And the pandemic has been a boon to the company, making it a good bet for investors. Robinhood has added an astonishing three million accounts in the first quarter of this year, bringing the total to 13 million.
A growth chart that goes up and to the right is all well and good, but has Robinhood, as one person said to me, “made the classic Silicon Valley mistake of applying games and brain hacks to an extremely important sector,” even as it underinvested in key parts of the business like customer service?
Robinhood has certainly doubled down on eliminating friction, which in Silicon Valley is almost like a religious tenet. Too many clicks are akin to a major sin to techies, as are too many “just a sec” warnings, even though most people find stop signs useful if irritating in real life.
It’s not clear yet how things went awry in Mr. Kearns’s case, except that the way the app rendered his account before his death appeared to make him think that he was deep in a financial hole. Of his own accord, he was engaged in complex options trading, but without much oversight on the transactions and without enough information about options trading on the app. All added up, the calculation proved deadly for him.
Options trading can be very risky — and is not recommended for the inexperienced investor like Mr. Kearns. To do it, Robinhood requires an eligibility questionnaire and for a user to certify his investing experience, along with signing an acknowledgment of risk and a promise to read its materials on the topic. Other brokerage firms provide more substantive interactions on their riskiest financial instruments and even offer to explain risks in real-time conversations before allowing an investment to proceed.
One investor I spoke with likened the Robinhood experience to giving a Ferrari to a kid without a driver’s license. That kind of carelessness is especially problematic when it comes to young men, who studies have shown are more attracted to online trading, especially because of its often addictive characteristics, and whose emotional investment can be too high.
In an interview with me this week, Mr. Tenev said the company could not comment on the specifics of Mr. Kearns’s account because of privacy concerns. But clearly chastened and shaken by the tragedy, he acknowledged that fast growth has been a management issue.