Robinhood is slick new social investment app recently released for iPhone by Vlad Tenev and Baiju Bhatt. Both have previously excelled with their joint algorithmic trading companies Celeris and Chronos Research. While working here they felt they had found a gap in the market for consumer investing. The goal of Robinhood is to provide crowd investment advice. Research teams at Stanford and MIT have found data suggesting that crowd investment prediction can perform better than high skilled investment managers. Robinhood has been backed by Google Ventures, Strategic Angels and members of GETCO. Google Ventures put lots of input into the style of the app which is slick and professional, a critical attribute as it’s success is based on trust.
Robinhood begins by suggested popular stocks and friends to follow which can be added to watchlists to track performance. Individual stocks have up to date news tab containing popular finance articles. Information is available on individual stocks over time, related news and a crowdsourced buy/sell rating. For instance, 64% of Robinhood’s community currently rates Google as buy. You can add you thoughts too right to the chart by dragging a finger over to indicate a rise or fall in coming weeks and months, as well as adding a comment. The center piece of Robinhood is the prediction feed full of recommendations from those you follow. This acts as a social network for stocks, where you can agree or disagree over a rating and ask people specifically why they came to that conclusion.
A critical feature of social investment is who to trust. The investment industry as a whole is based on predictions fed from anything from a single to several thousands factors. No single prediction can be guaranteed, but a winning approach should average out over several predictions. Sometimes every investment advisor is wrong which they don’t really want to advertise. In this age of social information it’s a lot harder to hide and probably a better environment where we all need to think harder before distributing potentially bad advice. In Robinhood, the performance of each users stock prediction is shown on their profile and allows them to be ranked. The apps’s community tab offers leaderboards of the highest performing advisors. Bhatt explains that along with fostering transparency and trust, the ratings are “a way for people to show they’re smart. That’s a very compelling driver of any action.” In early testing 25 percent of users were contributing predictions, which is high for user content driven apps. This confirmed the groups thoughts on the pent-up demand for a collaborative stock research app. However, the markets have long been know to be perilous. Those who buy ahead of such viral stock purchase can reap large rewards, but joining too late as the price crashes can leave the novice burnt. Anyone can get their hunches validated or invalidated by the knowledge of a crowd that’s held accountable to their predictions. While the stock market will always be risky, Robinhood lets you know you’re not alone in facing those risks.
Robinhood enters a growing market of independent investment apps. Stocktwits based around Twitter already provides a form of social investment in an unstuctured way. In future updates to Robinhood the company hopes to integrate direct stock purchasing, as major investment company apps such as E*Trade currently offer. The most exciting aspect of Robinhood is it’s potential to shift access to good investment advice away from the privileged (rich) to the masses (poorer) through talent and cooperation. Tenev explains his app’s name reflects that. “We understand the connotation of taking something from the rich and giving it to the poor. Robinhood is liberating information that’s locked up with professionals and giving it to the people.”