Robinhood and the New Reality

When Charles Munger isn’t busy bashing Bitcoin, he’s bashing other new methodologies such as Robinhood.

He Is delighted that the share price of Robinhood is crashing.

Clearly Charles Munger doesn’t like Robinhood.

Why?

Is it because the members of Robinhood can communicate in order to put the kibosh on a scam that they see developing on Wall Street?

For example, when regular people thought that Wall Street hucksters were shorting GameStop, they got together and started buying up GameStop in order to drive the price up.

Many of these short sellers were forced to cash in and take their lumps.

In other words they lost a lot of money.

This bothered Charles Munger.

Apparently it still does.

Never mind the fact that Charles Munger‘s friends found a way to stop Robinhood investors from continuing their game.

You see, in Charlie’s world, it’s heads he wins, and tails you lose.

After all, he’s a Harvard graduate. His partner, Warren Buffett, is a Wharton School graduate. This is the natural order of the world. They must win.

The Robinhood investors upended that world order.

After Charlie gloated about the falling price of Robinhood, his partner, Warren Buffett, chimed in and said that Wall Street was a casino.

Are you kidding me?

Wall Street has been a casino for a long time, nearly the entire time that Warren Buffett and Charles Munger made their billions.

I get it though.

Warren Buffett thinks that people should invest and make money the way he and Charlie did.

They call it value investing. Instead of playing the roulette wheel, you do research in a company in order to ferret out an undervalued company, invest, and hold.

Here’s the problem with their argument.

Regular people don’t get the same information that Warren Buffett and Charles Munger do.

By virtue of their Ivy League connections, Warren and Charlie receive information that other people don’t have the opportunity to access.

Warren and Charlie can know either directly or indirectly if a particular CEO is physically ailing.

They can also know if one of the top five accounting firms is getting ready to audit another company.

They hear about irregularities at the cocktail parties.

Because they own large companies, they may have members on their Board of Directors who also sit on the boards of other companies. Therefore they can receive information even though they are not supposed to receive that information.

People talk.

I’m not saying that what they are doing is wrong. I am only stating a reality.

In essence, Warren and Charlie get inside information that other people do not.

This gives them a huge advantage.

Additionally, when Warren and Charlie buy a piece of a company it usually gives them the opportunity to control that company.

When you or I buy a stock, we are along for the ride.

Consequently, the average investor is looking for a way to have more control than his share would normally permit.

This entails shareholders communicating with each other so as to effectively vote as a block much like a union would do.

Robinhood and the Internet facilitated such block voting.

Thus, we live in a world where your average investor can team together with other average investors to exercise much power.

This is what bothers Charles Munger.

Just as your corporate boss from the 1950s feared unions, Charles Munger and Warren Buffett fear the unionized investor.

In the case of GameStop, the unionized investors weren’t gambling so much as they were sending a message to Wall Street which was: “We like this company. We think this company deserves the opportunity to restructure itself.”

You see, it was the institutional investors, the hucksters on Wall Street who were gambling by selling short on GameStop.

They were the cowboys in the wild west sitting at the poker table. And on that particular day, they lost.

That’s what Charles Munger doesn’t like.

He and his kind aren’t supposed to lose.

But he did.

Sincerely,

Archer Crosley

Copyright 2022 Archer Crosley All Rights Reserved

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