Back in 2013, hedge fund software programmers Baiju Bhatt and Vladimir Tenev made the bold choice to leave their Wall Street business behind and start a new one, all based around a free stock trading app.
They had a vision, a prototype, and a dream – one that would eventually become a reality after wooing a handful of venture capitalists – but the road to finding their first investor wasn’t easy.
Bhatt and Tenev courted seemingly every deep-pocketed executive and money manager they could find.
Almost every time, they were met with the same responses:
“There’s no way it’ll work.”
“There’s too much competition”
“It’s too risky.”
…and even sometimes:
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“You guys are absolutely crazy.”
After 75 fruitless pitches and long periods of reflection on what they were doing wrong, the entrepreneurial duo finally found a few backers who offered them financial support – breathing life into the project that they so strongly believed in.
So, with a fistful of dollars and a chip on their shoulders, Bhatt and Tenev began to prepare their app for release. Neither of them had any experience working with consumer-facing products, and success from here looked like a longshot at best.
Nonetheless, after completing a working version of the app, they set up a website with a description on the homepage, which spelled out in plain terms what their new stock trading platform was offering:
“Commission-free trading, stop paying up to $10 per trade.”
Underneath that message, was a button that let visitors sign up for a wait-list – which slowly added new users to the app each day.
Word quickly spread about the trading app’s zero-fee structure, and in a short period of time, Bhatt and Tenev’s new venture was generating some serious buzz.
It all came to a head, though, when an article about the new app was published on Hacker News, a website popular with tech-savvy millennials. The story about a no-commission stock trading brokerage went viral, and within a few weeks, the app’s waitlist swelled to 1 million users – all before the product even launched.
The app itself is called Robinhood, and since launching it has grown in value to roughly $6 billion – making its founders some of the wealthiest self-made men under the age of 30. Its popularity with millennial investors is largely to blame for its success, and the zero-fee trades attracted tons of first-time stock traders, who could now play the markets entirely through a user-friendly smartphone app.
Robinhood was a revelation for many young, career-minded individuals – all of whom regarded investing in the stock market as just “something their parents did”.
With the Robinhood trading app, users weren’t just buying shares of stock – they were buying familiar brands. Some analysts credit young Robinhood investors with saving Snapchat (NYSE: SNAP), a picture messaging app, from several major crashes, as it was routinely the most popularly traded stock on the app – simply because millennials recognized it, price-earnings ratios be damned.
But I don’t want to just sit here and talk about the genesis of Robinhood, or how its creators managed to hit a nerve with novice investors.
Instead, I want to talk about how apps like this – ones that make stock trading simpler and more user-friendly – are going to lift more people out of poverty and mediocrity than any government program ever could.
Young people in school or entering the workforce these days are routinely taught that in order to make money, you have to work hard.
In order to make money, you need to invest in your education.
In order to make money, you need to trade the little money you have now for skills that will bring you wealth.
These points are reinforced to them every single day, especially the last one – coercing many poor souls into a mountain of high-interest student debt.
And yes, while it is true that hard work is usually rewarded, the fact of the matter is that there is another way to make money that many young people haven’t discovered:
You can trade the money that you’ve earned through hard work for something that will build wealth nearly effortlessly.
As obvious as it may sound to you or me, there are millions of people in the world that don’t understand this – and most of them are under the age of 30.
This is nothing new, though. Young men and women have, by and large, not been the best investors throughout history.
And I don’t think it’s caused by millennials who merely shirk responsibility in favor of flashy new gadgets – as much as the media would have you believe. No, explaining why most young people these days are “doomed to fail” in their early working years is a bit more complicated than that.
Over the last several decades, middle-class kids brought up through the public school system are (for the most part) locked into a track that culminates with some sort of secondary education.
After all, going to college is what their parents did – and look how successful they’ve become!
These kids pursue degrees (some better than others), graduate in 4-6 years, and finally hit the workforce, tethered to a monthly financial aid payment that rivals most peoples’ mortgage.
Due to the rapidly rising cost of college, the American dream has slowly warped into a modern form of indentured servitude – with new employees working in the name of their almighty lender.
Investing in the stock market, or anything that gains interest over time for that matter, is somewhat foreign to young people. Putting money into something that slowly builds wealth doesn’t seem worthwhile to millennials – or at least it didn’t until Robinhood came around.
And I don’t blame them. Self-directed investing through a brokerage can be quite daunting – especially to someone that already has some bad experiences with financial institutions (loan providers) in the past.
Apps like Robinhood are tearing down the barriers that prevent people from getting into the market earlier in life, and in doing so, they are inducting new members into a society where time – something that you’ll never get more of – is extremely valuable and must be managed efficiently.
This one act of getting first-time investors’ feet wet is going to change how millions of people view true wealth creation – something that had sadly been lost by the middle class.
But with new, easy-to-use solutions for novice stock traders, I’m happy to say that this could be the first step in a financial revolution for young investors – all of whom are undoubtedly rich with the most important resource of all.
I’d better google it to find out.