In Our Hyperpartisan World, Everything’s an InkblotWSJ · by Gerard Baker
So it is with the Great GameStop Insurrection of 2021.
To the censorious, it’s the latest terrifying threat in the age of mobocracy. The spectacle of individual investors, freely associating on a public social-media platform to turn the tables on a risky bet by hedge-fund managers, has been too much for the more sensitive Wall Street titans and their supporters to watch.
Some commentators compared the Reddit rebels to flash mobs looting a convenience store. A former SEC commissioner said the incident was reminiscent of the Jan. 6 assault on the Capitol. Forcing an obscure hedge fund into the arms of an obscure creditor isn’t, I suppose, as thrilling as posing for selfies with Nancy Pelosi’s lectern, but it can be more financially rewarding and is less likely to result in a federal prison term.
To supporters of the option-wielding partisans, depending on your political taste, it was 1789, 1917 or 2016 replayed on a trading platform: an angry bourgeoisie turning against a corrupt and insouciant aristocracy of finance; the proletariat throwing off its chains to topple its capitalist oppressors; or disgruntled, hardworking Americans voting with their stimulus checks against a corrupt Wall Street-corporate-Big Tech establishment.
I defy you to come up with another event in contemporary politics that could unite Rep. Alexandria Ocasio-Cortez and Sen. Ted Cruz. Their fleeting moment of Twitter comity (quickly terminated by the former’s mad assertion that the latter “almost had me murdered”) might be the perfect summation of our current predicament: the New York socialist and the Texas conservative seeing complete validation of their ideology in the same messy inkblot.
Closely allied with the tendency to see what you want in the complex patterns of objective reality is the tendency to be furious about whatever you imagine they reveal. Whether it involves the regulatory capital requirements for equity derivative trading platforms, the estimated reproduction rate of a respiratory virus, or the rate at which carbon molecules are being absorbed into the atmosphere, the default position of talk-show hosts and Twitterati with upward of 50,000 followers can be summed up as: “I don’t understand what’s going on, but I know it vindicates everything I’ve ever said, and I’m absolutely outraged about it.”
That people see completely opposing but equally outrageous things in the same event doesn’t mean they’re all wrong. Logically, half of them could be dead right. But the vehemence with which the commentariat and the political classes seize on something newsworthy ought to give everyone else pause.
So it should be with the grand remonstrances about GameStop and Robinhood.
The captivating moral fable of last week, complete with its outrage narrative, is the idea of the people vs. the powerful: When the going got tough for the Wall Street crowd, the establishment closed ranks.
If that’s true they were late to rally ’round their friends. By the time Robinhood and others moved to limit trading, GameStop’s price had already increased 20-fold since the start of the year, and many individual traders had made a lot of money. While we will surely learn more about the decision to limit trading, it’s hardly surprising that the volume and price moves in some of these stocks would present serious capital and liquidity challenges for the platforms. We are also discovering that the little guys taking on the hedge funds included some of the more familiar names in finance. As prices begin to return to terrestrial levels, the traders may find the excitement of the revolution less appealing than it seemed last week. On top of all that, the sharp fall in broader equity prices last week may owe something to increased institutional selling in response to the squeeze.
No one sheds any tears for a financial elite at the pinnacle of a corroding system that has produced unsustainable inequality for too long. If the Reddit revolution adds a new element of risk in its path to greater wealth, all well and good.
But beware of compelling morality tales. The revolution won’t be day-traded.