The GameStop Glow Up
2021 is off to a very weird start.
The first month of 2021 has been full of optimism and confusion. From an insurrection to an inauguration to WTF is going on with Conway Family, I have been wavering back and forth between dreaming of my first post-Covid vacation versus feeling completely hopeless.
This leaves me to the topic of Gamestop and reddit in which I must provide you a bit of personal history:
In 1999, at the eve of the new millennium, I worked for a startup called Novix Media and shared an office with Billy Baldwin which was a prime example of the dotcom bust and an epic failure. Trust me that when your personal life intersects with any member of the Baldwin clan, the world is about to go crazy. (i.e. Hilaria Baldwin in Dec. 2020.) I came to work one day and was told the company folded and was sent home with -$10 in my bank account and struggled for the next three years until I could get a next job in a Post 9.11 world. This was a very difficult time for me and I felt invisible and abandoned by a system that didn’t make sense to me. I was riddled in student debt and handing flyers on the street while my friends who worked in finance were getting bottle service. Still I retained optimism and a belief things would turn around for me.
After some years of hustle and honing my internet craft (and waiting on tables), I somehow got hired from Citigroup in some ragtag group of outsiders tasked to build the future of digital financial services. None of us had any financial service background and were mandated to take many hours of training on risk management and quantifying all of our digital bets. (I will confess that was a magical time in my life working with a bunch of very smart outside cats. ) For the first time in my adult life, I didn’t worry I would come home to a dark apartment because I could not afford my electric bill. Yet, sometime in late 2006, my friends would ask me, “Sow how is it going at the bank?” And I would respond, “I am not sure what is going on, but there is something wrong at the bank.” This was my hunch about the 2007 financial crisis from signals I saw happening around me with my basic knowledge of consumer credit as a digital “expert.”
I left “the bank” and went to the beauty industry with belief beauty was “recession proof” and have hung my hat there for over a decade where I have worked to build beauty communities and advocate the power of technology to make beauty more accessible to all. I have seen how communities have been created on reddit like Skincare Addiction and am a TikTok marketing pioneer. I am witnessing the democratization of beauty and it is fascinating. (I am also an early adopter on bitcoin after being dismissed by the financial system for so long.) I have been working from home for a year now. When people ask me how I am doing now, I sing Elaine Strich’s "I’m Still Here” which is the most truthful way I can answer as I live and work in my small apartment and wait for the vaccine as I write this Substack while speaking on an audio panel on Clubhouse.
Well, all that being said, I have been feeling uneasy about the current state of economic affairs with flashback to the cultural shifts that occurred in 1999 and 2007 as I went down the rabbit hole today about the GameStop/reddit situation.
Before I go into the cultural moment and implication on culture, this is my basic understanding of the situation from my elementary banking education (I may be wrong)
GameStop was a retailer in its deathbed and the stock was struggling.
Some people try to make money when stocks go down called Short Selling. I know some former hedge fund guys and wanna be bottle service/Fyre Festival types who are obsessed with this tactic.) Basically you borrow the stock from the owner and sell to someone for cash and then use that cash to hopefully buy it back at a cheaper price. Then you give the stock back to the owner for the price and make money off the profit.
Institutional investors and hedge funds were short selling the shit out of GameStop BUT short-selling only works when the stock price goes down but if the stock goes up, you are screwed.
This is where it gets interesting.
A group of investors who chat on Reddit WallStreetBets share information on the market. (Just like they do on skincare communities!) An investor posts on reddit that there were more shares of GameStop shorted than actually exist.
The WallStreetBets Community decided to band together to buy as many call options as possible of GameStop stock knowing this inside information.
This put the intuitional investors and hedge funds in a panic because then they had to compete against each other to buy the stock back and, in turn, drove up the prices making the situation even worse.
And, now the WallStreet reddit community is doing the same to AMC which keeps halting the stock and causing a lot of panic. Elon Musk and Chamath. Palihapitiya are somehow involved. And this is what I know.
Long story “short,” WallSteet bets has more influence over the stock market right now than the old school traditional investors and hedge funds and now this is all over the news and even hitting my TikTok feed.
And here is why I care.
Social media is disrupting the stock market which not only gives me bubble vibes, but is a powerful indicator of the influence of social communities. (The fact a bunch of ragtag retail investors banding together on reddit making hedge fund bros cry is also kind of hilarious.) Yet, all this is a more serious indicator on the power of online communities that we all need to understand as we navigate our way in this new world. This moment is also a commentary how many feel financially left behind and are working to disrupt the seats of power which impacts the future of work, politics and life in general. These online communities powered an insurrection and turned a stock from a dying company into a meme with a manipulated value based on a cultural moment versus the real value of the company. Do we want to live in meme culture in a Post-Covid world?
And the crazy thing is, I would kill to go back in a time machine and go hang out in GameStop right now before I meet you at the AMC theater in Times Square for a movie and a dinner inside at 100% capacity and party like it is 1999..