It’s the tyranny of the masses.
Just when you think you’re invulnerable, it turns out you are not.
The biggest story this week is not happening in the U.S., but Russia. I.e. Navalny. We don’t have people like this in America, those willing to put everything on the line, risk their lives. The Capitol rioters? They can’t stop blaming everybody else, they want to skirt responsibility, meanwhile Navalny is owning his “crime.” He was safe, in Germany, but he returned to Russia where he was immediately arrested because he loved his country more than money, and it was being ruined by Putin. And how did Navalny ultimately challenge the regime? HE POSTED A YOUTUBE VIDEO! All about Putin’s palace. Now Vladimir, believing he’s immune, and not spending time online with the hoi polloi, broke the number one rule of the internet…YOU NEVER EVER RESPOND! You punch up, not down. And if you’re attacked from below, you don’t react because you just amplify the message, and in the process you end up looking small and losing. Meanwhile, if you never say a thing, the story dies out. Yes, the internet is based on virality, and if there is none, it’s like nothing ever happened. Putin denied he owned the palace. And Mr. Invulnerable, King of the Universe, had a chip taken from his statue/identity, and you can never recover from this, because your faux pas lives online FOREVER!
Now Navalny is not loved by everybody, but Putin’s foes are banding together against him, the same way Trump’s enemies banded together against him so he lost the election. Trump can’t believe it, isn’t he all powerful, don’t things always go his way? But it turns out the people, the public, always win in the end.
So it started with music. MUSIC? What has that got to do with GameStop and Wall Street?
Plenty.
You see music was the canary in the coal mine for digital disruption. The movie played in plain sight, the labels consistently played their hand poorly, with lawsuits and more, suing their customers, until Steve Jobs and then Daniel Ek rescued them. Yes, they were too stupid to rescue themselves, they were poster boys, and they were all boys, for hubris. It couldn’t happen to them, they were the starmakers, look how much money they made on overpriced CDs! And that was a big motivator to trade files, it turns out fans were sick and tired of being overcharged for one good song on an album, and given the opportunity to revolt, they did.
Same thing with GameStop.
Now disruption has slowly worked its way into seemingly every other industry, and in each and every case not one of the major players decided to get ahead of it. Netflix disrupted television. Disney seems to have survived, its streaming platform is the beneficiary of a catalog of children’s content, evergreen. But every other outlet? GOOD LUCK! They’re all dependent on the new, as for HBO’s vaunted catalog, most everybody who cares has already seen it, and the shows of the past two decades age in a way that children’s programming does not.
So then they came for Wall Street.
Now Wall Street has been boosted since the eighties, as a matter of fact it’s Oliver Stone’s movie “Wall Street” that clued in the hoi polloi.
And it only got worse. Not only did the rich get richer, the poor got poorer.
And then Wall Street blew up the economy in 2008, paid no price as the public was kicked out of its homes, never mind losing its jobs and its savings, and the banks got government money to boot! God, if only that happened for the rest of us, FAILING UPWARDS!
And for the last four years, Trump kept telling us Wall Street is the economy. This is patently untrue, it’s essentially legalized gambling, controlled by the house. It’s Vegas, and the regular folk just can’t win, the odds are stacked against them, BUT WHAT IF YOU CHANGE THE GAME!
People kept being told to shut up and invest in index funds. To trade on your own was anathema. To leave the game to the big boys. Meanwhile, the big boys kept making more money while in most cases building nothing. Prior to Reagan Wall Street was seen as the funder of the economy, a distributor of cash to those who needed it, it was the engine of innovation. But now Wall Street is a giant casino where the products are invented by the institutions themselves, you can make gobs of money investing in products that have no basis in physical reality, that the average person can’t understand, but the average person knows they’re falling further and further behind every day.
So how does this GameStop story turn out?
PEOPLE LOSE MONEY! Just like they did in the music business.
In the music business there were tons of startups, seemingly all of which failed, or close to it.
But the story of the internet is there’s a new idea that is popularized and everybody gloms on and if the idea, the platform, the app, doesn’t crater completely, only a few end up winning in the end, the rest drop out.
So what’s going to happen here is the individuals, those on Reddit, those who drove GameStop up, are gonna lose their shirts. It’s gonna happen overnight. Same deal with BlackBerry and AMC. Sure, some will profit, but most will not. And the losses will be spread so far and wide that there will be no government rescue, like there was for the street in 2008, and most people will lick their wounds and go home, vowing never to play again, but not all of them.
So it started with Napster.
But then came the Arab Spring. A fruit vendor with a college education and no future finally had enough and stood up, almost like Navalny. End result? One Middle Eastern regime fell after another. Now eventually, too many returned to authoritarianism, in some cases even worse than before, but let’s not get ahead of ourselves.
The people are in charge, never forget it. Disruption happens when the people get ahead of the institutions. And the new game is always more equitable for the masses, whereas the old game saw concentration of capital within a very few.
So, Wall Street, making money on the internet, didn’t see that the internet would be its downfall. Trading is not rocket science. And the rocket scientists who got involved were all about math, which was beyond the knowledge of the old school traders, but now…
You see the math is based on fundamentals. Ultimately, in the long run, all of Wall Street is based on the fundamentals. And what is confounding the people on the street is the hoi polloi don’t care about fundamentals! They only care about making money, which is the ethos of Wall Street, never mind the takeover artists bankrupting Toys-R-Us and so many other employers of many while they end up enriching themselves, having borrowed the money for the purchase, layering debt on the target and paying themselves endless fees. They always talk about “efficiencies,” but the truth is almost all companies are aware of the street and are running more lean and productively than before, so what happens is the bankers just come in and squeeze more, to get their money. There’s no investment in the future, oftentimes there’s no money for investment at all, the debt payments are too high, and when the whole thing blows up, workers, usually making bupkes, are out of a job. How do you think that feels, to be out on your own, a complete unknown, like a rolling stone?
So, the internet allowed people to play on Wall Street. Companies were built, fees were lowered, all in an effort to get the public to invest more. But it all backfired, because some people figured out how to rig the game with these new tools. A company’s share price doesn’t have to reflect its true value, no way. But if you invest and the stock goes up, you’ve made money! So who cares what the company is really worth? It’s gambling, which, once again, is what Wall Street has evolved into.
So, the people taught Melvin a lesson. I mean come on now, shorting a losing company makes good business sense. But not if people flip the script, want you to pay for your excesses. Like in the music business. We constantly heard there would be no more music, people were killing the industry, and now so much music is being made that most of it goes unheard, and those playing by the old rules believe their careers should generate cash when they don’t. There are winners and losers, and they’re different from the ones they were before. If you’re not disrupting yourself, you’re gonna find yourself without a chair at the table.
So, like I said, many people trading can’t stomach the losses, so they will be out. But not all of them. Now, Wall Street will have to take into account what the Redditors, or whatever platform they employ, are doing. Turns out the Redditors are more powerful than any bank, even Goldman Sachs.
Expect the usual suspects to continue to bitch, to continue to go to D.C. with their lobbyists to continue to rig the game in their favor. But like Putin and Navalny, it’s too late for that, the horse is out of the barn, people are paying attention, you can’t get away with what you did before. Even worse, you must adjust your behavior for these new players.
Yup, Wall Street was so smart, so siloed, so ignorant, that it thought it was above it all. Now it found out it is not.
But it all comes down to information. And the truth is the public now has information as good as the insiders.
You can only push people so far until they rebel. And usually there’s a spark, oftentimes serendipitous, sometimes led by an individual, that rallies the public to take action, and then everything is up for grabs.
Putin put his enemies out of business and rewarded his cronies. Just like Trump. And his disinformation media misinformed people to their disadvantage, but then that pesky internet came along to punch holes in his armor. This is the story of internet disruption. The public is not only your customer, but your partner, treat people poorly at your peril.
The question is why the whole country hasn’t rebelled.
But pundits kept telling us Bernie was unelectable. Possibly so, but not his heirs. The public is sick and tired of being dictated to to their disadvantage. People can only be pushed so far. Don’t be distracted by the right wing nutjobs, it turns out people came out all over the country, all over the world, to protest against the mistreatment of Black people. Did we see the spontaneous generation of equal crowds on the right? No way!
Now in much of the world authoritarians continue to misinform the public. But it’s more difficult than ever, because of that damn internet. And sure, the net can also distribute disinformation, but that’s mostly because the fat cat business people who control the platforms are beholden to money, not truth. Now Mark Zuckerberg is in the crosshairs.
You see the game plays out the same way across all platforms. This is the result of the wiring of the world. We can band together to right a wrong.
That’s what the Redditors are doing to Wall Street right now!
