Meet Max. Max is 10. He lives in Westchester. Last Christmas his parents must have decided that it was about time Max put away childish things, because they gave him a gift that he'll never outgrow: a day trading account. They did so through an app called Stockpile – yes, Stockpile – which makes fractional amounts of publicly traded stocks available to low-dollar investors for fun and profit:
Max said he is invested in Microsoft, Tesla Inc. and Walt Disney Co. , among other firms, although his favorite publicly traded company at the moment, he said, is probably Take-Two Interactive Software Inc. —the distributor of videogames including “NBA 2K18”... After expressing an interest in stock investing, Max started receiving fractional shares purchased online from Stockpile in return for helping his parents out with chores around the house. “I think investing in the stock market will help kids later in life,” Max said, adding that he thinks more people should begin investing earlier on in life. “Sometimes when adults start investing, they don’t even know what to do.”
Now before you start to wonder what lesson, exactly, there is to be learned by letting a kid fritter away his hard-earned allowance on the stocks of companies that make his favorite cartoons, consider why Stockpile – which recently got a $30 million Series B round from investors led by Fidelity – has its sights on America's youth:
“It goes to show you that millennials and other young people want to invest,” Stockpile’s founder and chief executive Avi Lele said. “They just historically haven’t been able to at a young age because you need money and knowledge, both of which are in short supply when you’re young.”
It's easy to scoff at the suggestion that what ails America is that kids can't buy and sell stocks several times a day. They're drawing on the Robinhood delusion, that convincing young people to do idiot things with their money is a way of “democratizing finance.” But from a business standpoint, you have to appreciate what Fidelity is doing here.
Imagine a responsible investing app. Maybe it's a Bogle thing. It would teach kids to empty their piggy bank into low-fee index funds, to allocate them appropriately across stocks and bonds, and to mostly just sit there and do nothing. Needless to say, kids would hate it. The gameplay would be terrible. It might win over the same sorts of kids who play flight simulators, but that's a rather niche community.
So you have to make it faster and more interactive. But it's not just action and speed that a successful app delivers. It should also engineer rewards so as to trigger jolts of dopamine, which lock in obsessive behaviors like checking for new text messages. Part of Snapchat's success among teens, for instance, is the way it rewards streaks of exchanged snaps, gamifying daily interactions between friends. Every time the app sends a pulse through your leg, it travels up to your brain where it floods your brain with the same neurotransmitter that makes slot machines addictive.
Day trading stirs up similar juices. The prospect of quick money and instant gratification stimulates dopamine pathways. The somewhat random nature of intraday stock returns makes the prospect of sudden rewards even more tantalizing.
Stockpile's genius is to combine the inherently addictive nature of smartphone games with the compulsive charm of speculating small dollar amounts on individual equities. It's a double-whammy of dopamine-induced fun. Find a way to add in selfies and dancing lunchmeat, and this thing could really take off!