Holloway Editione1.0.0
Updated August 14, 2024Youโre reading an excerpt of Great Founders Write, by Ben Putano, writer, entrepreneur, and book publisher. Heโs the founder of Damn Gravity Media, a publishing house that inspires and educates tomorrowโs great founders. Purchase now for lifetime access to the book and on-demand video course.
Robinhoodโs decision to freeze $GME turned a chaotic situation into a crisis. Yet the company never took responsibility for their role.
Without Robinhoodโs zero-commission trading tool, the short squeeze would have never been possible. Did they ever consider something like this could happen? Itโs not like they didnโt have warning signsโGME trade volume rose rapidly throughout the month of January, which meant Robinhood needed more and more cash on hand to cover deposits. In hindsight, couldnโt they have been more prepared?
Worst of all, Robinhood never took responsibility for fixing the situation. After announcing the stock freeze, they made no indication they were working to unfreeze them. Instead, they seemed to blame their customers for the freeze:
Weโre determined to provide new and experienced investors with the tools and resources to help them invest responsibly for their long-term financial futures.
(Emphasis mine)
They might as well have said, โYouโll get your stocks back when youโre responsible enough to trade them.โ
As a founder, the buck stops with you. Itโs your responsibility to foresee and avoid a crisis. When thatโs not possible, itโs your job to fix it.
Be accountable.
All of Robinhoodโs missteps were exacerbated by communication that sounded like it was written by legal. (It probably was.) Hereโs one of the more obtuse statements from Tenevโs Twitter thread on January 28:
As a brokerage firm, Robinhood has many financial requirements, including SEC net capital obligations and clearinghouse deposits. Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment.
Using legal-approved jargon like โvolatilityโ and โcurrent environmentโ raised more questions than answers for Robinhood users. Tenevโs worst offense was refusing to mention the stock at the heart of the entire crisis, Gamestop, as if uttering the name would open them up to legal action.