None of those would explain why his answers were so ******ed or why his plan for this business makes absolutely no sense and is internally inconsistent.

This isn't going to fail tomorrow but this business will not be around in five years. I'd actually be surprised if it gets past two years.

I bought a few shares on the platform last week. easy to use.

could you link the interview? i've watched a few interviews with elon musk and despite being smart sometimes he comes across as a weak public speaker. it could be the case in this situation, as well.

http://www.bloomberg.com/video/how-r...i3ffTlBow.html

well, that was bad. dodged a lot of questions (regarding operating costs) and the ones he didn't dodge did not have convincing answers (young people would rather invest in individual stocks than index funds because the former is less boring, they make money by reeling people in when they are young and charging them later (assuming they will stay out of loyalty)).

The model is fundamentally flawed. Their target demographic is first-time investors in their late 20s who they offer the service for free.

The revenue is supposed to come from individuals who use margin but even in traditional brokerages where you have experience mature clients the percentage who use margin is really low -- I believe it is about 20%.

Given their target demographic we can realistically expect what percentage to be margin users? My most optimistic estimate is really low single digits but a realistic estimate is less than 1%. He is talking about people opening up accounts with hundreds of dollars which is a joke.

The encouraging inexperienced people to invest in individual stocks is also an issue. I was a young investor -- I can't remember exactly how old I was but I know I was still in high school. Of my initial stock choices two went to zero. One went ballistic so it made up for that but I had no idea what I was doing. People who don't know what they are doing to lose money. This is not how you make people into long-term investors.

What I see of value here is the software. I haven't used it but I have a feeling it will be better than what is currently out there. The second thing of value is the client list. Most of them are going to be useless but it isn't costing very much to gather a list of young people who have at least expressed an interest in investing. If the software is any good this gets bought by someone who abandons the free model and just keeps the IP and clients.

I don't trust that haircut

He addressed all of this in the interview. Did you even listen to it? Or were you too busy thinking he's a "complete idiot" because he's young and has no charisma?

He said people start with a couple hundred dollars and then add more over time, as they feel comfortable with the platform. He also said they are trying to get people when they are young so they stay with the company for life.

Dude went to Stanford and has raised $16 million from Google and Andreesen Horowitz. I think it's safe to say the complete idiot here, is you.

Did you watch the same interview?

Cory hands him a paint-by-numbers interview and the guy shows up either without preparing for the questions he should know are going to be asked or worse he actually thinks those answers are good.

He doesn't seem to realize that his answers are internally inconsistent.

He does a ****ty job of avoiding the obvious issues with the business model.

There is absolutely no way you can watch this interview and have any confidence in a business under his stewardship.

On Bloomberg West at least 30% of the guests are young. It really isn't a factor. Some have great ideas -- a lot of them have stupid business ideas. The difference is that even for young people with stupid ideas for most of them you can still predict that while this is going to fail the founder is still going to go on yo be successful. This guy is a moron.

To be fair I have seen the co-founder interviewed and he is much smarter. I can see him having a future but since this is the 3rd business they have started together he needs to lose the dead weight.

So you can't even name one ******ed answer then?

He said words but he didn't address any of the obvious flaws in the model.

So when is projected profitability -- 2050?

I believe he went to Stanford for physics. He might actually know a lot about physics.

Countless startups get funding. It doesn't mean anything. When someone is looking to invest in a startup they are not endorsing the business model but only betting that they will be able to get their money out at a higher valuation. I don't see that as an unreasonable bet if we consider this an IP play and client funnel that gets bought and shutdown.

When somebody goes to Stanford and then they found a startup and get Google and Andreesen Horowitz to give them $16 million in funding, it's a fairly safe bet they are not a 'complete idiot'. All of those institutions vet people for high intelligence and aptitude. Making it through all three while being a 'complete idiot' and with no competence, would be a very impressive feat. He'd probably be the first person to ever do it.

As for your criticisms of their business model, you may be right. I've never run an online stock brokerage and am not familiar with the costs and how much you can make off of 20-something clients. Maybe you have run a business like that and you know it better than he does. In any case, I've yet to see compelling evidence that he is a 'complete idiot'.

I can't speak to Stanford's admission process but if you think angels and VCs vet investments based on how intelligent the founder is you'd have a lot of trouble explaining a good percentage of the startups that get funding.

When it comes to angels a decent percentage are ******s who won the lottery on a previous venture themselves.

By putting so much reliance on the authority value of getting funding I also get the feeling you are not familiar with how many startups get funding and fail.

Or perhaps you just suck at making reads on how intelligent people are based on their CNBC interviews.

If you think Google and Andreessen Horowitz are in the business of funding 'complete idiots', you don't know much about either of them. Which I guess isn't surprising since you aren't even aware of the fact that you have to be really ****ing smart to get into Stanford.

You're also supposed to be really ****ing smart to get into Harvard yet I've met plenty of idiots who graduated from there. I guarantee there are plenty of idiots at Stanford as well -- admissions relies on prior academic performance which is not really that good of a proxy for intelligence.

The long game here might be to make the retail order flow available for HFT's to prey upon. Pull in volume with the $0 commission structure, sell the order flow to HFT's, and the fees get hidden in the prices retail orders get filled at. Obviously it would be unpopular to discuss this, so the margin revenue they're talking about is probably just to distract people from the actual business model.

I considered that but then they can't target 20-somethings and first-time investors.

Zero-commission trades isn't new. This has been done at least a half-dozen times before -- the whole unique thing about this attempt is that they are supposed to target a new demo of broke young people. That isn't going to get the volume you'd need.

Facebook started with college kids. Now everybody with an internet connection is on it.

Just because their strategy right now is to go after 20-somethings doesn't mean that's the end game. That's just where they think they can get early traction. And it seems to be working, I tried to signup and they put me on a waiting list, with a few hundred thousand people ahead of me.

Is it just me or does their logo look like a dick?

looks like a delicious ice cream cone to me, man

Rooting for this to work out since it really is the lesser of evils in the retail brokerage space. But they definitely aren't saving lives or doing charity work here.

There's a lot of problems with U.S. equity market microstructure, some of which have been publicized, albeit not very thoughtfully or accurately, by Michael Lewis in his book Flash Boys. Among the problems, brokers are already selling your "uninformed flow" to Citadel and the like. Or they are feeding it to their internal MM (e.g. IB - Timber Hill). Also, as a retail trader, you will never see the exchange rebates for liquidity provision.

Unfortunately, it may be years, if ever, before market access is equal for all participants. Microstructure issues are incredibly complex, have many special interest groups fighting it out, and the impact of various alternatives is not fully understood. Robinhood's founders are not tackling these issues. In fact, as some of you have surmised, it's likely they will in fact use them to their advantage.

But there is one thing that they can easily attack. That is the ridiculous commissions being charged to the majority of retail investors with accounts at Etrade, Ameritrade, Merrill, Scottrade, etc. (Note: There are some online brokerages catering to active traders, but they have other fees, minimums, etc.).

Robinhood touts the ability to offer zero-commission trading in part because of their use of automation to scale. While this may partly be true and I'm sure they are running lean, equities trade processing is already highly automated and explicit costs should in fact be minimal. I wouldn't be surprised if they are getting free execution and clearing for the first year or two of operation. I certainly don't expect them to be hemorrhaging money absorbing execution costs on behalf of clients, and they may already be breakeven to slightly cash flow positive from net rebates. So I think they have a reasonable idea to undercut the competition/alternatives by offering barebones mobile trade execution at zero commission. They've attracted a lot of interest and have a long waiting list and should eventually have sizable retail flows. Then they have several options for monetization, including internal MMing, selling flows to MMs, and charging for various add-ons or premium services.

what is the margin loan rate at robin hood? is the trade a market order?

https://brokerage-static.s3.amazonaw...20Schedule.pdf

According to this, you have to contact support for their margin fees.

I heard it was "above market rates" at 5%. Doesn't sound above market at all. Not sure how they will make any money on "above-market" 5% margin.

that is definitely not shady

IB is 1.6% below 100k, 1.1% above 100k