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Squeezing Short-Sellers for Fun and Profit

On January 27th, 2021, u/DeepFuckingValue, whose real name is Keith Gill, posted a screenshot of an investment portfolio composed entirely of GameStop stocks and options, displaying over $33.3 million in returns on what had in 2019 been a $53,000 investment. Gill, a 34 year-old former financial educator, was posting on r/WallStreetBets: A Reddit page that describes itself as “Like 4Chan found a Bloomberg terminal,” refers to its users as “degenerates,” and is frequented by Redditors posting under usernames such as u/juicykitten22 and u/LiveLaughLibor. GameStop, the company that had proved such a lucrative investment for Gill and many others on the subreddit, is a brick and mortar video-game retailer struggling in an age when more games are sold digitally than physically.

When Gill made his initial investment in 2019, the value of GameStop’s stock (GME) was about $4 per share. Gill’s frequent posts convinced many of r/WallStreetBets’ 580,000 users to invest heavily in the stock. In the next year, the Reddit page managed to generate enough investment in the stock to execute a short squeeze on hedge funds who bet that the value of GME would fall, sending it soaring to over $340 per share, and exploding the membership of the page to millions.

The day after Keith Gill posted displaying his massive earnings, Robinhood, a no-fee investment service popular with r/WallStreetBets users, decided to suspend purchases of GME, along with a collection of other stocks that are popular with the subreddit, including Blackberry, Naked, Bed Bath & Beyond. Retail investors were effectively locked out of the stock, despite hedge funds being able to trade it freely and, although Robinhood eventually reneged, the value of GME tumbled, eventually hovering around $50 per share.

The backlash was swift and fierce. GameStop had become a viral sensation, and outrage spread swiftly from Reddit across other social media platforms. Politicians from disparate ends of the political spectrum weighed in, with democratic-socialist Alexandria Ocasio-Cortez’s (D – NY) tweet that Robinhood’s move was “unacceptable” garnering approval from vocal Trump supporter Senator Ted Cruz (R – TX).

In the days that followed, journalists and pundits speculated on what political views might underpin the phenomenon, and why it led to a rare moment of unity between politicians from the far left and right. Some have unflatteringly compared the “movement” to Trumpism, QAnon, and Gamergate, but this is accurate only to a point. On the one hand, in the words of one journalist, the movement is clearly “a meme first and a political movement second,” beginning as just another “YOLO” and eventually donning an anti-establishment mantle. It is also unavoidably true that the movement originated on exceedingly vulgar message boards, with some on the fringes of the GameStop pump having used blatantly hateful language.

This is, however, where the similarities end. The GameStop pump is similar to earlier, more explicitly hateful internet movements in the circumstances of its rise, but not in its fundamental politics. The Reddit and 4chan-fueled MAGA movement was inextricably rooted in virulent xenophobia and racism; QAnon is a rabid, similarly hateful conspiracy theory; and Gamergate was a cesspit of rampant, violent misogyny. The former two, notably, were explicitly partisan, relentlessly supporting and defending the candidacy (and later incumbency) of a particular politician.

The GameStop pump, on the other hand, is rooted in a loose economic populism utterly devoid of any partisan allegiance. Redditors gleefully reposted messages from AOC, Cruz, and any celebrities or politicians who declared support for retail investors. As the movement exploded to viral fame, posts by Reddit users and supporters on other platforms became overtly political, but the only consistent message was a desire to score one over Wall Street. One user, under the handle u/ssauronn, posted an open letter to the subreddit describing their experience as a young teen during the 2008 financial crisis. The post recalled the user’s family surviving off of stored beans and rice and their friends drinking soup made from cafeteria ketchup packets, before accusing Melvin Capital of standing for “everything that [they] hated during that time.” The letter has received over 140,000 “upvotes,” and its replies are filled with users sharing similar stories of struggle during the Great Recession. Other users, in interviews with NPR, describe their desire to punish the financial firms they blame for the crisis. These accounts uncover a simmering undercurrent of resentment from the 2008 financial crisis, which destroyed millions of jobs and resulted in an immense government bailout of banking institutions. When the GameStop pump hit headlines, the news predictably spawned a flood of memes, but there was also a swell of support across various platforms beyond Reddit. In one post, a Twitter user recommended that hedge funds’ losing money to “Reddit shitposters… get a second job driving Uber, cut out the Starbuck’s [sic], and skip the avocado toast,” parodying a years-old refrain that millennials’ economic woes can be blamed on an obsession with lattes; the tweet has since amassed over 570,000 “likes.”

A more accurate comparison for the GameStop debacle would be the Occupy Wall Street protests of 2011, a movement largely without clear goals but held together by fury at Wall Street’s corruption and greed. OWS was explicitly political from the outset – it protested inequality and corruption in no uncertain terms – in contrast with a Reddit phenomenon that began with the simple goal of personal enrichment and entertainment. Both movements, however, target the same financial institutions, and both vocally deride the avarice and danger of Wall Street. The GameStop pump is the Occupy Wall Street of the social-media age.

That resentment of Wall Street continues to fuel viral movements demonstrates that the scars of 2008 remain fresh, and that economic populism continues to bubble up in the public consciousness. This also explains why the movement has seen support from the extremes of both parties. Alexandria Ocasio-Cortez’s brand of democratic-socialism led numerous executives, attorneys, and employees from investment banks and hedge funds to donate the maximum allowable amount to her 2020 primary opponent (whom she defeated with over 74% of the vote). Ted Cruz, who also voiced disappointment with Robinhood’s cutting off retail investors, and who also entered Congress after winning an upset against an incumbent of his own party, first ran for Senate as a member of the Tea Party, a far-right, populist movement that arose in the aftermath of the 2008 financial crisis.

Though economic populism is present in both the left and the right, Democratic populism and Republican populism take very different forms. First, although far left and right politicians make economically populist overtures, this is not a demonstration of equivalency, since both sides do not execute economic populism in the same substantive way. The example of Ocasio-Cortez and Cruz is illustrative: When Cruz expressed support for the congresswoman’s  call for an investigation into Robinhood, Ocasio-Cortez promptly rebuffed him, charging Cruz with inciting the rioters at the Capitol, some of whom threatened to assassinate her. Ocasio-Cortez rallies with striking workers, fights for a high marginal tax rate, has called for student debt cancellation, and is a famous proponent of a single-payer healthcare system. Cruz, on the other hand, has used his influence as a senator to call for cuts to taxes on capital gains, secure government relief for billionaire donors, raise millions of dollars for his campaigns from the financial industry, and attempt to overturn the results of the 2020 presidential election. The policies that Ocasio-Cortez supports bolster her populist credentials; Cruz’s brand of populism involves enriching the wealthy and jeopardizing the democratic process. Right-wing populism is patently dangerous and fundamentally disingenuous. 

While leftist and far-right politicians may be increasingly popular, the Democratic Party keeps its more radical members on a far shorter leash than does the Republican Party. Top House Democrat Nancy Pelosi (D-CA) vocally opposes Medicare for All, a landmark policy proposal among progressive members of her party, and Senator Dianne Feinstein made headlines two years ago with her dismissive response to a group of young activists advocating for a Green New Deal. The Republican Party, on the other hand, has rallied around the former president Donald Trump, who made frequent promises to “drain the swamp” of government corruption, and top House Republican Kevin McCarthy (D-CA) recently refused to take action against representative Marjorie Taylor Greene (R-GA), who has promoted wild, antisemitic conspiracy theories and supported calls for the assassination of government officials. Greene even received a standing ovation from her Republican colleagues at a recent meeting.

The persistent, if not growing, presence of economic populism in the American political psyche, as manifested in the recent GameStop frenzy, presents a possible political opportunity. Democrats in particular, by adopting the substantively populist policies of their leftist colleagues, have the opportunity to harness the same energy that sent the stock of a dying video-game retailer skyrocketing by over 1,700%. This would require sending a unified message that the party prioritizes the livelihoods of individual citizens over the prosperity of Wall Street hedge funds, acknowledging that the two may be mutually exclusive, and accepting the likely loss of Wall Street donations that would accompany this shift. Likewise, Democrats should heed the GameStop pump as a warning that opposing populist policies or appearing to cozy up to financial institutions could come at great political cost, allowing Republicans to capitalize on that same energy. It’s unclear if r/WallStreetBets is a financial force to be reckoned with or just a fleeting trend, but social media’s viral support for the page, now over 9 million “degenerates” strong, is indicative of one thing: economic populism isn’t going anywhere.

Photo: Original Illustration by Jenny Zhang