Show Me the Money, Honey!
Platforms and Investing
I have often spoken about financial independence and value of saving/investing early in life. In fact, one of my last discussions with many of my graduating class is about the need to save first and then spend. Some of you would recall scribbled notes of break up of your take home salary where discretionary spending would be at the end once your insurance, pension, loan repayment, short term savings and mid-term investing goals had been met.
In my previous newsletters , I have spoken about Shape of Money and Shaping Money. Last week’s newsletter on Platform and the Business of Love had a special section on various financial management tools for couples.
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If you would like to read a summary of the 45 posts in 2020, please do read this newsletter.
DTW
During the Week, RobinHood CEO Vlad Tenet appeared before the United States House of Representative hearing to answer questions related to #GameStop and other “meme stocks”. This was one of the most talked about story over last few weeks and also a sneak preview of the future of investing especially on platforms. If you would like to get a quick update , please read these stories on NYTimes and CNET.
As more and more stock investing becomes automated, we are also seeing '“Democratisation of investing” via platforms like RobinHood in USA and Zerodha in India both of which offer people the opportunity to make fee-free investments. Most of these platforms are driven by Millenials investors , gamification of investing and mob mentality/wisdom of crowd.
Many enterprises in India have grown in last few years started offering two broad categories of Investment Management platforms and Investment platforms. Three factors may have created this current trend of platformisation of investing - First, Rise of Millennials investors; Second, Gamification of Investment process and Third, Wisdom of crowd dominating expert advise.
Rise of millennials as an investor class has brought new rigour and direction for almost all investment/asset class. They have higher risk taking capabilities and in fact during the pandemic , the bored, stay-at-home unemployed , twitchy finger cohort has poured billions of dollars in US stock market through both stock and options trading. According to a report by Groww , the thought process which screams ‘quick money’ has gradually pushed millennials to derivatives and other complex financial instruments.
An earlier report by E&Y points that gamification will revolutionize client experiences and relationships, leading to improved investor loyalty and better investment outcome. Latest trend is gamification of investing which is best exemplified by RobinHood App use of graffiti when you make a trade or running a leadership board on number of interactions on the app interface. This has led to promotion of gambling-like behavior and exploiting people's interest and greed to push them to adopt behaviors that are not in investors’ best interests but enrich the platforms.
Many others have lamented this new generation of investors that treats the markets like a slot machine in a Las Vegas casino at 2am thus raising the question whether applying gambling theories to investing is wise. Perhaps we need to find way that bridges the gap between gamifying investing and investing itself.
Social media including reddit and private groups on WhatsApp have fuelled mob-like behaviour across various investing platforms.
This social media influence has led to rise of influencers and/or private groups dishing out investment advice and thus moving huge pile of cash in specific direction/stock. Last months frenzy around #Gamestop , AMC and other stocks is an indicator of future of investing which is driven by non-experts.
To conclude, future of investing on platforms would be driven by tech-savvy financially impulsive , social media driven , casino-fun chasing and wisdom of crowd influenced investors.
OTW
Over the Weekend, I got hold of The Last Queen by Chitra Banerjee Divakaruni which is a fictionalised account of the beautiful Jindan Kaur who went on to become Maharaja Ranjit Singh's youngest and last queen.
I first read about the life of Rani Jindan Kaur when I reading another book Kohinoor: The Story of the World’s Most Infamous Diamond by William Dalrymple and Anita Anand. Though the book was focussed on the journey of Kohinoor diamond but I was intrigued by the cruel treatment meted out to Maharani Jindan Kaur and her young son Duleep Singh ji. She was forced into exile , then escaped the house arrest, moved to England and eventually died there at a very young age of forty six though she looked older reflecting the tragedies of her life.
More power to the incredible women in our history and present times.
I Love You
Shailendra
PS- We had an amazing episode of MountainSpeak with Kamana Gautam on 14th Feb 2021 discussing about living a sustainable life. Kamana is Nutritionist, Lactation Consultant, Farming Enthusiast and an Unlearner. Follow her Instagram Page for her brilliant work- You can watch the episode on this link.
MountainSpeak is a Free-Form Conversation Style Platform for exchanging ideas about Multi-sided Networks, Business , Marketing , Endurance Running and Life in general ! You could sign up and join once-a-month session here !
Hi Sir
I loved your thoughts.
According to me, the Gamestop and AMC like incident is happening because of free cash provided by the US economy to its public in Pandemic.
Money is routed to market. People are taking the risk and playing it like a game. Two cheques has been dispatched till now, such incidents happened just after second relief cheque.
Just thinking, what would happen if third cheque is dispatched in coming weeks, which is the biggest one. The game might become more reckless, as people are not bothered to lose this free money
No one else could've captured it perfectly. Also seeing the current trend in crypto currency, pumping and dumping of coins just by mere tweets ( read Elon Musk). With the most recent example of an altcoin that was just treated as a joke appreciated in its value by over 700%. The kind of influence these billionaires have over the fluctuations is leading to unhealthy growth.