How did we get here?
The last week of January and the first week of February 2021 will be remembered as a strange time to be an investor. Reddit/r/wallstreetbets’ orchestration of the pump and dump of AMC Theaters, GameStop, and other highly shorted stocks was both an unsettling shaking of the stability of the stock market as we know it and an illuminating window into the double standard given to Wall Street fat cats vs swarms of retail small-investors. I am not a financial expert, but as someone whose entire work-life exists via building and analyzing websites, I have several observations from watching this entire debacle unfold, from a website expert’s point of view.
As a daily user of Reddit for the better part of a decade, I have watched the hive-mind change over the years. In the past, Reddit had a more independent and skeptical spirit, priding itself on being a bastion of free speech and integral to the global online discussion. I have slowly watched the platform lose this spirit as it has become more popular with the masses. As the 3rd most popular website in the USA, only sitting behind Google and YouTube, Reddit is the place to be right now for online conversation. Its Upvote system and sorting algorithms have spread across the web and permeated many of the other behemoths in the webspace, including YouTube.
The concept behind Reddit is the ‘hive mind’ of users upvoting content that they find relevant or interesting. A neat idea in theory; in practice, it has created a nightmarish system of biased information feeding to the masses heavily influenced by fake accounts and special interests. I have been paying close attention to Reddit’s growing influence and impact, of which several essays could be written. The following is a presentation of a few choice anecdotes of this phenomenon:
Case study #1: 2013 The Boston Bombing Witch Hunt
Case study #2: 2021 Wall Street Bets Short Squeeze Debacle
#1: The Boston Bombing Witch Hunt
Think back to April 15, 2013. The Boston Marathon comes to a chaotic end when two bombs killed 3 people and injured hundreds. A manhunt ensues for the two suspects, and the internet is flooded with theories. Reddit, a then somewhat underground website, used its hive mind to start ‘guerilla-identifying’ potential suspects. I watched this event unfold with my very eyes. It was captivating--like being in a real-life CSI episode, enhance, enhance! Using the photos from the FBI as a reference, over 3000 Redditors in the r/findbostonbombers subreddit put a suspect on the online chopping block--Sunil Tripathi, a missing student from Brown University who was of Indian descent and looked like one of the photos of the Chechen bombers according to users in the subreddit . People who claimed to have known him or been classmates with him also chimed in and helped in the witch hunt.
The result? Sunil’s family was disgraced and harassed. Harassed, mind you, while grieving the disappearance of their son, who was found a week later, dead for unrelated reasons . Social media outlets falsely broadcasted Sunil as one of the suspects and a general misinformation monster was unleashed on the public. As we have seen in our online-world of permanent records, once someone is disgraced by the internet’s digital crosshairs, falsely or otherwise, a thick cloud of ill-repute forever haunts them and their families existence. The hive-mind claimed its victims, fueled by the toxic combination of sensationalism and fear.
#2 2021 Wall Street Bets Short Squeeze Debacle.
A bit of Context
As mentioned in the introductory paragraph, the 2021 Reddit ‘stonk’ squeeze of Gamestop (GME) and AMC Theaters (AMC) was a pivotal moment in internet history. Rather than going into the details of the event or talking about why the short squeeze happened, of which there are many well-written articles, I would like to provide my first-hand primary source account of what I saw as I watched the events unfold in real-time.
For background: I follow the r/wallstreetbets community passively, out of wit and entertainment’s sake. Being a non-gambler myself, I avoid day trading stocks or crypto, having lost a few thousand on the latter in my college days. I now stick to more stable investments and try to make measured long-term decisions. However, as I checked the market on January 25th, I noticed AMC was starting to rise and threw $100 into it at $4.59 a share, thinking it was undervalued and going off a gut pulse that was circulating on wallstreetbets that heavily shorted stocks were up for the grabbing. Two days later I sold that $100 investment at $13 per share, making a 218.65% return in two days (+$218.65). Besides taking the time to boast about the best short term investment I’d ever made (albeit a small ‘bet’), I mention this to help you understand that I have felt the infectious intoxicating fumes of the r/wallstreetbets phenomenon and madness first hand (though I hope to never be a part of it again).
The Floodgates Open
What is concerning about this event is not my small win, what is concerning is the way the subreddit evolved, self-aggrandized, and imploded on itself. In the early days of the ‘squeeze’, there was nothing short of madness on the subreddit. Once the stocks started shooting up, meme and emoji-fueled investors loaded up to go ‘to the moon’ in droves. Millions of retail investors bought into the stocks, most of them once the prices were already starting to skyrocket. GME went from dollars a share to triple-digit numbers seemingly overnight. I watched post after post saying essentially ‘now is the time, throw everything in!’, ‘take out a loan, this is the big one!’, or variations on ‘buy buy buy, get in quick, and HOLD’.
And millions did. Upvoting the self-inflated posts of getting rich quick, screenshots of investors like the legendary ‘deepf**kingvalue’ who made millions on the deal and continued to hold, the hive mind fed itself an energy of pure mania I’ve never before witnessed on the net. The subreddit was absolutely ecstatic, digitally enveloped in its own positive feedback loop and dreams of riches for all.
Stories of overnight millionaires were swept to the front page with a holy reverence never before seen on the web. Hundreds of thousands upvoted posts proclaiming ‘We are beating those Wall Street greed-sters, look! This guy paid his mortgage off. Come, see, I just paid for my mom’s cancer bill!’. And maybe they did, maybe they did. But with every winner, there comes a loser. And far too many entered the market craze at all the peak of the stocks, letting the hive mind and FOMO (fear of missing out) fuel irrational decisions. Dark days lie ahead.
The stocks started dropping, as I and many others knew they would. I said to friends who were traveling with me at the time “what do they think is going to happen? It just keeps going up forever?”. As the stocks like GME began to crash, the hive mind doubled down on its belief that the stocks would shoot up ‘to the moon’. Posts and comments referring to ‘diamond hands’, ‘HOLD brothers’, and ‘we just like the stonk’ were upvoted, and anything that countered that rhetoric or offered a skeptic’s perspective were downvoted into oblivion, never to see the light of the front page. The Reddit front page itself was so polluted with r/wallstreetbets content that the subreddit grew millions overnight, from the low millions to now over 8.7 million as of 2/5/2021.
As the blimp of hot-headed first-time investors continued to catch fire, I watched with sick fascination as the rhetoric on the forum split into two camps: those in denial that the stocks were going to continue plummeting, leaving them as sorry ‘bagholders’, and those who let their anger and frustration with taking a loss turn into some of the darkest cynicism I have ever seen on the web. Posts reeking of complete negativity started replacing the glee and hubris-filled posts that once inspired the masses. Those in denial became more and more pathetic, waiting for the ‘2nd coming’ of the squeeze, delusional thinking their now halved, quartered, or even further fractionated investment was still going to magically make them a millionaire. I read one comment from a poor soul that was likely going to lose their home, wife, and all savings with their foolhardy investing. Others spoke of taking out and maxing credit cards, payday loans, and other risky ways of trying to throw anything and everything into the ‘moon machine’.
With sadness, the forgotten dregs of the pump and dump--the bag-holding lost souls--turned on one another and offered little comfort other than comical self-deprecation and shared misery. I poured through droves of comments of people who had lost significant savings, major pieces of their portfolios, or worse. Some shared suicide hotline numbers, and others probably did, God help me be wrong, kill themselves in the panic of losing so much.
A Need for Change
I tell this account, not for entertainment, but because I believe our digital humanity needs to learn from what happened in these past weeks. Just like the Boston Bombing incident, the r/wallstreetbets phenomenon was born of biased and hasty misinformation. Redditors with no idea how stocks worked followed the hive mind like antelopes off a cliff, just as the smaller group on r/findbostonbombers gleefully ‘played detective’, the first-time ‘stonksters’ followed the trending posts like moths to a flame, and more of them burned than found their fortune.
We need to ask ourselves what kind of skepticism is required to navigate the internet. We need to consider having restraint and measure when our digital world thrives on what is most popular, not what is most reasonable. Sensationalism is the flavor of the day; once confined to the mainstream news outlets, it has now permeated all fabrics of the internet, especially my once beloved Reddit. Add to that mess the ability for corporations to enlist bots to manipulate what posts are upvoted, and the involvement of governments and special interests in censoring posts and comments, and you have a perfect storm of Orwellian dystopia, served on a sleek smartphone to almost every human on the planet. How can we, as emotional beings, resist the dopamine flood of joining with the trends and fads of the online world? Are we doomed to repeat the Boston Bombing witch hunt and r/wallstreetbets disaster ad infinitum?
I lack the answers to these questions. I do, however, passionately believe that the internet is still the most important invention of human history and that the knowledge one can gain from using it is limitless and powerful. This comes at a price, and we as a species need to be careful and prudent as we evolve together into hybrid part flesh, part digital beings of the ethical and social implications this evolution brings with it. Our brains are not able to adapt to the unprecedented rate of change that the digital revolution has cataclysmically unleashed. It is the job of the builders in this wild west, specifically website developers, to build the solutions and fix our online paradoxes by giving the average web-surfer some kind of protective armor that protects them from being swept down the river of misinformation, hysteria, and seriously bad investments.
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