It’s been a week where the stock market became a stonking market. For those not familiar, “stonks” is an Internet meme, an absurd pun on the word “stock” that has become almost inevitable on social media. On January 26, Elon Musk, recently the richest man in the world, tweeted “Gamestonk!!!” and received more than 200,000 such messages. It included a link to the WallStreetBets forum on the Reddit online messaging platform.
WallStreetBets has become a communications center for a phalanx of small smart traders challenging the heroes of the David vs. Goliath battle with hedge funds, big banks and other avatars of the American elite. This includes the blue controls on
The talking heads on CNBC, even Robinhood, the trading platform where many of them bought options until it halted some of that trading on Thursday morning. (The financial machinations of this battle have been described in fascinating detail by my colleagues, including an interview with the man who founded WallStreetBets and then lost control.)
But this is the story of something much bigger and more coherent than the fate of a single brick, I mean of an action, or even, when traders go home for the day in search of faster profits, of a handful of them. What’s happening on WallStreetBets is a play on other Internet phenomena, from Bitcoin mania to QAnon’s online conspiracy theories to the events that led to the Capitol Rebellion.
Research on the emergence of innovations has shown that it is often small groups of people, rather than large networks, who are best able to nurture new ideas that then spread throughout the world. But in the case of recent collective manias, people develop ideas that have a kernel of truth in them but are largely fiction, often created in defiance of authority and authoritative information.
Once cultivated in small online forums where anything goes, these inverted ideas are reinforced by the powerful complex of social media giants like Facebook, Twitter, TikTok and YouTube. The algorithms on these platforms that select the most interesting content, the ones that touch, inspire and/or frighten us, push these concepts to as many people as possible and eventually into the mainstream.
While in the past these phenomena could remain virtual, confined to the Internet, they are now breaking through to the “real world.” What began as useless chatter on a forum now has the power to influence the centers of political and financial power, at least temporarily.
The current process is fostering a kind of brilliant anarchy, whether it’s the Wap-Washington populism that led some to participate in the Capitol uprising, the mindset of some Bitcoin enthusiasts, or the idea that you can keep buying and keeping
stocks and call options, an army of keyboard warriors can simultaneously end wealth inequality and destroy “predatory” hedge funds.
In this case, their method was to buy shares and GameStop options to drive out short sellers who were gambling on a decline in the stock. The result was a buying frenzy that drove the stock price skyward, far above any price at which it reflected the plausible future of GameStop’s business fundamentals.
This may sound like hyperbole, but it is the hyperbole that has been sprinkled on the WallStreetBets forum, the chat server that belongs to Discord (before it was shut down for what Discord claims is a repeated violation of hate speech), Twitter, and the TikTok and YouTube corners in recent days.
The thousands, if not tens of thousands, of retailers behind the gathering of GameStop and other stocks clearly consider themselves revolutionaries. And their fervor is so great that politicians like Alexandria Ocasio-Cortez, a member of the House of Representatives Financial Services Committee, have expressed sympathy for them. When Robinhood and other trading platforms that enabled GameStop’s rise in value prevented traders from continuing to buy GameStop, Ocasio-Cortez called for an investigation. Sen. Ted Cruz, rarely a fan of Ocasio-Cortez’s prescriptions, tweeted “Totally agree” in response to her statement. (Donald Trump Jr. and Senator Elizabeth Warren also commented on the issue).
“I think this is a very important point. I don’t think we’re going to get back to it anytime soon, because these communities are a byproduct of the connected Internet,” said the co-founder of Reddit.
said in an interview with CNBC on Thursday. “Whether it’s one platform or another, that’s the new normal,” he added.
As GameStop’s stock price continued to rise, these investors agreed to continue buying and holding the shares. They posted screenshots of their profits, jokes about the fear their mania had caused Wall Street traders and professional stock market commentators, and memes inspired by Batman and The Lord of the Rings.
On WallStreetBets, a typical popular message of the genre invited investors to “buy high, never sell,” a standard subversive investment wisdom similar to Bitcoin’s “HODL” ideology (a variant of the meme on “Hold”). Some cryptocurrency investors believe that the key to getting rich with Bitcoin is to never cash out, as the value will only go up in the long run. Similarly, another popular WallStreetBets post stated that GameStop shares, which were trading at less than $20 per share in early January, will eventually be worth $5,000 at the current rate of appreciation.
The way WallStreetBets members convinced themselves that their search was right and good reflects the logic, if not the sentiment, found on the QAnon forums. Both are what philosophers call “closed epistemic systems,” views of the world that are unaffected by information that contradicts them. This is a bias against steroids. It is also a cult logic, realized by the same psychological tricks.
These gadgets are enhanced by the environments in which they are distributed. Extensive research has described the exciting potential of social media, and applications such as Robinhood, where the stock market gives the impression of playing, have the same potential. Take both together, throw them into a stew of sensationalized youth with limited entertainment options during a pandemic, and it’s no wonder it all happened.
Share your thoughts
Are the platforms of social media adequately accommodating the growth of large subcultures that reject traditional authority and expertise in favor of alternative viewpoints? Join the discussion below.
The fact that GameStop’s stock price is likely to spike and even fall, leaving some of these investors with large losses, is not the stock that has been at the top of WallStreetBets’ list. Commenters who have raised the issue in other forums have been attacked. The usual online harassment mechanisms in social media have also taken hold, including threats and the communication of contact information and addresses of short sale sellers and their families.
Meanwhile, as the hype around GameStop increased, there were attention seekers with a large number of followers but no great credentials, from the self-proclaimed “nobody verified” with over 200,000 followers to the rapper and failed impresario at the Fyre Festival Ja Rule. In unison, they reinforced the message that what was happening was a popular uprising and that anyone who claimed otherwise was a stooge of the systems that oppress most Americans.
In a meme recently adopted by the WallStreetBets crowd, the Joker, represented by the late Heath Ledger, sets fire to a giant pile of cash. “It’s not about the money,” he says. “It’s about sending a message.”
As we see the crazies of alternate reality continue to multiply, the lesson is this: These monstrous outbursts will not go away. From the ethnic cleansing of the Rohingyas in Myanmar and the WhatsApp-related killings in India to riots on Capitol Hill and takeovers in the stock markets, each of these individual phenomena is unlikely, but social media is almost a guarantee. The above algorithms give those who want to spread these ideas, however extreme, a way to reach all of us.
The GameStop stock scandal began this week on Wall Street after members of the popular Reddit WallStreetBets forum bet on the video game retailer. The WSJ explains how options trading is driving this development and what is at stake.
For more analysis, evaluations, tips and titles on WYD technologies, subscribe to our weekly newsletter.
Email Christopher Mims at [email protected]
Copyright ©2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8