If 2020 was when elites failed upwards, then 2021 is when they are facing their moment of reckoning.
January has been shaped, in part, by the repercussions of the elevated loneliness, unemployment, hopelessness, and lack of faith that many Americans endured throughout last year and for some, the last decade. The absence of in-person social interaction compounded by the rise in suffering left people in search of fulfillment that was often found through community. The communitarian school of thought on the Right often cites how, even before the pandemic, there was waning community engagement in the forms of union membership, family formation, and religious worship among others. Now, we increasingly see that void filled by online communities on Facebook and Reddit, but also tribal obsessions with partisan politics that is facilitated by mainstream media networks.
Individuals have always been drawn to an ‘us versus them’ dynamic, a psychological pitfall that is often exploited by the media, organized religions, cults like QAnon, politicians, or those who benefit from widespread polarization — ruling-class elites. Consisting of corporations, finance, media, academia, lobbying, establishment politicians, the intelligence community, and Silicon Valley, ruling-class elites have stoked divisions on cultural issues among Americans for decades, while converging on an economic consensus that has messed up our country in well-documented ways. A consensus that is given less and less attention as we yell at each other more and more about cultural issues, such as abortion, capital punishment, race, and immigration. Progress made on such issues in either direction is marginal, at best, and whatever progress does exist is usually erased after four to eight years when the next administration rolls back the previous administration’s executive orders.
Even worse, social progress has begun arriving in the form of new corporate HR compliance policies, countless change.org petitions, and a diversity and inclusion tab at the top of every hedge fund’s website. Black Lives Matter, for example, which was a movement that called for seismic shifts in the power dynamics within our country, became co-opted by the very people who possessed power. Now, BLM has become another polarizing culture war issue that people can virtue signal and pay lip service to, without discussing real public policy or holding the powerful accountable.
Was real progress made? Absolutely. Yet the change that did end up taking place, made little impact on the way power is allocated within society, as the movement has, at least indirectly, set out to accomplish. Directly challenging the unbridled and concentrated power, however, may be an approach that can unify broad cross-ideological coalitions and seriously impact the status quo — as we are seeing now.
Explaining the Reddit Revolution
For those who are confused, I will attempt to lay out the situation with GameStop and the stock market as entertainingly as I can. For those who are not, there will still be analysis in the next section.
The key players to know include GameStop, hedge funds, r/WallStreetBets investors, and Robin Hood. GameStop was that store people bought gift cards from because they could not think of anything else to give to you on your ninth birthday. For years, it has sold video games although at a declining rate, especially within the past year.
Hedge Funds are partnerships among investors in which they manage a pool of money and seek to maximize returns and ‘eliminate risk.’ Coming from a completely unbiased perspective, these hedge funds are parasites in the financial system. A few newsletters ago, I wrote a sentence or two about creative and distributive activity within our economy — a reference to this essay. Hedge funds are the embodiment of regressively distributive actors within our economy who not only maximize the returns of already wealthy investors but often manipulate the markets in their favor while doing so.
While there are many methods of market manipulation that hedge funds engage in which go unchecked, the one that is relevant to this past week essentially involved shorting the stock of GameStop into bankruptcy. Shorting stocks basically signifies a bet that the stock price will decrease. A company can be shorted into oblivion because no one wants to bet against a wealthy, well-known hedge fund, which has out-of-this-world-intelligent quantitative analysts at their disposal, that so vehemently believes a company will fail. Reason 10283 behind why hedge funds are parasites is that they are able to draw the most intelligent young people in the country and turn them into parasites as well. Reason 10284, perhaps more importantly, is how hedge funds can pick and choose which companies survive in this manner. Were there vulnerabilities within GameStop’s business that justified shorting its stock? Sure. Except one particular hedge fund, Melvin Capital, went even further than merely doubting the company’s future success and shorted 139% of existing shares of GameStop, making the company one of the most shorted companies in the entire stock market.
Something to understand about shorting is the insurmountable risk involved. With investing in stock normally, there is a limit to how much money you can lose because the price of the shares cannot surpass zero. With shorting, however, there is no limit to how much money you can lose because there is no explicit limit to how much the stock price can increase. By shorting 139% of existing GameStop shares, Melvin Capital was taking an extremely risky position.
Enter u/DeepFuckingValue.
Months ago, Reddit user u/Deepfuckingvalue, who has accumulated and added well over millions of dollars to his net worth by now, noticed Melvin Capital’s publicly published short position. He began posting his own concrete, well-researched analysis behind why GameStop was worth more than its $4 stock price on r/WallStreetBets, an online subreddit community made up of normie retail investors (people like you and me) dedicated to memes, bad investment advice, and self-deprecation. This Reddit user was not alone in doubting the justification behind Melvin Capital’s short position. Also agreeing with him were other more prominent investors such as Michael Burry, who famously foresaw the housing market crash in 2008, and another guy named Ryan who I am too lazy to search for through the barrage of articles about GameStop.
There was legitimate analysis behind buying GameStop stock by investors on Reddit, Michael Burry, and that Ryan guy, followed by huge waves of momentum throughout the r/WallStreetBets community that began buying the GameStop stock pushing it to as high as $483 per share. The price was able to rise as so many people were willing to buy it, often on RobinHood, an app that allows people to invest in the stock market easily. At one point it was estimated that nearly half of Robin Hood users had bought GameStop stock. As a result, hedge funds that shorted GameStop stock lost billions of dollars.
Soon afterward, we saw the elites’ greatest hits.
There was the freakout of elite economists, pundits, and wealthy investors coming on financial news channels such as Bloomberg and CNBC speaking vaguely in their technocratic jargon about the newfound instabilities within the financial system contributed to by social media and Robin Hood. There were calls for more censorship, elites patronizing the ‘unsophisticated every-day investor’, and dozens of hypocritical statements in general. Despite hedge funds having taken on the most risk and maintaining a well-documented history of engaging in malicious and manipulatory practices, it was the normie retail investors that were supposed to be regulated, according to these guys.
The adverse reactions to GameStop’s stock price rise from Wall Street were precisely because it was a phenomenon that was attacking them directly. Unlike with Black Lives Matter, elites could not co-opt whatever this thing was — especially because it hit them where it hurts: their pocketbooks.
While I could do a separate newsletter about the history of the well-deserved hate towards Wall Street, these recent events mark the first time in a long time that tangible damage to Wall Street has been caused by the people. And the damage could be long-lasting because the same momentum behind GameStop could take place with respect to other stocks that are shorted heavily.
The most amazing part of this story — up there with the billions of dollars that these parasitic hedge funds have lost — is what drove people to not just buy GameStop stock but to also hold it so the price keeps going up.
That’s Right, the Machine is Being Raged Against
Circling back to the ‘us versus them’ dynamic we all somewhat succumb to, what happens when this behavioral instinct is not directed toward calling the other side bigots and idiots or communists and softies?
In one case we saw this month, the ‘us versus them’ instinct was directed towards calling the other side pedophilic, Satan-worshipping baby-eaters. Which was much worse. In another scenario, the ‘us versus them’ mentality was directed towards Wall Streeters who were bailed out by the taxpayer in spite of their irresponsibility in the lead-up to the 2008 Financial Crisis. Gazing across the r/WallStreetBets there are many users who post messages about how their investment into GameStop is a statement more than a money-making venture. For Redditors such as the one below, the financial crisis affected them and their families pretty harshly and they took note of the preferential treatment of finance in comparison to the average American.
Like it or not, the QAnon movement and the Capitol riots, just like Black Lives Matter and this Reddit situation, was a form of social unrest directed at … something. While the validity of the justifications behind these movements is certainly unequal, the parallels between them are eerily present:
People came together in the name of a cause they found worthy.
Worthiness was measured by degrees of injustice, suffering, and/or unfairness.
The cause identified an opponent that the newly formed community could organize against.
Challenging the opponent involved fighting ‘the system’ in some way.
There was patronization and condemnation to some extent of all of these movements. But what the critics often missed was that had the circumstances been improved, unrest would not have happened. My perspective does not absolve the wrongdoers from the Capitol riots, for example, of their own agency. It shifts the conversation to where it should be — towards the circumstances and those who have the greatest impact on them.
We all want reasons for why we suffer and to be the good guys in our own story. Black Lives Matter was driven by the need to replace an unjust system that black people have suffered from for too long. The subreddit r/WallStreetBets is made up of many different users with different motivations — but many are motivated by unveiling the complete hypocrisy of Wall Street. Some QAnon supporters such as Ashli Babbitt, who was shot at the Capitol, were former Obama voters who were suffering serious financial hardship and loneliness at a time when both would become accelerated by the COVID-19 pandemic. QAnon gave them corrosive and dangerous answers, yet they were answers nonetheless. Just as generalizing that every single QAnon supporter or r/WallStreetBets member is an unenlightened leftist suffering from economic anxiety is unreasonable, so is painting all QAnon supporters as racists with legitimately evil intentions compelling them to hurt us. In fact, such a characterization is following the same behavioral pressures of an ‘us versus them’ mentality that continuously divides us.
What I love so much about the Reddit and GameStop story is that it unites many people across the ideological spectrum against how power is assorted in society. People see the blatant issues within the destructive way Wall Street conducts business and gets rewarded for it. And it has to do with the concentration of power within the financial sector that has exponentially expanded since the 1970s, especially during the Clinton administration. While Dave Portnoy’s solutions may be different from Elizabeth Warren’s solutions, at least there is a fundamental problem being agreed upon by the public.
Whether it is the poor regulatory environment, the revolving door between the private sector and government, or a governing class that seems to fail upwards — all of which I have written about before — many of our problems trace back to governance. Unfortunately, the current political establishment has had everything to do with creating the conditions for such problems to arise in the first place. But we have overcome a corrupted political establishment in a time of unbridled concentration of power before. Learning what it entails requires a history lesson on the 1920s and 30s and another newsletter.