Games are Dangerous! – Robinhood and Youth Gambling
By John Mah | October 28, 2022
Disclaimer: This post mentions an instance of suicide.
Learning to invest and understand the stock market are fundamental in wealth building. Unfortunately, only 58% of Americans reported owning a stock in 2022 [1]. Not surprising considering it seems incredibly terrifying to enter the stock market world due to indecipherable indexes, mind boggling charts, and confusing financial jargon. However, with gamification all these barriers of entry are thrown out the window due to the addictive psychological mechanism of variable rewards [2]. Teenagers and young adults are especially susceptible and are entering the financial world without proper risk control and developing an addiction, akin to gambling, towards excessive trading for quick profits. Robinhood, a commission free trading platform, is leading the charge for this abuse and making a conscious decision to disregard the well-being of the youth for their own gains.
What is Gamification?
Gamification refers to the development of features on applications that make the user experience more visually appealing and intuitive. For Robinhood, the purpose is to make stock trading more fun for the average consumer, it is like playing a video game where it’s appealing to see fun visual graphics when performing an action [3]. These techniques are dangerous as they go beyond just reinforcing a “fun” action to take; instead, they create addictive habits for users.
So why are technology companies like Robinhood using these techniques? It’s simple – to retain users on their platform, which leads to increased revenue and opportunities to procure data. These techniques ultimately tie into the “hooked model” [4], a pattern that allows companies to hook users into their applications as a habit in their daily lives rather than as a tool. The hooked model isn’t just apparent in Robinhood, it is deeply embedded into many of today’s most popular applications like Instagram and Uber.
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So Why Target the Youth?
Gamification techniques are particularly effective on the youth because they are more familiar with game like interfaces. As such, it’s not a surprise that roughly 40% of Robinhood’s userbase are between the ages of 19 and 34, in fact the median age of their users is 31 [3]. It’s important to understand that Robinhood is a broker who makes money from trades executed on their platform. In essence, the more trades done on their platform, the more money they make. Robinhood’s use of gamification is now very clear. Teenagers and young adults have little to no experience with investing. When you combine this lack of knowledge with extremely high-risk tolerance that comes from youth brashness and years of playing video games, you get the perfect targets for brokers. Robinhood is not in the business of education, they violate any aspect of justice as specified in the Belmont Report by exploiting the youth for profit.
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Inadequate Disclaimers and Disclosures
It’s without a doubt that the financial sector is extremely regulated. A lot of this regulation has to do with information and data that providers are generally transparent with customers. Unfortunately, with an application like Robinhood with heavily gamified features, these disclaimers and disclosures are extremely easy to overlook. The game-like designs leave little room for any disclaimers or disclosures about the risks users are taking when performing trades. Users essentially lose their ability to make rational decisions and we can argue their ability to “consent” sensibly is taken away. There are clear dangers to this. One such example is the case of Alexander Kearns, a 20-year-old from Naperville Illinois, who committed suicide after mistakenly believing he had lost $730,000 dollars [5]. His lack of knowledge on how options worked made him believe he had lost money and, in the end, took his own life. It’s not farfetched to say this will likely not be a rare occurrence anymore in this age of technology.
Conclusion
Addiction is a real problem. As companies continue to develop new applications, it’s only logical that they are going to want to rope in as many users as they can, and gamified features fit perfectly. The youth are the biggest victims as they grew up with technology. So the next time you open your favorite application, try to see if you’ve been hooked into a gamified model.
Sources
[1] Dhawan, S. (2022, August 11). Financialexpress. The Financial Express Stories. Retrieved October 28, 2022, from https://www.financialexpress.com/investing-abroad/featured-stories/58-of-americans-reported-owning-stock-in-april-2022-with-an-ownership-rate-of-89-for-adults-earning-100000-or-more/2626249/
[2] Eyal, N. (2022, August 25). Variable rewards: Want to hook users? Drive them crazy. Nir and Far. Retrieved October 28, 2022, from https://www.nirandfar.com/want-to-hook-your-users-drive-them-crazy/
[3] Gallo, N. (2022, June 29). Robinhood and the gamification of investing. FinMasters. Retrieved October 28, 2022, from https://finmasters.com/gamification-of-investing/
[4] Eyal, N. (2022, September 11). The hooked model: How to manufacture desire in 4 steps. Nir and Far. Retrieved October 28, 2022, from https://www.nirandfar.com/how-to-manufacture-desire/
[5] CNBC. (2021, February 9). Robinhood sued by family of 20-year-old trader who killed himself after believing he racked up huge losses. CNBC. Retrieved October 28, 2022, from https://www.cnbc.com/2021/02/08/robinhood-sued-by-family-of-alex-kearns-20-year-old-trader-who-killed-himself-.html
[6] https://edtechnology.co.uk/dashboard2/wp-content/uploads/2021/09/3726585-scaled.jpg
