04 Feb 2021 GameStop. Ever Heard of It?
At this point, I don’t know how much there is to be gained by wading into the vastly oversaturated territory of GameStop-related (and AMC, Blackberry, et al) material. In doing so I run the risk of dragging into the fray those of you who’ve made an all-time great decision to ignore it, and I also run the risk of inviting the crowd-sourced
conspiracy theories wisdom of Reddit on my head. But on the other hand, nothing has dominated the discourse like GameStop in at least three months, so it sort of feels like I have to. Anyways, here I am.
One of the problems with wading in here is that the GameStop story encapsulates so many key facets not only of the stock market and what it means to invest there, but also the oddities and idiosyncrasies of human behavior and sociology. Once you start pulling at the thread of “What happened here and why?” you get a sense that maybe it would have been better to cut it off somewhere instead. So I’m not going to talk about why short-selling fears are way overblown. And I’m not going to talk about hedge funds. And I’m not going to talk about Reddit and the problems with trusting anonymous, opaque, and wildly bad advice on the internet. And I’m not even going to get on one of my favorite soap boxes, which is that all multi-level marketing schemes are doomed to implode. By the way, as I sit down to write this, $GME is trading at well under $60/share.
What I do want to talk about is the concept of “Revolution.” The folks at WallStreetBets worked themselves and lots of people on the sidelines into a frenzy over the idea that a) short-selling is evil and kills companies, b) that the hedge funds that engage in short-selling are evil just by existing, and c) if the investing masses joined together and bought a stock of a terrible company and pumped the price up (buy continuing to buy it), they could teach the short-selling hedge funders a lesson and thereby bring revolution to the market. And look, I’m no hedge-fund cheerleader! And you know what, the crowd really did stick it to a couple of hedge funds who were short GameStop stock! That’s awesome.
But here’s the problem: The revolution so many say they want to bring about has already happened. I can’t say this forcefully enough: It has never been easier, cheaper, or more accessible to be a “little guy” investor. It is almost embarrassingly easy. If anything, given the human predisposition to treat investing like gambling, it might even be too easy. No one is keeping anyone from putting money into the stock market in cheap, widely diversified ways. This hasn’t always been the case! But now it is, and we didn’t need all the nonsense and harm of a chatroom pump-and-dump saga to get there.
Of course, that’s not what a lot of the people who got caught up in this really wanted in the first place. No, they wanted to play the game of investing—the one where you trade regularly and dabble in options and make bets and try to squeeze the shorts for a profit—and they wanted to play the game without getting hosed. To that unspoken revolution, the one underpinning all this, I simply say: Good luck!
In our city right now there are lawyers who give away time to provide representation for those who need it, there are businesses and non-profits who partner together to provide meaningful employment to people who typically face barriers to it, there are doctors and nurses who provide healthcare to people that can’t access it otherwise, and there are all sorts of regular people who simply strive to be good neighbors, living beneath their means and giving generously to those who have need. Maybe that’s not a revolution, but maybe it’s not far from one. The key is, none of us need to spend our time worrying about GameStop anymore. We never did.
Investing is really important in its own way. But it’s always a means to an end. And in our opinion, it’s a means that should be done as cheaply, as broadly—and honestly, as boringly—as it possibly can be. Some people want exciting investing, and that’s okay! As long as you know ahead of time the expected value of the game you’re playing. At Beacon, we’re more about purposeful investing. Save the exciting for what actually matters.