The last year has illustrated a new kind of "platform risk," where I think we always tried to diversify exposure to them in architecture, security, and supply chains, but it's as though it has finally trickled down to individuals.
The new risk that's I'm seeing exposed here is populist outrage can tank your business even if you've done nothing wrong, but operate in a space that isn't intuitive or won't allow you to act intuitively.
Finance is complicated, and often unintuitive and yes, the rules here tend to favor the large movers (at least larger than retail investors). How do you operate a business for retail investors in an environment where the rules will force you to screw over your retail customers (one could argue the "real" customers are the consumers of the retail investor's trade information but let's set that aside for a second) once in awhile?
You explain the rules to them as clearly as possible when they join, and put in alarm bells to sound when your margin account is getting low. Robinhood could have had a ticker on their homepage showing how close they were to being forced to stop trading, for example.
I thought a large part of Robinhood’s appeal was that it made trading more accessible to retail investors. I think the risk here is more running a business where the rules force you to screw the very audience you’re trying to target.
Platform risk has always been a factor in finance. That's a large part of why retail investing is regulated so heavily: retail investors expect an abstraction layer where your counterparties will always be there and your trades will always be settled, even though the underlying market often doesn't work that way.
