Investing is entertainment, traders are celebrities, BREAKING news has live odds, everyone has inside information, the American dream is to get rich quick.
Yep, Fidelity and Schwab have a large number of 401(k) retirement users whose employers have picked the provider. Also, their average user is older and benefits from decades of compounding. 75% of Robinhood customers are millennials and genz who have less assets.
It’s the classic pattern: young, impulsive personalities burning time, money, and energy on get‑rich‑quick schemes, speculative bets, and gambling—almost always ending with nothing to show for it. All that effort comes at the expense of the one thing they can never get back: the years that could have been compounding steadily inside a simple, low‑cost portfolio of broad‑based equity ETFs. Sounds boring, but many may wake up in their 40s, 50s, and 60s having to work shitty physically and mentally demanding jobs for minimal pay - this because they pissed all of their time and money away in earlier wealth building years.
There are many periods of mania throughout history where people believed that speculation yielded more than hard work: Ancient Rome in the 2nd century AD, Dutch empire in the 1630s during the tulip mania, England in the 1690s where everyone started a diving company, Mississippi bubble in the 1720s driven by John Law, the railroad bubble, roaring 20s, dot com boom, etc. But what’s different about today is the access: through the smartphone, we have over a hundred million monthly active traders, which is unprecedented. In comparison, only a *few hundred* people participated in the tulip mania.
There’s a case that insiders improve market pricing (they do), but they also change norms about how people with privileged information should behave. Should athletes bet on their own games? They shouldn’t because there are explicit league rules against this, but should their friends or acquaintances? Should a waiter at a restaurant who overheard the athlete say something about the starting lineup? Should someone who went to the same gym as the athlete who can see that they look injured before a game? These things used to be gossip before, but now there are explicit markets to profit from them. The positive externality is that news comes with live odds, which is arguably more accurate than gossip.
Equities assets per user for Robinhood is ~25x smaller than Schwab/Fidelity. Interesting...
Yep, Fidelity and Schwab have a large number of 401(k) retirement users whose employers have picked the provider. Also, their average user is older and benefits from decades of compounding. 75% of Robinhood customers are millennials and genz who have less assets.
Please edit your Equities graph, footnote #3: Fidelity and Schwab numbers should be $X Trillion, not Billion, thanks.
Fixed, thank you for noticing.
Terrific post, by the way, thanks.
It’s the classic pattern: young, impulsive personalities burning time, money, and energy on get‑rich‑quick schemes, speculative bets, and gambling—almost always ending with nothing to show for it. All that effort comes at the expense of the one thing they can never get back: the years that could have been compounding steadily inside a simple, low‑cost portfolio of broad‑based equity ETFs. Sounds boring, but many may wake up in their 40s, 50s, and 60s having to work shitty physically and mentally demanding jobs for minimal pay - this because they pissed all of their time and money away in earlier wealth building years.
There are many periods of mania throughout history where people believed that speculation yielded more than hard work: Ancient Rome in the 2nd century AD, Dutch empire in the 1630s during the tulip mania, England in the 1690s where everyone started a diving company, Mississippi bubble in the 1720s driven by John Law, the railroad bubble, roaring 20s, dot com boom, etc. But what’s different about today is the access: through the smartphone, we have over a hundred million monthly active traders, which is unprecedented. In comparison, only a *few hundred* people participated in the tulip mania.
There’s a case that insiders improve market pricing (they do), but they also change norms about how people with privileged information should behave. Should athletes bet on their own games? They shouldn’t because there are explicit league rules against this, but should their friends or acquaintances? Should a waiter at a restaurant who overheard the athlete say something about the starting lineup? Should someone who went to the same gym as the athlete who can see that they look injured before a game? These things used to be gossip before, but now there are explicit markets to profit from them. The positive externality is that news comes with live odds, which is arguably more accurate than gossip.