Holloway Editione1.0.0
Updated August 14, 2024Youβre reading an excerpt of Great Founders Write, by Ben Putano, writer, entrepreneur, and book publisher. Heβs the founder of Damn Gravity Media, a publishing house that inspires and educates tomorrowβs great founders. Purchase now for lifetime access to the book and on-demand video course.
Over ten hours had passed when Robinhood CEO Vlad Tenev finally broke his silence. By then he had become the most hated man on Wall Street. Maybe in all of America.
The irony is that Tenev built Robinhood with a mission to democratize finance for all.
Earlier that day, on January 28, 2021, Tenev and his executive team made the decision to freeze the buying of Gamestop stock ($GME), along with several other stocks that were targets of a historic short squeeze.
Unlike past short squeezes, which were weapons of the financial elite, this one was orchestrated and led by regular people. Retail investors met and rallied through a Reddit forum called WallStreetBets (WSB). Soon, the entire world was in on the action, from nurses in L.A. to Elon Musk. In just a matter of months, $GME rose from $5 per share to almost $500. The frenzy pushed hedge fund shorters to the edge of bankruptcy, costing them billions of dollars in the process.
This was exactly the type of revolution youβd think Robinhood would welcome. Yet at the peak of the $GMEβs rise, when it looked like nothing could slow the stock down, the investment platform halted trading. It was a death blow to the WSB short-squeezers.
In hindsight, Robinhoodβs action were completely justified. But their poor communication during the chaos turned them into villains. Alex Lieberman, Founder and CEO of Morning Brew, summed up the destruction best on Twitter*
Robinhood is officially a case study in the fragility of brand. It took them 7 years to build up confidence in their platform. It took them 1 day to switch from βby the peopleβ to βagainst the people.β
Courageβor the lack thereofβis revealed in crisis.
Robinhood was put in an impossible position. But the real damage was self-inflicted. Tenev and his team showed no courage when addressing their customers, destroying all the goodwill they had worked so hard to build up. They may never fully recover from the fallout of January 28, 2021.
When people are turning to you for answers, how will you respond? We can look at Robinhood as an example of what not to do when courageous leadershipβand writingβis required.
Writing with courage can be distilled into 7 principles:
Be visible
Be direct
Be honest
Be helpful
Be accountable
Be human
Robinhood broke them all.
Letβs look at each one and see what we can learn.
Tenevβs first mistake was simply not showing up when people needed him. The ten hours it took for him to address Robinhoodβs decision to freeze $GME trading is inexcusable. In that time, wild conspiracy theories raged all over the internet.
An internet sleuth discovered that one of Robinhoodβs largest investors, D1 Capital, held a large short position against Gamestop. The fund had lost 20% of its value in a matter of weeks. Was this why Robinhood delisted Gamestop?
Later, an even more damning fact surfaced: Robinhoodβs largest enterprise customer, Citadel Securities, had recently invested in a hedge fund who was on the verge of bankruptcy from the Gamestop short squeeze. Just a coincidence? Or was Robinhood forced to take action by a powerful institution?