Is GameStop the Boston Tea Party of Wall Street?

You may be devastated to learn that several hedge funds are bleeding cash - and at least one had to be bailed out when amateur investors on a Reddit forum decided to buy heavily shorted stocks, like AMC and GameStop. ("Shorting" is selling borrowed shares, betting you can replace them later, at a lower price.) But rising prices forced a "short squeeze", which only sounds like a sad sex move. It means short-sellers were forced to buy high to cover their shorts. (Yes, it's all morbid erotica from here.)

Even as Robinhood halts trading on these "meme stocks", there's something deliciously sadistic about anonymous Redditors spearing Wall Street sharks, who routinely play roulette with people's lives.

Whether it's buying millions of homes for pennies after causing mass-evictions, getting bailed out at taxpayers' expense, or feeding large clients PPP cash meant for small businesses, Wall Street has all the lovability of Patrick Bateman.

But is this anything more than advanced trolling? Is this the battle cry of the masses, rising up against a heartless industry, as billionaire founder of Social Capital Chamath Palihapitiya suggests? Or, is it "young men not having enough sex" as NYU Professor Scott Galloway sees it? Are we on the brink of The People's Financial Revolution...or something else? I have a theory...

'Buy & hold' for thee, leveraged multiples for me

Let's start with the basic insanity of allowing "shorting" a stock - at more than a company is worth. The only way to "short" a stock you don't like should be: 1) not buying it, or 2) selling shares you own. The rest is gambling. Or, alchemy. Both Wall Street specialties...until their next oopsie and bailout.

(To be fair, some defend short-selling as an important modulation tool. I respectfully disagree.)

To understand our priorities, the Fed wasted no time at the start of the pandemic buying up corporate debt. But getting aid to people and small businesses? Fax your Congressman (a check).

Even when Robinhood halted trading of GameStop and AMC, it chose Wall Street tycoons over thousands of its customers. We might never know if some powerbroker called in a favor or a threat, but the message was clear: 'quell the rebellion and put the plebs in their place'. And the plebs are pissed. They just filed a class action lawsuit against Robinhood that might just torch Sherwood Forest.

In general, the financial industry preaches "buy and hold" to 401Kommoners, but gets free cash from the Fed to buy Treasuries or make exotic bets that have little to do with the productive economy. And a handful of investors get rich from top startups before foisting their unprofitable carcasses on public markets. Then there's the tax-free paradise of Hedge Funds... You get the idea.

As software eats the world, financial engineers scrape out the marrow.

It's no wonder Wall Street now lusts for Bitcoin and cryptocurrencies. They're ethereal manifestations with a growing flock of believers. Belief is profit. And our future is belief.

As the pandemic wears on and millions remain unemployed, the stock market reflects the splintering beliefs of our four-tiered society:

• The Emancipated are rich, diversified and free from the burdens and borders that constrain the rest of us. They believe in the American Dream, from the comfort of Majorca, where their spouses taunt millions of Instagram enviers with beautifully designed bags and bodies.
• Work-at-home Zoombies with bulging retirement portfolios and property values, who believe the future is bright and America has finally returned to normal
• Essential workers, who deliver meals, personal services, and Amazon boxes to Zoombies. Their treadmill has no "off" switch. They believe they can never stop running - or afford to get sick. They're not reading this article.
• Futureless castaways, who drift deeper into economic irrelevance or depression each day. They don't believe.

10 Forces Driving this 'Reddit Revolution'

Of course, this isn't all about Wall Street. Economics, culture and technology are fueling this digital Tea Party. Here are ten forces that immediately come to mind.

1. Gaming/meme/trolling/cancel cultures fuel a devilish desire for chaos, outrage, dark humor, and conspiracy. Their virality is made possible by social media, forums, and chat apps.
2. Greed. From Bitcoin HODLers (long-term holders) to daytraders to finance fetishists, a growing number of young people crave their slice of financial freedom - and they're willing to trek deep into speculation to get it.
3. Stimulus cash might not have been life-changing for families with big expenses, but for young adults living with their parents, it's playtime!
4. Free trading tools, like Robinhood, have made trading small volumes frictionless and sexy. If you can't trust a startup run by 20-somethings that targets amateur young gamblers with a mysteriously free service, who can you trust?
5. Rising anti-establishmentarianism, especially in online forums, where socialists, libertarians, anti-fascists, BLM-ers, right wingers, and Bugaloo Boys see our system as unjust. They just can't agree on how, exactly. Occasionally, their battles spill into meatspace.
6. Elevated joblessness and pandemic frustration that also contributed to this summer's protests and recent storming of the Capital
7. Meaningless jobs - even Zoombies alternate between PowerPoint and existential crisis, as the pandemic laid bare that all their decisions might have been wrong. Pay a fortune to live in a crowded city? Choose work over family? Stare at THAT GUY's cubicle all day?? WHY??
8. Financial industry disdain dates back to the '08 crisis.
9. We are engulfed in a crisis of purpose. Too deep to get into here, but you should read The Economics of Happiness.
10. A declining need for men plays a big part in this. Let's face it, most finance forums and crypto groups are sausagefests. It's no wonder. Young people are barely having sex, they're waiting longer to have kids, and women aren't finding worthy partners. This trend partially explains the rise of smart 50's dad Jordan Peterson, as well as groups like Antifa, Proud Boys and Bugaloo Boys. Their members are dying for meaning, community, discipline and purpose. Sometimes, literally, dying. I satirized the looming death of masculinity in 2010. I just didn't expect the end to come so soon.

Is This A Revolution?

In a word, no. But financial revolutions accompany real ones. Several are percolating all around us. We are engulfed in crises of wealth, power, identity and expectations that are consistently and cynically misdiagnosed and mistreated. We almost never address root causes because activists represent narrow interests and incumbents choose tokenism to preserve their power. As the majority remains silent, the real problems fester. (I explore this idea in this video from The McFuture podcast.)

At the moment, the GameStop "insurrection" mainly benefits the establishment. Market masters will gladly throw a hedge fund (or ten) to the wolves, for higher trading volumes and volatility. Pros have way more tools and assets to profit from chaos than a ragtag bunch of Redditors.

In fact, Silverlake just converted its loan to AMC into equity, pocketing a sweet $284M profit from this "rebellion". This is exactly like dropping your tea in the harbor - then buying more tea from the same supplier. Ah, symbolism...

Whether the real revolution comes or not, the stock market - and financial services in general, beg for disruption. Entrepreneurs need financing, more people need credit or a second chance, too few enjoy the upside and security of investing, and the interests of companies and citizens must be realigned (and casino decommissioned).

But wealthy incumbents are protected by a moat of regulations. They have limitless cash to buy, copy, outspend or litigate upstarts. They're huge political donors and have mass distribution. Challenging this system is non-trivial. There's certainly innovation, but rarely disruption. Regulated industries move far too slow to be surprised.

Financial services disruption will come from below, not from above. I'll explain.

As I wrote in Why Monopoly Is The Future...And We LOVE It!, "It turns out, competition is a temporary state of Capitalism. The steady state is monopoly." Not only is every major industry consolidating, but mass consolidation is a sign of an aging society that values stability over choice.

Think of Maslow's Hierarchy of Needs. You can't worry about self-actualization when you're being chased by a puma. First things first. Now apply that to our lives - how often do you want to think about changing electricity or water providers? Or, lenders? Wouldn't you rather watch Netflix?

Banking and finance are now utilities, woven into our lives, employers and government. It's infrastructure. And all the wannabe-disruptors rely on that infrastructure for financing, banking services, and regulatory compliance. So true disruption must come from fractures in the foundations beneath the industry, not shuffling around what sits on top. It's why people joke that "we need an alien invasion" - a real battle to distract us from stupid ones on Twitter. (Note: it would take the aliens exactly 37 seconds to barbecue all of California, but dare to dream!)

That said, there are noble innovations improving customer experience (Current), expanding banking access (M-Pesa), driving down fees (CashApp), or improving transparency (Policygenius). While they won't "disrupt" financial services, they may interrupt it.

When Robinhood attracted younger investors with a no-fee mobile stock trading, established brokers were forced to cut fees, upgrade features, and consolidate. But Robinhood won't drive incumbents out of business, unless they seriously fail to adapt. Like PayPal, the OG of digital innovators, they'll add a seat to the incumbent's table (not to be confused with the Captain's Table on the Love Boat).

Same goes for blockchain and cryptocurrencies. They're increasingly co-opted by establishment players. And here I discuss the Long-Term Stock Exchange, which seeks to reinvent the stock exchange that rewards companies with high ethical standards. My former client LendingClub pioneered crowdlending, but it occupies a profitable niche that coexists with the establishment. So do Angelist, GoFundMe, OurCrowd and countless other new financing models. At their best, they siphon customers with superior offerings and force incumbents to catch up.

It's not hard to imagine countless yet-to-be-invented financial models. What if Barstool Fund, which raises money to help small businesses crippled by pandemic lockdowns, became an investment site? Small businesses could raise money from investors in exchange for equity or a profit-share. To make this happen wouldn't take a revolution, but diligent work within our system.

If you're happy with the system we have, why did you read this??

If you crave something better, I don't think Reddit will deliver it. But it might be where a new ideas are conceived - for better or worse.

Our new presidential administration and ruling party is flush with Wall Street cash, so I'm not expecting transformative government reforms - or the right ones. Politics is a slow burn. But silence is not an option. Otherwise, the loudest and fringiest special interests get their way. And you may not want to live in the world they craft.

For now, we can vote with our money and actions.

Choose providers and investments that represent our values and how we want to be treated. We can join or start companies that solve important financial problems. Increasingly, we live in a world where imagination is our only limit. Even in this flawed system, there are plenty of entrepreneurs, philanthropists and venture capitalists eager to support audacious solutions to big problems. The same greed that fuels Wall Street's casino can also power countless innovators. Maybe you're one of them.

I'm not sure what options we'll have after the revolution.

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PS - If my explanation didn't work for you, here's a perfectly good alternative: