Redditors sucker-punched a hedge fund but are they also getting played?
The point of this post is fairly simple (though its implications are a mess):
Networks can and do change the world in dramatic ways all the time. Our collective ability to do so in grassroots ways is increasing. However, we have to be careful about the ways that top down actors can tip the scale in their favor by pinning us against their enemies and making it harder to see the full picture of our situation.
So while we play one actor? How do we avoid getting played?
Long story short, people on a subreddit called r/WallStreetBets taglined “if 4chan got access to a Bloomberg terminal” figured out that they could fuck over some hedge funds by investing in companies they were shorting (betting that they’d fail). So just like that, Gamestop’s stock went up almost $300 in a week mostly through small traders on the app Robinhood.
The back story is pretty interesting. Basically a random Redditor named u/DeepFuckingValue realized that Game Stop was being shorted way beyond it’s actual likelihood to fail. It turns out that Game Stop was basically fine despite the Hedge Funds betting on its failure.
So then after he kept insisting that everyone buy Game Stop, eventually it caught on and became a viral meme. And it worked! The hedge fund Melvin Capital went insolvent! A bunch of small traders beat down a hedge fund!
On the face of it this is extremely exciting and interesting. A grassroots meme and a huge swarm of people toppled a major player in the US hyper-capitalist economy. A bunch of Redditors made BANK. People posted screenshots of paying off things like student loans and medical bills. One user claims (though i couldn’t find the referenced article) that short-sellers lost $14.3 billion in one day on GameStop stock according to S3 Partners. I mean, lol.
However, because reality is complex, there was more going on than meets the eye. The twitter user @toxic broke the story of the ways in which, primarily High Frequency Traders, especially those with a milliseconds peek at RobinHood trade data such as Citadel, were able to ride the wave with bots. And of course, Citadel went in for investing in the now poor downtrodden Melvin Capital. Now articles are coming out and suggesting that it wasn’t just the scrappy, (and quite toxic) r/WallStreetBets turning the surge into major private profit. A bunch of establishment long-runners like Black Rock also saw massive increases in positions to the tune of billions. But simultaneously, a class action lawsuit was launched against RobinHood for shutting down trading.
A member of the Stanford Internet Observatory had this to say
And indeed, as networks of grassroots actors learn their collective power, as do vanguards like state intelligence agencies, oligarchs, sketchy bankers, and rival corporations look for ways to hit pressure points and steer such waves in their favor. A reply to this thread stated fairly:
New questions emerge in the wake of the fiasco about whether there was any market manipulations or security fraud that the SEC could charge people for. Of course, they turn their scrutiny on small players rather than the hedge funks and investment bankers that create the bubbles we face in the first place. Trading of GME (Game Stop) stock was arbitrarily halted except for the big cats in Hedge Funds while the SEC attempts to do damage control. The SEC is BIG SCARED. 😈
But the cats out of the bag. Just like when people burned down a police station in the beginning of the George Floyd rebellion, now everyone collectively knows this is possible and is building up their collective intelligence on how to do it.
So the question remains: How do we play the big players without getting played? It’s an inherently hard question. Networks are better at routing around influence operations for the same reasons they can route a hedge fund. But a lot of money has been put into things like Graph Theory based influence operations to try to impact events in a top-down way. The best we can do is stay mindful of both the near enemy, and the other corrupt actors at play if we hope to juke and topple them all.
In any case, who I’m actually shorting are states at reacting with enough dexterity to route climate change like redditors can a hedge fund.
p.s. I know that shorting seems weird from a leftist perspective, but it’s no weirder than any form of stock or futures. In fact, it’s often how bubbles are finally popped ie. in the based on fact movie “The Big Short” about the mortgage crisis. Also whether this action counts as “leftist” or not is much more boring to me than it’s general impacts. Also here’s a comment from Marx on the matter: