When 2020 rolled into 2021, somehow I wasn’t expecting things to get crazier. This, in hindsight, was absurd. Insanity begets insanity and although we’ve had a month full of insurrectionists, impeachment and the swearing-in of a new president, it’s near impossible to believe anyone had “GameStop bankrupts Wall Street” on their bingo card. Finally, a proper excuse to use my nascent business minor to analyze the world of digital culture. Don’t worry, I’ll explain the best my seven Ross credits allow me to.
A viral source on Reddit explained this well here, so I’m extrapolating from that post. On Wall Street, there is something called a short. Essentially, a consumer would borrow a share of stock from a broker and then immediately sell it, gaining back say $5. Easy money, right? Well, they still owe the broker a new stock to replace the one they borrowed so they must use that $10 to buy a stock. In the best-case scenario, the price of the stocks would go down and the consumer would spend, say $3, and give it back to the broker. Thus, their capital gain would be the difference between the initial sale and new stock purchase. Ideally, one would do this with many stocks and get a much bigger profit than $2; in fact, there exist many funds and companies who rely on this type of stock trading to be profitable. And this is where the issue lies.
If, after selling a stock, the seemingly failing company’s profit happens to rise, then rather than gaining money, the short seller would lose money. If purchased on the larger scale, as many of these businesses do, that loss quickly rises to an incredible deficit. But this is rare.
Imagine being a broker and buying a whole bunch of shorts for a company on the decline, such as GameStop. This seems like a sure bet, as the once-great video game giant has had a difficult time over the past few years and almost always seems close to bankruptcy. The plan is foolproof: Sell the initial stocks in bulk at a high price and buy them back in a few days when the stock is exponentially less. Doing this during a pandemic seems like an especially surefire way to make easy money. However, one thing these investors didn’t count on is that the people are pissed off at Wall Street.
While most Americans are struggling, many without government support — save for a measly $600 stimulus check — Wall Street and billionaires have been raking in the dough. People have lost loved ones, small businesses have been forced to shutter and still, America’s 614 billionaires have collectively made $931 billion since March.
So, it’s no surprise that a group of angry people gathered on the forum site Reddit to commiserate and complain about the crushing fist of capitalism together. The subreddit r/WallStreetBets, chock full of these angry people, decided that they were done letting Wall Street get away with making money while the rest of the country suffered.
The subreddit took action, targeting short sellers of not only GameStop stock, but Blackberry, AMC and Nokia, too. If you were a tech company going downhill, then you were a prime target for short sellers to profit off of. The righteous subreddit declared they would purchase stock in failing companies such as these, which would raise the stock price far beyond what short sellers initially paid for, thus causing massive monetary loss. This is called a short squeeze.
Suddenly, the firms and brokers for whom short selling is the cornerstone of their entire business existed on unstable ground. Debt amasses quickly, especially when multiple companies for which you own stock all rise exponentially at the same time. It soon became impossible for some of these companies to even think about getting out of debt, sometimes their losses exceeding the worth of the business itself. What was only a few days ago a stable, seemingly safe form of making money became a fatal blow. They do say one of the mortal sins is greed.
But what about these stocks that the Redditors invested in? Well, literally almost overnight the CEO of GameStop was a newfound multi-millionaire. Some sold the stocks when they felt the price was right, making hundreds to thousands of dollars. Stories were posted all over the subreddit and beyond about people using this newfound money to pay off student debt, pay for surgery for their animals or loved one or to help pay for groceries or their mortgage.
The money, now in the hands of the people, was providing real relief and change in their lives, something that the Trump and Biden administrations have yet to do in terms of the pandemic. There still exist many others who kept their stock, refusing the lure of money for the higher purpose of continuing to squeeze Wall Street dry.
The situation with GameStop, and the other companies, got so large that not only was it being reported by major news sites, President Joe Biden held a press conference to assure the public (i.e., Wall Street) that the White House will survey the situation that, according to one source, “doesn’t make business sense.” For the first time in years, GameStop was talked about on prime time news as anchors everywhere tried to wrap their brains around what a Reddit is.
Even day trading companies like Robinhood and TD Ameritrade have taken notice, although their solution has been way less pro-consumer than many would like. Robinhood, an app made for the standard person to buy and sell stocks, began barring these same people from purchasing new stock in all the companies affected by the Reddit scheme.
Rather than taking from the rich and giving to the poor, it seems this company would rather protect the King’s gold, temporarily banning trading for anyone not located on Wall Street. This, frankly, is not a very “Robin Hood” thing to do. Although the app later released a statement explaining the choice, they are still coming under fire. Even the Senate has stepped in, with both Republicans and Democrats alike demanding a Federal Security Commission investigation into whether what Robinhood and other similar apps are doing is legal.
The subreddit r/WallStreetBets not only seems dead set on continuing and expanding this squeeze, but doesn’t mind losing whatever capital they may have gained doing it. The message from them is clear: The stock market is not as sacred as you think, and a dedicated group of people can game the system, just like brokers have been doing for decades.
What’s important here is not simply the democratic rebellion against the upper class, but that it was fueled via social media. This entire event, similar to the Jan. 6 attack on the Capitol, was planned on a social media platform. I am not comparing these uses — any and all calls for violence such as the Jan. 6 insurrection, Charlottesville and beyond should be vehemently denounced.
But the point still remains that these were planned by people thanks to the direct connection social media has provided us. Alt-right demagogues and hate groups have used 8-chan, 4-chan, Discord and Facebook for years to plan rallies and marches and disseminate disinformation, just as many Black Lives Matter rallies this summer were planned over Twitter, Instagram and Facebook. A tool in one hand can easily be a weapon in another.
There is good to be found over the proliferation of social media over the past decade; people keep in touch, re-establish communication and obtain news and other information far quicker and easier than ever before. But, just like anything, there is the ability to corrupt this pure intention and maliciously use a platform.
After four years, Facebook and Twitter are finally beginning to take this danger seriously and that means changes — such as the recently announced Birdwatch — are coming. It’s incredibly hard to predict where these influences of digital culture may arise next, as evidenced by this recent Reddit event, but it is important to understand that things are going to change in fascinating, and probably frustrating, ways as society continues to grapple with our ever-growing dependent relationship with social media and the companies behind the platforms.
There will absolutely be long-standing repercussions from this event, be it for Wall Street (probably not), social media or day trading apps, but one thing that is certain is that people are mad as hell and are not going to take this anymore. One hopes that the democratic republic we claim to be will listen and change things for the better.
Digital Culture Beat Editor M. Deitz can be reached at mdeitz@umich.edu.