Did a class-war just break out on Reddit?
A case study on the GameStop saga
The ‘GameStop reddit saga’
As I write this, GameStop, has been thrust into what has been lauded as a socially mediated ‘class-war’. Fans on Reddit believe it is unfairly undervalued by large investors and have harnessed the power of collective leverage, buying its stocks and thus raising its price, to the detriment of large conglomerate hedge fund investors who had bet billions on a price drop. While media narratives have framed this as a landmark and revolutionary instance of awakening public resistance against capitalistic manipulation by Wall Street, there is more to this story than a feel-good David and Goliath tale. A group of day-traders (who frequent Reddit) have taken the initiative to collectively challenge the short selling positions typically adopted by hedge fund giants. Note that short selling has been around for ages, some 400 years ago. This isn’t a new development in financial markets. The GameStop saga however is perhaps the first time a social media platform has facilitated (quite publicly) a concerted intervention to overturn an otherwise routine hedge-fund managed short selling strategy.
There is however much to learn from qualitative commentary and data both on reddit and associated platforms around the issue.
Is this a true class-war in action or are there other overlapping contexts at play? Could this simply be a clash of egos between corporatised financial big-wigs and your savvy ‘neighbourhood day-trader’? Is this a story on activism or just a salient lesson on the versatility of technology in facilitating strategic collective intervention in financial markets ( thus allegedly flat-footing seasoned hedge fund firms)? How has the presiding global pandemic contributed to this saga if at all? How has the current global political climate influenced proceedings, if it has? To what extent/degree are complex capitalist systems under scrutiny? What does this entire event say about ethics and morality in the corporate world, the media and everyday life? Whatever the answers are, there is great potential for interdisciplinary inquiry in further unpacking what, if anything, the GameStop reddit debacle has thought us.
A deep-dive into Reddit posts on the GameStop issue
I analysed over 4,500 posts through a concordance analysis of Reddit’s most popular threads on the GameStop debacle. It made sense to examine Reddit since it was the originating platform where events first unfolded.
For those not familiar with concordance data analysis, it is in its most basic form, an examination of word-frequency distribution in a large corpus, a method commonly employed in the fields of linguistics, sociology, media studies and political science. The most frequently utilised words are then explored against the contexts they were used in. Words used in the same context are grouped together to form broader themes/insights. The similarity of contexts between words are determined through an established matrix of factors predicated on Van Dijk’s work on discourse analysis, which include, “time”, “agency”, “modality/tone” and “granularity” (i.e. level of detail). I won’t bore you with the methodological intricacies here. That is for another post.
The following insights were extracted:
Technology is ‘dangerous’ when it works too well
There are socially and institutionally enforced limits to the democratising potential of technology, because technology operates within a broader capitalistic system that serves to protect certain interests/privileges over others. The Robinhood Investment application (used by a large proportion of both seasoned and amateur investors to buy and sell stocks) was vehemently criticised for temporarily suspending the purchase of ‘meme stocks’ much to the frustration of day-traders and Reddit based investors. While ‘market volatility’ was cited as the official reason for the measure, Redditor’s felt this move conflicted with the company’s ethos in democratising access to financial trading, made more damning by Robinhood’s alleged ties with select hedge-fund firms. Like other brokerages, Robinhood gets paid to route orders to market makers, a controversial practice known as payment for orderflow. Citadel Securities is a major source of revenue for Robinhood.
The underlying point here is that there is a price attached to the democratisation of technology, especially when profits are on the line. Applications like Robinhood typically dance between the fine margins of protecting stakeholder interests and ensuring some degree of acceptable transactional efficiency for its service-side clients. It just can’t be a free-for-all platform because it renders their existence financially unsustainable.
It is also worth noting that there was a significant statistical correlation between the use of the word ‘Democracy’ and ‘Robinhood’ indicated by a strong stat value of 0.781. This means that there was more than a strong likelihood (78% probability) that both words were utilised in the same sentence when they did occur in the sample of Reddit posts.
Concordance keywords: Robinhood (N=2367) Democracy (N=2891) Betrayal (N=1728)
‘Average’ is just a superfluous descriptor
Definitions of the ‘average person” is relative with most commenters adopting a general understanding that anyone trading in an independent capacity outside the perimeters of large hedge-fund backed conglomerates qualifies as ‘average’. This definition obviously raises questions of generalisability and how diluted and relative notions of ‘average’ and ‘the common man’ have become by todays standards of profit-driven wealth generation. The above sentiment is captured quite elegantly in the words of one Redditor:
“To be honest, I’m a tad perturbed at Reddit bros (the day traders) championing the average man’s cause…I mean most of us here have substantial portfolios of some kind. Not average by any stretch of the imagination, I’d assume?”
Concordance keywords: Average (N=1720) Common-man (N=892) small-fry (N=401) Cause (N=222)
There is no David vs Goliath in a system legitimised by shifting inequalities
There was also a presiding sentiment that profitability derives its value from inequality. Where there is money to be made, one person and/or community almost always ends up with the shorter end of the carrot stick. N=739 comments out of the sample of 4,200 posts alluded to how this entire episode had reinforced the notion that capitalism and capitalistic structures thrive on an unequal distribution of resources. It facilitates various flavours of strategic (sometimes legal) manipulation, with people traversing between the roles of ‘the manipulator’ and ‘the manipulated’. This is further underlined by the claim that both hedge-funds representatives and Reddit day-traders have claimed to be victims - a narrative that has been contextualised by much of mainstream media as one premised on a David vs Goliath scenario. But is this really accurate?
36% of sampled posts also asserted that this was really about the clash of financial players and personalities rather than a confrontation between ‘big’ and ‘small’ investors. As one sampled Redditor comment succinctly put it:
“So let's dispel one quick thing: this is not David vs Goliath. It also isn't the little man vs hedge funds or WSB vs big finance. ”
Perhaps, the true impact of the GameStop saga (or the ‘activist slant’) lay in the concerted reflection of just how tragically polarised and fractured notions of value and equality have become, a point once masterfully summarised by American investor John Bogle; “On balance, the financial system subtracts value from society”
Concordance keywords: David vs Goliath (N=1320) Inequality/Unequal (N=711) Activism/Activist (N=401) big-finance (N=349)
When silence speaks louder . . .what about the pensioners?
There is a notable absence of any commentary (in the sample of posts) on how this incident may have resulted in collateral damage across vulnerable communities who remain passive players in the financial system. Pensioners, many of whom have contributed substantial assets to hedge-funds with a view towards a retirement nest egg, could end up as the unintended casualties of a game that takes no prisoners. The resounding lack of attention on the broader societal impact of this entire saga raises the point that individual survival and an instinct towards self-preservation remain as chief priorities. Further to this, there were only N=98 posts (2.1% of the entire sample) that referenced the resounding and potentially profound psychological impact a sudden turn in fortunes in the stock market could inflict whether you are a ‘hedge-fun super-player’ or an ‘average day-trader’.
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