🌍 Robinhood Won't Survive Long-Term & Multiple Mental Models Explain Why

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The Daily Compound #003

Multiple Models Explain Why Customer Centricity Works

Intuitively, we know that not acting in the best interest of customers is a sure-fire way to fail. But why? Why do we know this to be true? What models help us validate this belief?

👉 Use This: This visual illustrates and explains my current method of using the multidisciplinary approach (1) to test ideas against reality and (2) discover new models in the process.

Charlie Munger: “Robinhood trades are not free.”

During a lecture I gave at Columbia University Business School last week, I said this: “manipulation doesn’t scale.” That was not in reference to Robinhood, but it applies to Robinhood. I suspect their best days are behind them.

👉 Remember This: Disingenuous companies are not rewarded with customer loyalty. Retaliation is inevitable, in the form of leaving for a more customer-centric alternative.

💬 “Robinhood trades are not free. When you pay for order flow, you're probably charging your customers more and pretending to be free. It's a very dishonorable, low-grade way to talk. —Charlie Munger (via Daily Journal shareholder meeting, 2021)

Customer-Centricity Is Not An Option

Customer-centric businesses make for solid long-term investments. I would never invest in a business that is not genuinely customer-centric. It’s bound to fail in the long-term.

👉 Remember This: Research shows that <15% companies truly focus on customer centricity. Short-term incentive systems may explain this. If a company does not incentivize doing what is best for the customer, you are in a perverse incentive system.

💬 “The most important single thing is to focus obsessively on the customer. Our goal is to be earth’s most customer-centric company.” —Jeff Bezos

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