In the smartphone-driven instantaneous information access age, there's virtually no ability to remove the prior of access. One imagines Dostoevsky's Gambler would be much less interesting to read about if he existed in a nation that had no roulette. Beyond the sports betting ads shoved ad nauseam in every broadcast, nook, and cranny of ordinary society, it's never been more impossible to *avoid* it all. The securitization of everything was not made to withstand seamless speculation. The endless operation of markets, and markets on those markets, and markets on *those* markets, means that no matter where you are in the world, as long as there is internet access available, you can place a trade, having done so myself 35,000 feet above the Pacific Ocean on my way to Singapore.
One of the “lessons” every trading influencer will beat you over the head with is the obvious advice to “control your emotions”, but there’s a corollary — you can’t be totally unfeeling if you’re not trading in an automated fashion because you still have to close the trade, and that requires some sort of profit/loss sensitivity. The psychotic ability of a Tom Dwan to not have any money sensitivity as to how much is in a pot has repercussions when there are no discrete exit points like a turn or river. A trade has no finite endpoint other than option expiry — you have to know when it’s time to get out, and complete apathy towards the actual $ amount hurts more than it helps.
Trading undoubtedly induces adrenaline when you have a position in it. Stocks don’t have enough leverage to induce the thrill that a volatile options trade might. But the downside to an adrenaline-inducing activity is it can get addictive fast, especially when you have products like crypto or futures that trade around-the-clock. You find yourself chasing that hit of an 80 VIX like a Red Bull sponsored skier chases that god run from the pristine mountain peak. I myself have fallen prey to this — for a 3 month period in 2017, I would wake up at 4:30 to trade the KC open, then the CL open, have some breakfast before the regular markets opened, trade until close, sleep for a couple hours/go to happy hour or dinner, and then trade the night session until sleeping for another couple hours pre-KC open. It was almost standard to be watching markets 17 hours a day. This is why the goal of every manual trader is automation, because that way you don’t have to worry about the fact that you might miss a trade due to human concerns like, well, life.
So when I see articles like this, I totally sympathize, even though crypto addiction is decidedly a lower-rung societal problem:
In the circle of a therapy session in an 18th century Scottish country house are half-a-dozen recovering addicts. Many recall, at their lowest points, battling chronic depression and contemplating suicide. The patients, all male, share harrowing stories of dealing with a newfangled addiction: compulsive crypto trading. Some say their crypto addiction combined with an alcohol or drug habit, while others say they began by treating trading digital tokens much like gambling. “I spent eight hours a day on Reddit reading [crypto] white papers, thinking I’m making an intellectual decision . . . it was just ridiculous,” said one patient.
While most industry relies on specialists (due to the fact that humans are, well, creatures of specialization since the hunter-gatherer divide), I’ve noted before that
“Finance” is the practice of pricing and allocating risk through the movement of capital and reorganizing exposure to those movements and what it creates. It’s truly a composite field composed of all sorts of “actual” areas of study like math, law, econ, history, and philosophy, with a little psychology thrown in for good measure. As such, it’s where generalists truly shine.
What this implies is that there’s endless rabbit holes to go down. It’s the most interesting problem with no one solution; there’s always another angle to shoot. This is why generation after generation of academics get intoxicated and make their way into finance rather than, I dunno, doing something more useful for society overall. I have found it near-impossible at times to stop thinking about new solutions — indeed, one of the hardest things to do was to stop trading futures so I’d actually focus on other things. Market hours need to be reduced, not expanded. I wholly empathize with being unable to look away from the charts, having been there myself.
Trading venue GFO-X said: “All investors — whether retail or institutional — deserve access to orderly markets which establish price discovery, in the same way as other financial instruments or commodities. The rhetoric around crypto assets being classed as gambling is extremely unhelpful and provides worse customer outcomes.”
Much like Diageo will put out “drink responsibly” advertisements while never explicitly acknowledging that its business relies on alcoholics, any company that derives its revenue from trading volume cannot explicitly say that they need people constantly flowing in and getting addicted to the volatility. Sometimes, the companies explicitly do it — a glossy veneer of a trading interface and “tools” to assess the market and seamless one-click trade execution is entirely rigged to get you addicted, much like a slot machine:
Robinhood is employing the same tactics used by social media companies to get you hooked. It absolutely is not scare media when they report on the marketing that results in people trading far more than they should, and their “Robinhood Year-End Recap” version of “Spotify Wrapped” is absolutely appalling for a brokerage that purportedly has your fiscal interests at heart to do.
Robinhood is by far the worst offender of “gamifying” trading and enabling access to people who undoubtedly have no business trading options:
The accusations from Massachusetts center on the tactics that the company uses to keep customers engaged, claiming that it “encourages customers to use the platform constantly” through what it calls “gamification.” The complaint alleges that, through the promise of free stocks, push notifications and its signature digital confetti, Robinhood encourages “continuous and repeated engagement with its application.” State regulators allege Robinhood allowed one customer with no investment experience to make more than 12,700 trades in just over six months.
In another example, the regulators point to Robinhood’s rollout of a new cash-management feature, accompanied by a wait list for customers to sign up for early access. Customers were given the ability to improve their position on the wait list by “tapping” a fake credit card in the app up to 1,000 times a day, the complaint says.
I wrote about this lawsuit and Robinhood’s sadistic UX a couple years ago, and noted that
On my old site, I documented a case of a $4000 account being leveraged to hold upwards of $1 million of Apple stock, an oversight of Robinhood margin calculation that led to the CNBC wax statues calling the exploiters ‘psychopaths’. This error, while ‘patched’, culminated in the suicide of a 20 year old who couldn’t get a response in time to a visual glitch. It is also a well documented phenomenon that retail traders are generally awful at trading, and I have long maintained that Robinhood’s popularity might end up destroying a generation of savings. Although it seems long overdue, it seems that regulators are finally realizing what has been wrought:
In a 24-page complaint, the enforcement arm of the Massachusetts Securities Division said Robinhood failed to protect its customers and their assets, violating state laws and regulations. Robinhood exposed Massachusetts investors to “unnecessary trading risks” by “falling far short of the fiduciary standard” …
But Massachusetts is claiming that Robinhood violated fiduciary standards by not having their client’s best interests at the highest priority, which is a tough argument to make: if your clients are happy with your offerings, and your offerings literally cannot guarantee profit, what exactly is the duty they are flouting here? There is nothing fraudulent about your product ‘offerings’ - it is just what is available on open markets. Robinhood should have been held more accountable for their incorrect margin calculation, but there was nothing violating fiduciary duty, nor was there anything fraudulent - it was a chud-tier oversight.
The crux of the issue is that trading is gambling-adjacent but not exactly gambling; when you add “Wall Street” to “Bets” it becomes a community that will “gamify” a stock that isn’t regulated like “games of chance” which, admittedly, can lead to hilarious outcomes. Have you ever listened to your buddy talk about a poker or blackjack bad beat and been absolutely exasperated hearing the same stories of why variance by all “logic” shouldn’t have reared its ugly head and caused the loss of a hand that was obviously winning, and realized that this is the exact same slant as most people bitching about a trade that went awry? (Frankly, the only gambling tale I care to hear anymore is by Dostoevsky, of course.) There is virtually no difference between gambling and trading addiction, as social media has proven.
Unfortunately, as I highlighted years ago, I was pretty certain Robinhood would be absolved of their exploitative design, and it seems like that’s the case:
Suffolk County Superior Court Judge Michael Ricciuti in Boston ruled in a lawsuit Robinhood filed after Massachusetts Secretary of State Bill Galvin in December 2020 accused it of encouraging inexperienced investors to place risky trades.
The decision impacts only part of Galvin's administrative enforcement action, and he may still pursue claims that Robinhood's conduct was unethical or dishonest and that it failed to adequately supervise employees…
But Ricciuti wrote the rule improperly overrode Massachusetts state law governing stockbrokers' duties and that Galvin went beyond his authority by adopting a regulation that conflicted with federal law.
When a brokerage is dependent on specifically PFOF revenue, you get a misalignment of incentives. Much like a dating app loses money by enabling functional relationships, a retail brokerage loses money when people trade less. I don’t know how we stop this flywheel, but certainly the people that put it in motion must be made to acknowledge that this is severely detrimental to people’s health and savings. Alas, speculation is human nature, after all:
As for me, I lost everything, and very quickly. I straight away staked twenty friedrichs d’or on evens and won, staked five and won again, and so it went two or three more times. I think about four hundred friedrichs d’or came into my hands in some five minutes. I should have walked away right then, but some strange sensation was born in me, some defiance of fate, some desire to give it a flick, to stick my tongue out at it. I placed the biggest stake permitted, four thousand guldens, and lost. Then, getting excited, I took out all I had left, staked it in the same way, and lost again, after which I left the table as if stunned. I didn’t even understand what had happened to me, and announced my loss to Polina Alexandrovna only just before dinner. The time till then I spent loitering in the park.
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