Younger and less experienced investors may be tempted by Robinhood’s focus on “casino-like” investment opportunities, says legendary investor Warren Buffett.
A Warning to Millennial Investors by Buffett
Warren Buffett is a good example of why gambling and investment are worlds apart. The investment guru, though, believes that Robinhood, a trading platform that charges no commissions and appeals to Millennials and younger audiences, may be catering to the gambling instincts of investors who bring a casino-like decision-making process in the market, and this is probably not a good idea.
Speaking at Berkshire Hathaway’s annual shareholder meeting on Saturday, Buffett argued that “[Robinhood has] become a very significant part of the casino aspect, the casino group, that has joined into the stock market in the last year or year and a half.”
Buffett professed that he’s looking forward to Robinhood’s SEC S-1 filing as the company is readying up for an Initial Public Offering (IPO) unscathed by the GameStop stock saga, which took place earlier this year. If anything, Robinhood believes to have empowered younger generations to join and learn about trading.
However, Buffett has a warning of his own to share. While American corporations, he argues, have created “a wonderful place for people to put their money and save, they also make terrific gambling chips.” Having too many of those chips, Buffett argues, is something he doesn’t want to see in the future.
Do Not Gamify Trading
His sentiments resonate with a broader view that Robinhood is “gamifying” trading, pointing to some features, such as the confetti animation when you make your first trade and other cosmetics that feel closer to a game app than a serious trading platform, not that the two should be inherently exclusive.
Regardless of his own feelings towards the platform, Buffett recognizes Robinhood’s potency and appeal to younger investors. In fact, the platform added 6 million customers in just the first months of the year, according to JMP Securities data. Buffett went on to argue that catering to the “gambling instincts” of the general public was not the most admirable of accomplishments:
“The degree to which a very rich society can reward people who now know how to take advantage essentially of the gambling instincts of not only the American public but the worldwide public, it’s not the most admirable part of the accomplishment.”–Warren Buffett
However, Robinhood was listening and argued that “the old guard” was uneasy with a platform that turns into a gateway for young people into the investment game. “The future is diverse, more educated, and propelled by engaging technologies that have the power to equalize,” a Robinhood spokesperson said for CNBC.
The Old Guard Objects, Says Robinhood
Robinhood’s mission is critical, the company explained, precisely because it’s facing serious challenges by the status quo, which doesn’t seem to want it. “The new generation of investors aren’t a ‘casino group,” the spokesperson concluded, adding that Robinhood would end on the right side of history.
During the Berkshire Hathaway’s meeting, Buffett’s right-hand and vice-chairman Charlie Munger spared no criticism towards Bitcoin, calling it “disgusting,” but Buffett himself refused to comment, arguing that if he spoke up his mind, there would probably be 400,000 people angry at him, referring to the people tuning in to watch the event.