I worry about this one. It’s probably OK so far, but I still worry.
The Robin Hood Coop calls itself a “coop”, though it operates as an “activist investment fund”, using an opaque algorithm to automagically manage the investments. Some of the proceeds are raked off to support the operations.
Investing in a magic algorithm should be done carefully in all cases. so it is a definite red flag that I can’t find any information about the algorithm (called, “The Parasite”, which somehow fails to reassure me very much). There certainly nothing published or peer reviewed on their web site.
There are additional warning flags in the promotional materials. This isn’t just a hedge fund, it is “a cooperative that bends the financialization of economy for the benefit of those who are not the financial elite”. There are management fees plus a rakeoff to “fund projects that expand the commons”. And, of course, it is implemented using Ethereum, which is “revolutionary technology for decentralised computing” (so what could possibly go wrong?)
Lot’s of fine sentiments, but impossible to really know what they might mean in practice.
I have to admit that my eyebrows rose at the FAQ item, “Is it Legal?” (Answer: Yes, under the laws of Finland.) I’m glad that this is a relevant consideration, but it’s still troubling that they think people would be in doubt.
Of course, the answer is actually much more complicated than the FAQ indicates, at least for people not living in Finland. You are transferring money to this Finnish organization, which is investing in the US. If you take money out, it’s another transfer from Finland. As they say, “When you receive payments from Robin Hood, you will be liable for whichever taxes you would pay for investment income in your country of residence and/or Finland.” In short, who really knows?
Anyway, this is probably OK, though it seems unlikely to be a particularly profitable investment. It may be a good way to support the “commons” projects they select, though, again, I don’t really know the implications of such international investments.
In the long run, they might be well advised to create a network of RHC affiliates incorporated in different jurisdictions.
This project has moved to a more troubling RHC2.0, which manages all shares as a private cryptocurrency (RobYns) which is used for trading in various currencies and cryptocurrencies. This may or may not be a cost effective way to run the service, but it certainly does raise issues of trust. (Do I want to invest via a fund that has no humans in charge, and has no legal presence in my local jurisdiction?)
And if I understand their materials, they correctly are aiming to go even farther, with V3.0 called Robin Hood Unlimited. This is a member owned (I think) “platform, where anyone could develop financial instruments, and launch them as apps for other members to use”. The goal is to offer “every opportunity to devise different investment strategies and different ways of directing profits or other funding to projects”.
Cooperative or not, this is a description of an offshore, extralegal, money hub, which is not a socially positive animal. I this an “offshore coop”? Do the benefits of “cooperative” outweigh the negatives of “offshore”? Does the “Unlimited” cancel out the “member owned”?
Whether you share my own aversion to hot money in any form, you have to agree that RHC seems to take the motto “think globally, act locally” kind of backwards. The fund is directing funds from everywhere to a few deserving projects, extracting capital and transferring it. These transactions may be ethical (though we have to trust them on that), but they certainly aren’t local for most of the investors.
The blockchain technology they use not only makes this strategic error easy, it is really the only way that blockchain can reasonably be used. A global, peer-to-peer network is a primary affordance of blockchain technology, which is just plain the wrong model for local economies. In other words, selecting Ethereum technology is leading down the wrong path.
My basic point is that where ever the investors are, they surely could find local enterprises to invest in. And that is what we all should do. Shipping funds off to other continents or to untethered Internet projects is not a good way to make your own community better, which should be a top priority. In fact, it tends to move funds away from local social enterprises.
The new “RH Unlimited” project will likely be much worse. Much, much worse. Sure, it will be possible to create local tokens and local cooperatives, though we already can do that with “some guys in Finland”. But it will also be trivial to sell and buy shares in anything, with unknowable consequences.
Making it easy for anyone to mess about with financial instruments is really not a way to promote community solidarity, trust, or sustainable development. How will this be policed, if it even can be? What happens if the coop is turned into a financial tool for criminals, terrorists, corporate trolls, and/or political shenanigans?
I note that even if you are satisfied that the current leadership is ethical, a decentralized organziation–cooperative or not–can be taken over by nefarious forces. So watch out.
I probably shouldn’t be too hard on RHC. There are dozens of variations on these “non-extractive investment” ideas and Ethereum is a favorite technology for these concepts. To me, this looks like a hammer in search of nails. We have a technology that lets people build their own financial systems, so obviously we should tackle the problem of ethical finance.
My own view is that the harder problems are social, and they need to be solved by talking and working together, face-to-face, in our own communities. Imagining that faceless, soulless Internet technology will help in this ground campaign is misguided. In fact, blockchain technology is antithetical to the personal human contact essential to actual ethical economics.
I’m willing to be proved wrong. I will leave this as a challenge to RCH and other similar projects. Let’s see what kind of sustainable “non-extractive” economic activity is actually possible.