Warren Buffett about Robinhood: it’s like gambling
Warren Buffett has harshly criticized the Robinhood app. He did so at Berkshire Hathaway’s annual investor meeting.
The app, which has become very popular in the United States, has often been accused of being so easy to use that it has turned trading into a game. For this ease of use, Robinhood has been the victim of criticism, which is now coming from one of the leading figures in US finance: none other than Warren Buffett.
Speaking of Robinhood, the Oracle of Omaha stated that it 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”.
According to Warren Buffett, thanks to Robinhood, many small investors who perhaps for the first time found themselves with money to invest, started betting on American corporations. Robinhood has made all this much easier also by virtue of the fact that it does not charge commissions. But this choice is seen by Buffett as that of someone holding gambling chips.
And there are now millions of customers betting using Robinhood. Many have joined in the toughest months of the pandemic, but others continue to join. As many as 6 million have signed up to Robinhood in the first two months of 2021 alone.
This growth is not illegal, nor is the way Robinhood incentivizes trading, but according to the US financier, it is not “healthy” either:
“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”.
Moreover, GameStop’s pump shows how this mechanism can be very dangerous.
Robinhood criticized also by Warren Buffett’s partner: the response
Warren Buffett’s partner and Berkshire Hathaway vice chairman Charlie Munger also attacked Robinhood:
“It’s deeply wrong. We don’t want to make our money selling things that are bad for people”.
Robinhood responded. As reported by CNBC, according to a spokesperson for the app, the words coming from the top executives of Berkshire Hathaway are typical of those financiers who would like this world to be shut down:
“There is an old guard that doesn’t want average Americans to have a seat at the Wall Street table so they will resort to insults,” a Robinhood spokesperson told CNBC. “The future is diverse, more educated and propelled by engaging technologies that have the power to equalize. Adversaries of this future and of change are usually those who’ve enjoyed plentiful privileges in the past and who don’t want these privileges disrupted. Their criticisms are unfortunate but they prove why Robinhood’s mission is in fact critical”.
In short, the investors using Robinhood are not casino players. They are simply entering a market that until recently was restricted.