ike comments on Rationality Quotes Thread October 2015 - Less Wrong

3 Post author: elharo 03 October 2015 01:23PM

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Comment author: ike 16 October 2015 08:28:26PM -1 points [-]

People pay a fee because they are told that the fund will bring them higher returns (or less risk, etc.).

That's not how it sounds from the article and its source

What Stash tries to add, and what it’s charging users for, is both the unique framing of the funds and ease of use.

Investing in these tech or green energy companies is “self expression,” Robinson said, even if a bog-simple Vanguard index ETF plan “is probably the smart investment.”

Of course, there are still a great many young adults who are more focused on their returns. For them, Stash has an “I Want” tab that includes more diverse investments with snazzy labels.

“We talked to 100 people, and we heard the same thing over and over again: the whole concept of investing was confusing, it was expensive, it was unrelatable, it isn’t my world,” Ronick said about the conversations.

There's nothing there that implies an expectation of getting a higher return that if they'd invest traditionally.

Do you at least agree that Stash claims it's doing what Matt claims it is? And you then think that Stash is wrong about what motivates its users?

Comment author: Lumifer 16 October 2015 08:39:25PM *  3 points [-]

I think the key word here is "marketing".

“We talked to 100 people, and we heard the same thing over and over again: the whole concept of investing was confusing, it was expensive, it was unrelatable, it isn’t my world,”

This is not consumption preferences. This is needing to do something you have no idea about -- so you go to whoever claims to be an expert and you believe whatever he tells you. There are many people claiming to be experts, so it becomes crucial to use the right marketing to lure in the marks... err. customers. The old marketing style which mostly used a reliable-looking oldish white guy in a suit and a tie isn't working all that well any more, so there is a new marketing style that goes for young and hip and cool and all that.

I still don't believe that people consume and particularly enjoy investment offerings. Giving money to a mutual fund just isn't a notable sensuous experience :-D

What I do believe is that it is very much in the interest of certain people to make you convinced that giving them money has special significance.

Comment author: ike 16 October 2015 08:56:00PM 0 points [-]

I think it's important to note here that their fee is $12 a year. That's a lot more in line with "paying for a good experience" than "paying for investment advice". I don't think this $12 a year product falls into the same reference class as typical financial advisors.

Comment author: Lumifer 19 October 2015 03:27:01PM 1 point [-]

I think it's important to note here that their fee is $12 a year.

I don't see how this is a meaningful number. The cost to the user is much higher since they're now stuck in a high-fee fund. And I'm pretty sure that a lot of Stash's revenue comes from something other than $12/user/year. In particular, high-fee funds tend to pay commissions to those who sell them.

Comment author: Raemon 30 October 2015 05:50:45PM 0 points [-]

I think a much better analogy would have been "drink tap water instead of bottled water." It's a more similar instance of paying explicitly for branding with a misguided understanding of what's for sale. (i.e. most bottle water is literally tap water)

Comment author: Lumifer 30 October 2015 07:19:33PM *  1 point [-]

I think a much better analogy would have been "drink tap water instead of bottled water."

I drink bottled water. I don't care about branding in general, but the particular water which I drink tastes different from the water in my tap and I can easily recognize the difference.

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