Wall Street Teams Up With Little Tech to Stop the GameStop Revolution
Updated: Feb 1
You may have heard some fuss in the past few days about a company called GameStop and the crisis it's causing on Wall Street. You may have tuned it out because you're not interested in financial markets. But I encourage you to try to understand what's happening -- not just because this drama highlights who our broken financial System really serves, but because it's yet another sign of how technology may be used in the future to silence anyone who threatens that System.
Here's a quick rundown of what happened:
Wall Street routinely places bets against struggling companies by selling (i.e. shorting) shares of their stock. As the stock price tanks, investors "win" their bets and rake in profits. Some of these firms even borrow money to place bets (if you or I gambled with borrowed money, people would call us crazy; but as you'll see, the uber-wealthy play by different rules). What's even crazier is that some hedge funds "short" stock in companies that doesn't even exist (this would be like to selling someone the deed to a home that's never been built). Clearly, this is also illegal, but Wall Street has gotten away with it for years, making hundreds of billions of dollars. And neither the SEC nor Congress have done anything to stop it.
A few weeks ago, a group of investors on a Reddit subgroup called WallStreetBets decided to turn the tables. They discovered that hedge funds were selling/shorting millions of shares that didn't exist in companies like GameStop, AMC Theatres, and Nokia. And they saw an opportunity. They decided to call the hedge funds' bluff by buying the stocks these firms were supposedly selling/shorting. It was a completely unexpected move that left Wall Street gamblers wildly exposed, causing billions of dollars in losses. The clever Reddit investors, on the other hand, became overnight millionaires.
The media is caught up in whether or not WallStreetBets broke the law by manipulating stock prices, but what I find far more interesting is how the Establishment has reacted to this drama, because it speaks volumes.
Hours after the story broke, Congress demanded investigations into the trading volatility, and the SEC quickly announced its own probe. It turns out that when average Americans are gutted financially -- due to a mortgage crisis or epic unemployment caused by lockdowns -- there's mild concern, but no panic. Lawmakers jawbone about the problem, but there's no urgent need to find solutions or punish wrongdoers: it took months to approve $600 "stimulus"checks to millions of devastated Americans, and just one high-profile banker was ultimately prosecuted for the widespread fraud that led to the 2008 Financial crisis.
But when people at the top of the food chain start to bleed, it's a different story. There's immediate and immense pressure to find out what went wrong and "fix" the problem ASAP. When rich people hemorrhage money, something else happens: help comes quickly from all quarters to stop the bleeding. And this is where things get interesting.
As hedge funds losses reached dizzying levels last week, Robin Hood (the preferred trading platform of WallStreetBets traders) took an unprecedented step: it prevented users from buying shares in GameStop and the other companies the hedge funds had shorted. Of course, Robin Hood had no legitimate business reason for keeping its clients from buying stock in these companies. It was a move that only helped one group of people: the hedge funds that had shorted these stocks. Why? Because selling/shorting a stock doesn't work if too many people keep buying it. The only way to stop the losses is to stop the buying.
Outraged users accused Robin Hood of "pandering to the elite," but its CEO denied the "conspiracy theory," insisting the company's actions weren't influenced by deep pockets. Because rich and powerful people would never pull strings to avoid losing billions of dollars, right? The GameStop saga is laced with ironies, but one of the biggest is that a platform that claims to use technology to level the financial playing field was instead used to subvert smaller investors and protect wealthy ones. The technology that was supposed to liberate the masses and give them more autonomy was being harnessed against them.
What became clear last week is that Facebook, Twitter, and Google, i.e. Big Tech aren't the only companies willing to use technology to protect the Establishment; smaller platforms, i.e. Little Tech, can also be counted upon to do the job.
Discord, the popular instant messaging platform, did its part to punish WallStreetBets by quickly banning the trading group -- not based on its financial activities, but for “violating community standards against “hate speech, glorifying violence, and spreading misinformation." Sound familiar? It should, because that's what Discord did last month to a pro-Trump group operating on its server. Although there was no evidence that it used the server to organize the Jan 6 riots, Discord decided to take action because of the group's "overt connection" to a Reddit forum that was used to "incite violence, plan an armed insurrection in the United States, and spread harmful misinformation related to 2020 U.S. election fraud." Because in an enlightened America, we're no longer judged by our words and actions, but also by the words and actions of people who may be associated with us. Amazon even terminated hosting of Parler, the conservative social media app, because its members violated community standards by making 100 posts that stoked fear, hate, and spread misinformation (for perspective, Parler had 8 million members at the time).
To be perfectly clear, I have no doubt that some members of WallStreetBets and Trump groups made violent, hateful and inappropriate comments. There are "bad" apples in any group, and it's naive to think we can always avoid them. Even among Democrats, the party bearing the banner of the disenfranchised, we're likely to find chunks of voters who resist women's rights, gay rights, and racial equality. Yet common sense and experience tell us these people are the minority in any group, not the majority. And when bad actors surface, the sensible course of action is to punish those individuals, not the entire group.
But that's not what Big Tech and Little Tech are doing now. Their baby-with-the-bathwater-banning makes about as much sense as sending an entire class to detention because a few kids in the back of the room are noisy and disruptive.
Which leads to another irony. In their efforts to promote sensitivity, controllers of technology are willing to brand entire groups of people as racists, sexists, or insurrectionists -- even if the vast majority aren't. They have no problem advancing stereotypes against some people for the sake of eliminating them against others or creating "unity." It's a hypocrisy that flies in the face of the tolerance narrative, which tells me it may be time to consider the possibility that there's something else going on here. There may be more to this quest for tolerance than meets the eye.
While "wokeness" ostensibly benefits people of color, women, and other disenfranchised groups, I think we're getting our first glimpse of how it could be co-opted for completely unrelated purposes. Establishment players could wield political correctness, indirectly, as a weapon against those who dare to challenge the System and the way it operates.
Think about it. If it only takes a few "bad" people to justify silencing an entire group, then any organization or movement, regardless of its goals or mission statement, could potentially be at risk. Big Tech and Little Tech could deplatform Occupy Wall Street 2.0 (by accusing members of spreading misinformation) or political groups who support an independent candidate (by accusing 50 members out of 5 million of being racist). And if the activities of mostly-male online traders threaten the fortunes of hedge funds in the future, they could be banned for being sexist.
Under the guise of "wokeness," anyone who steps out of line or becomes threatening to those running the System could potentially be branded undesirable and silenced. This means we could find ourselves in a society where no one is offended, yet no one is guaranteed a voice.
It may be time to ask ourselves which matters more to us: not being offended, or having the right to speak our mind in the face of an increasingly oppressive System. Because I think this is a choice we may all be facing soon. Would love to hear your thoughts.
Thanks, and be well.