One of the biggest stories to arise last week concerned the stock market app Robinhood and some wild trading moves that it got swept into. Obviously the Wall Street jumps were the biggest headlines, but NBC News touched on an interesting point as well. Their latest article touched on some of the behaviors behind this rapid-fire trading and how they may fuel online gambling addictions.
For years, there have been studies about addictions and day trading. Similar to the thrill of betting at casinos, people can easily become hooked on the lure of throwing money into volatile stocks. It is quite possible to turn over a small fortune in a short amount of time, but (just like traditional gambling) it comes with some very high risks. Robinhood is unique because it makes investing much easier and quicker, which is why NBC zeroed in on them for their article.
Keith Whyte, the executive director of the National Council on Problem Gambling, was quoted in the piece. He believes that apps like Robinhood have special features and functions designed to fuel addictive behavior.
“The online day trader with problems is indistinguishable from the online gambling addict,” Whyte told NBC. “A lot of this is directly taken from the user experience of casinos: It encourages immediacy and frequent engagement. I believe that Robinhood specifically is designed and makes money based on clients trading addictively.”
And certainly for all of the lucky people who were able to make a quick profit on the trading events from January, there are millions more who lost their life savings through apps like these. One of Robinhood’s signature features is its ability to let people play the market for themselves, without having to consult with a legitimate stock trader. Many have argued, though, that this can be dangerous, as professionals are much more experienced and know how to properly assess risk.
There are also social media type elements to these apps, which can entice gambling traits even more. Robinhood, for example, has a Twitter-like interface that lets users see what their friends are buying and selling. This can also fuel competitive and compulsive behavior, enticing people to make quick, irrational decisions.
Robinhood execs have, of course, denied that their app encourages people to spend irresponsibly. But even their digital environment has many advocates wondering. They believe that there are more calculated maneuvers in place, which specifically hone in on gambling impulses.
“If Robinhood’s goal had been to foster wealth creation and shift capital gains to the hands of everyday people, they would have designed an experience where the big dopamine hits were from regular contributions to index funds,” Whyte concluded. “This was about monetizing gambling impulses.”