The struggling video game retailer GameStop soared as Reddit users egged each other on to buy, cleverly taking advantage of rules in a game that otherwise would have made a number of hedge funds very rich. Then the stock plummeted as online brokerages took the extreme step of cracking down on trading to stem volatility, prompting an outcry, a lawsuit and calls for congressional hearings.
Throughout it all, befuddled financial analysts on cable TV struggled to explain how an amorphous group of social media users could upend the markets as part of a massive in-joke from which the rest of Wall Street was very much excluded. "We've seen how social media can be manipulated to expose fault lines in our democracy," said Arthur Levitt, Jr., the former chair of the Securities and Exchange Commission, in an op-ed. "Are we certain the same isn't happening in our financial markets? Time to find out."
The implication that social media has destabilized the markets, and that perhaps this even represents some emergency, speaks to the sense that this may be a turning point for the financial industry. But it should hardly come as a surprise. The whole spectacle reflects precisely the same dynamics that have rattled politics, media and other sectors for years. The only surprise is that it didn't happen sooner.
Just another week on the internet
What makes the GameStop story so compelling is not just the unlikely bounce-back of a company that has arguably more in common with Blockbuster or Radio Shack than, say, Amazon or Facebook. The underlying story is that a group of seemingly ordinary retail investors harnessed the power of the internet to humiliate hedge fund investors who had bet deliberately and enormously against GameStop.