On our minds: GameStop, swatting, and the power of Very Online schadenfreude. |
GameStops, GameStops everywhere |
 | | Hiroko Masuike/The New York Times |
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I don't know what I thought was going to happen in 2021, but I now feel pretty foolish for not having "a bunch of bored redditors eroding the theoretical underpinnings of the global financial system for lolz" on my list. |
Over the past week or so, members of a reddit community called Wall Street Bets have sent the stock of GameStop, Inc., a company that specializes in selling video games through brick-and-mortar stores, on a wild ride. And while there seem to be multiple motivations behind the activity, with some participants genuinely believing that the company has potential to grow and others trying to make a quick buck from internet excitement, many seem to be motivated by old-fashioned schadenfreude: Pumping up Gamestop's stock price is a way to hurt certain hedge funds. |
The quick version of that story is that the funds had "shorted" the stock: promising to sell shares in the future at a lower price, betting that Gamestop's share price would fall in the meantime. But the redditors realized that the funds had shorted more shares than actually existed in the market, leaving the short sellers vulnerable to a "short squeeze" — spikes in share price would force the sellers to buy shares to forestall more losses, sending the share price even higher, exposing the short sellers to ever-larger spiraling financial catastrophe. |
It worked. By the middle of this week, short-selling funds were taking huge losses as they scrambled to get out of the GameStop market. Redditors gleefully reveled in their power, and bystanders had fun, too. A quick scan of Twitter suggested that an awful lot of people were thrilled to watch wealthy financiers take a hit even if they understood little else about the situation. |
But public entertainment and score settling are technically not what markets are supposed to be for. The rough theory of the stock market is that it efficiently allocates capital to companies that can use it well. Sometimes that happens. The GameStop saga is solid evidence that sometimes it doesn't. |
While there have always been manipulations, mistakes and frauds, they were at least usually about making money, which was a limitation of sorts. Markets becoming entertainment venues for people willing to pay to watch the powerful suffer falls outside that limit. How do you price "maybe a message board somewhere will want to watch this burn" into your investment strategy? |
I like a good hit of schadenfreude as much as the next journalist, which is to say probably much more than the average person. But as I watched this play out, I kept thinking of another, far darker kind of online vengeance that seems to have parallels to the GameStop gang-up: swatting. |
That's the practice of placing a 911 call to the police, claiming to be reporting a hostage situation in a private home. But there is no hostage, and the home address is not that of the caller, but of some helpless target of online anger, perhaps for something as minor as annoying opponents during a video game. The police send heavily armed SWAT teams, sometimes with devastating consequences. One 2017 swatting call led police to shoot an innocent man to death in his own home. |
Swatting and GameStopping are not the same: the former targets powerless individuals using the most extreme state violence, the latter is making some wealthy hedge funds and their investors lose money. One of those is manifestly worse than the other. (Although it's worth remembering that wealthy financiers' losses have a way of becoming everyone's losses. See, e.g., the 2008 financial crisis.) |
But both are examples of the ways that social platforms are simultaneously showing people how to turn existing institutions into vehicles — or weapons — for their amusement, and giving them social affirmation for actually doing it. As anyone who has ever had a child or taught a class knows, those are the essential ingredients for creating new behaviors. And swatting shows how quickly that behavior can go from being a niche, random behavior to something more political. In one case, it was later used to attack a woman who had criticized the toxic sexism of some video-gamer communities. |
So we can't expect mass schadenfreude to remain a tool of the weak against the powerful, instead of the other way around. And we should expect more of these kinds of outbursts to keep happening, in various sectors — unless human psychology changes, social platforms control it, or institutions harden their defenses against that kind of exploitation. |
I don't have high hopes for sudden, mass psychological adaptation. And if past behavior is a guide, social platforms will make piecemeal and contradictory efforts to respond to these situations. |
Which leaves institutions to anticipate schadenfreude attacks and harden their defenses against chaos. Sometimes the methods are fairly clear. There is considerable evidence, for instance, that police departments already overuse SWAT teams. Reducing them in general would also blunt the dangers of swatting. |
But it's less obvious how to account for the possibility of meme-ified schadenfreude in financial regulation, or for that matter an investment strategy. And what about the institutions that have yet to find themselves the targets of this kind of campaign? What can a political party do, for instance? A bank? Or, for that matter, what about a newspaper? |
- What we get wrong about Joan Didion.
- Matt Levine, author of my favorite finance-news newsletter, has been predictably excellent on the subject of GameStop. (And I rarely recommend Times articles in this space, because I figure you come here for variety rather than my home-team cheers, but this piece by my colleagues Matt Phillips and Taylor Lorenz is too good to leave out.)
- "Betraying Big Brother," by Leta Hong Fincher, is a really excellent dive into the gender politics of modern China.
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