younger and more amateur demographic with their simple and game-like interface and features. Because of this, the vast majority of their users are far younger than the national average age of investors, and are consequently more vulnerable to subconscious nudges and gambling-like tendencies.
Many psychologists and addiction experts alike have expressed their discontent with the way Robinhood’s platform operates. They frequently juxtapose Robinhood’s gamified investment interactions with gambling and gaming addiction. These experts have repeatedly reiterated their stance that Robinhood’s features directly reward users for things that should not be incentivized, such as frequent, fast-paced stock investing or risky, volatile cryptocurrency trading. In other words, these experts accuse Robinhood of utilizing psychological tactics to ensure their success at the expense of the health, well-being, and education of their customers.
Together, these two perspectives―Robinhood and gambling―bring to light the addictive nature of gamified investing. In analyzing Robinhood through the lens of gambling, gaming, and addiction, I hope to underscore the similarities of the two, as well as expose the relationship between investing and gambling in order to confirm that investing addiction is a real problem.
Investing on Robinhood’s platform is comparable to playing a video game in that the interface is red and green and has flashing lights that subconsciously encourage users to ‘play’ more often. According to a CNBC article titled “What Robinhood Could Learn from Gaming Companies about Gambling Addiction” published in February of this year, “investing is beginning to look and sound more and more like gambling and video gaming. For instance, video game Space Shooters gives away free treasures. Sports gambling platform FanDuel offers free bet insurance and Robinhood gives away free stock” (Brewer). Here, the author of the article is explaining how the free-stock feature of Robinhood promotes frequent use by rewarding those who refer more people to the platform. The reward given to the user is an offer of a free stock between the value of $2.50 and $250 (“Our Commitments”), and comes in the form of a lottery ticket. The lottery-esque nature of the rewarding process combined with the unknown value of the reward itself creates a very high likelihood of addiction (Gomez). These two traits, when merged, create a negative feedback loop that can trap unsuspecting investors into a mindset virtually identical to gaming and gambling addicts.
Robinhood’s many game-like features are consistent with casino slot machines in how the user’s psychology influences their decisions. For example, several of these pleasure-inducing features include green confetti to celebrate transactions, a constant update of stock news articles, an eye-catching interface, emoji notifications, one-click trading for instant gratification, and the prospect of receiving free stocks in the shape of lottery tickets. All of these properties of Robinhood trigger dopamine responses and encourage immediacy and frequent engagement. According to AddictionCenter, “much like drugs or alcohol, the flow of uncertainty and risk fuels the brain’s reward system, leading to addiction in many cases. Studies show that market volatility can enhance the desire for drugs” (Gomez). Further, “digital experts have concluded that Robinhood’s success with young people stems from their dopamine-dumping features that reward negative impulses such as spending a lot of money on one asset at one time” (Farivar). The most successful casino slot machines share many of the aforementioned characteristics and are explicitly designed to subliminally motivate users to keep playing, and continue putting more money on the line.
Finally, Robinhood’s features that lead to an addiction to investing cause the same behavioral and psychological problems as an addiction to gambling or gaming. The effects of these types of gambling are virtually indistinguishable from each other, even to an expert in the field (Brewer). An extreme example of the effects Robinhood’s platform can have on a young mind is the story of Alex Kearns. Alex was merely twenty years old when he began to make increasingly more dangerous and haphazard trades on his Robinhood account. Alex, following the misunderstood failure of a trade “committed suicide after mistakenly thinking he racked up more then $730,000 in deficits” (Brewer). Because Robinhood’s features subconsciously incentivize risky trading behavior, Alex found himself trading options credit spreads, a topic he was clearly not adequately familiar with. Essentially, he had made two trades that offset one another, and when one of them was assigned, Robinhood displayed on his home ‘Investing’ screen that he had an account value of approximately -$730,000. However, this was not the case, and had he been a more careful and informed investor, he would have known that his second trade, valued at about $731,000, was a hedge against this, meaning he actually had made over $1,000 in this two-part trade. Following his death, his family sued Robinhood for “wrongful death after blaming the company for his circumstances” (Farivar). This very unfortunate instance provides ample evidence of how life-altering and mentally-threatening an addiction to investing can be, especially on young people, which happens to be Robinhood’s entire consumer base.
In summary, through analyzing Robinhood’s digital investment platform through the perspective of addiction experts, it is clear that Robinhood’s features change the dynamic of the investor-investment relationship into a player-game one. Additionally, Robinhood uses tools like confetti and flashing colors to trigger dopamine dumps in the brains of users to subliminally encourage risky and harmful trading habits. The addictive nature of Robinhood and digital investing is very similar to gambling in a casino and causes real-world harm to real people.
Bibliography
Brewer, Contessa. “What Robinhood Could Learn from Gaming Companies about Gambling Addiction.” CNBC, CNBC, 22 Feb. 2021, www.cnbc.com/2021/02/19/what-robinhood-could-learn-from-gaming-companies-about-gambling-addiction.html.
CNBC writer Contessa Brewer analyzes key features of mobile investing platforms and brings up several instances of people in the gambling and investing world who have become addicted. Specifically, she mentions the story of Alex Kearns, a 20-year-old Robinhood user who committed suicide after mistakenly thinking he racked up more then $730,000 in deficits, prompting his family to sue Robinhood for his wrongful death. Her goal is to visit gaming addictions and compare them to addictions to investing as are becoming more and more prevalent in today’s world where everything is accessible at a moment’s notice on our cell phones.
She begins by outlining three key points she aims to get across in the article. The first point is that those in executive positions of investment firms all testified in Congress that investment is not gambling. After investing received an increase in awareness following the GameStop (GME) hysteria, Congress decided to begin an investigation into the situation. According to the article, the vast majority of the representatives who voted, claimed that investing is in no way affected by, or representative of, gambling.
The second point she addresses is that long-time gaming scientists consistently place investing in the same category as gambling. She makes the connection between investing, gaming, and gambling. All three can result in addictions that effectively are behaviorally and psychologically the same. Experts in the field say that investing is by definition gambling in that both are risking money in hopes of earning returns. Thus, losing money you deposited can cause one to enter the vicious circle that is the Gambler’s Fallacy: the belief that a streak of losses increases the probability of observing gains on the next trial.
The third point presented concerns the possible ways to overcome an addiction to investing, and by proxy, gaming or gambling as well. After consulting with former addicts, she asserts that the best way to avert troublesome behaviors when dealing with addiction is education.
This article is perfectly relevant for the argument as it groups together gambling and investing into a single category using expert analysis and online investing’s similarities to video gaming. The article effectively juxtaposes the worlds of investing and gambling, as well as how an addiction to investing is extremely similar, almost identical in some cases, to an addiction to gambling.
Farivar, Cyrus. “Gambling Addiction Experts See Familiar Aspects in Robinhood App.” NBCNews.com, NBCUniversal News Group, 30 Jan. 2021, www.nbcnews.com/business/business-news/gambling-addiction-experts-see-familiar-aspects-robinhood-app-n1256213.
Investigative tech reporter, Cyrus Farivar, writes his article to offer a frank and straight-to-the-point explanation as to the realities of the addictive nature of several fundamental Robinhood features. He begins by setting the stage with a comparison to the mindset of gamblers and investors, and how they are essentially the same. Both investing and gambling often draw young people who exhibit self-destructive behaviors and take their obsessions too far.
The underlying argument for the article begins with an analysis of Robinhood’s psychology-influencing features. Digital experts have concluded that Robinhood’s success with young people stems from their dopamine-dumping features that reward negative impulses such as spending a lot of money on one asset at one time. They accuse Robinhood of monetizing gambling-like decision-making tendencies. Farivar continues by pointing out the fact that there are professional investors for a reason; people who correctly and properly assess potential risks before investing. He ends this section of the article by comparing Robinhood’s game-like user interface to things like video games or fantasy sports leagues.
The next section strictly addresses Robinhood executives’ poor attempts to solve the problems their platform created. For example, Robinhood co-CEO wrote that he wants to move in the more simplistic direction, beyond the already over-simplified interface it currently has. The problem with implementing this change is that it results in a Twitter-like experience, where users can see what their friends are buying and selling. Social media-fueled investing can be wildly hazardous, especially for a young, inexperienced investor. This type of platform would only serve to incentivize hype-based trading like when all of Reddit stampedes into one stock.
This article snugly fits into my argument because it focuses specifically on Robinhood as opposed to the other online investment brokerages. It also digs deeper into the psychological aspect of addiction and how features on Robinhood cause dopamine and endorphin dumps that inevitably lead to uninformed, rash, and compulsive decisions.
Gomez, Suzette. “Signs Of Gambling Addiction In Robinhood App.” Addiction Center, 3 Feb. 2021, www.addictioncenter.com/news/2021/02/gambling-addiction-robinhood-app/.
The Gomez article, published on an Addiction Help Center website designed to help those who need help escaping the bonds of addiction, immediately puts forth accusations that Robinhood is causing a rapid and widespread boost to the number of adults addicted to gambling in the United States. According to whistleblowers in the industry, Robinhood is intentionally utilizing exploitative practices to induce gambling-like decisions in its users.
The middle section of the article rather aggressively asserts that Robinhood is just another gambling app that promotes addiction. Here, Gomez explicitly lists the features that Robinhood employs to ensure dopamine rushes following certain behaviors and actions on the platform. For example, some of the many pleasure-inducing features include green confetti to celebrate transactions, a constant update of stock news articles, an eye-catching interface, emoji notifications, one-click trading for instant gratification, and the prospect of receiving free stocks in the shape of lottery tickets. All of these properties of Robinhood trigger dopamine responses and encourage immediacy and frequent engagement. Much like drugs or alcohol, the flow of uncertainty and risk fuels the brain’s reward system, leading to addiction in many cases. Studies show that market volatility can enhance the desire for drugs.
Gomez continues her accusatory tone to claim that Robinhood manipulates their users by proving a very gamified interface. This method has lured over 13 million consumers. The gamification of investing as done on Robinhood results in the presentation of complex financial instruments as fun games. Many experts believe that in doing this, they don’t help investors, but instead downplay the risks of trading stocks and cryptocurrencies. Gomez states that inexperienced inventors are not actively warned about the potential financial dangers. Instead, the app’s design draws them to the riskiest forms of investing, such as options trading. The app also highlights hyper-volatile trades like cryptocurrencies in a moving, neon interface that is comparable to giving someone a fast new car with no driving instructions.
This article is extremely applicable to the argument since it directly questions the motives of Robinhood’s features that are explicitly in place to encourage gambling-like decisions, induce frequent engagement, and promote increasingly risky and compulsive investments.
“Our Commitments.” Robinhood, Robinhood, 2013, robinhood.com/us/en/our-commitments/.
This webpage serves as Robinhood’s explanation of features, purpose, and motives as a platform. The top of the webpage, labeled “Our 6 commitments to you,” followed by “We want you to feel confident and secure on Robinhood, so these are the commitments you can always expect from us”, shows how they are trying to double down on the positive publicity and build a welcoming and constructive public image in the wake of some relatively significant allegations. The captions that follow each individual commitment are misleadingly vague to hide the harsh reality that is their questionably nebulous business practices.
These commitments are listed out in a user-friendly and aesthetically pleasing manner down the page: no account minimums or commissions to enable access for everyone; your money is protected for up to $11.5 million total; dedicated to maintaining the highest security standards, covering 100% of direct losses due to unauthorized activity; here to help with a dedicated team of customer support professionals available to answer any questions; a transparent business model, laying out the ways Robinhood makes money; execution quality for every securities order.
This webpage put up and maintained by Robinhood is the most relevant piece of evidence to set up the primary object because it shows the features Robinhood boasts as an investment platform; however, the secondary object, supported by several other rebuttal articles, is a direct and targeted attack on these commitments. It is important to get both sides of a story, and this page that Robinhood has created―equally as psychologically manipulative as their platform itself―has certainly provided the world with their side.
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