In the past year, the online finance scene has garnered many absurd investing stories. One story detailed an Indonesian student who uploaded 1000 selfies of himself to be minted as Non Fungible Tokens. In no less than a month, the student made an astounding return of over a million dollars. While this was a small subset of the miraculous rags to riches stories, other retail traders in the online financial scene were not so lucky. In one case, Alexander E. Kearn, a student - in the United States - sadly took his own life after having racked up an astounding debt of over 700,000 dollars. Partly due to a software malfunction and a series of uneducated trades.
Characterized by a wide range of extreme stories such as these, the emerging online trading scene is oppressive in capturing the retail trader’s participation and interest. Moreover fostering a reality that characterizes trading in a very different way from how trading should be perceived. In examining this, I believe the philosophy of the late Jean Baudrillard provides a great starting point to understanding the oppressive and hyperreal nature of the emerging trading scene. Specifically through his philosophy of “Simulacra and Simulation”.
To begin, the stock exchanging process has evolved greatly over the course of time. Initially, the process was mostly done via a physical stock sheet. When one obtains the sheet, it not only symbolizes ownership of a portion of a company but also symbolizes a transaction. A physical transaction between individuals, whereby the relationship between buyer and seller is dependent on the physical exchanging process. In the 70s, the NASDAQ was created, and the stock exchange no longer required a physical transaction between individuals. With advancements during the 90s, e-trading became the most popular form of exchange.
With the advent of E-Trading, the physical transaction between a buyer and seller of stock was reduced to a virtual transaction. The online stock trading platforms virtually “Simulate” the physical process between a buyer and a seller. In a strict Baudrillardian sense, this was the first order of simulacra, whereby E-Trading “is the reflection of a profound reality”. A once physical reality (Simulacra and Simulation). Nonetheless, it is worth noting that regardless of being simulated, online trading still required a commission fee when a retail trader purchased the stock. Signifying an exchange or transaction between two parties, albeit virtual.
Until recently, another improvement to the stock exchange process took place. Robinhood, a mobile trading platform was founded in 2013. What made Robinhood so revolutionary was not its accessibility for retail traders, but its accessibility to commission-free trading. In other words, Robinhood had eliminated the commission fee between the buyer and the seller; in turn, the transactional process was promptly dissolved. While the removal of a commission fee may prove beneficial for technology and everyday retail traders, it is important to acknowledge that this removal “masks and denatures a profound reality” (2nd order simulacra). In other words, an exchange-less stock trade masks and denatures the reality of the once physical, virtual, and transactional process. This denatured trading process that Robinhood provides is further exemplified in its user interface. When one purchases a certain amount of stock, all it takes is a “swipe upwards”, and virtual confetti will rain on your screen.
It is no surprise that one of the biggest critiques of Robinhood entails its dangerous “gamification” of stock trading. With its completely new form of stock trading, the incoming wave of new retail traders exposed to Robinhood will be far removed from the true reality of the stock exchange. The responsibility of owning stocks is no longer enforced.
In a way, when a trader participates in a virtual or physical model of the stock exchange, his responsibility in owning the stock is triggered in the exchange process. Whether the exchange is a physical handshake, or a virtual commission fee, a symbolic exchange of responsibility takes place. Without an indicator, the modern trader will not have a symbolic gesture of the transfer of responsibility. Instead, the simple swipe up with confetti signals a game, covering the nonexistent transfer of stock ownership and responsibility. The Robinhood user is only fixated on whether or not his/her graph is going up or down. Thus, the gamified interface “masks the absence of a profound reality” (Third order of simulacra). Robinhood’s appearance as a game masks the lack of financial and business tradition that stock trading once had.
This detached reality of what trading is can hit hard for some individuals when they discover that they are not “winning”, but “losing” - both of which are arguably new perspectives in trading. And in extreme cases, a 700,000 dollar debt can build up as a matter of inexperience resulting from Robinhood’s oppressive platform. Leaving the trader unexposed to what exactly he is doing. Ultimately, the emerging financial scene is oppressive in capturing the retail trader, fostering a reality that characterizes trading in a detrimental way; further removing the individual from reality.
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