"Disruption"
is the keyword for the 21st-century economy. There is no
such thing as a stable corporate empire now.
If you need a perfect definition of "nouveau riche," look no further than Crypto
Castle, and the preening Jeremy Gardner, the poster child for the
cryptocurrency millennium millionaire. Before you cheer too loudly
for the fresh face of a new generation, remember that forty years
ago, Boomers were a bunch of hippies having love-ins in Central Park.
What's this guy going to be in forty years? You better hope he turns
out nice.
First
came the Internet, the World Wide Web, and Amazon. Retail malls dried up gradually in an event we now call the "retail
apocalypse." The wealth shifted, from big-box retailers to indie web kiosks, which then grew to replace the
malls. There's a whole category of urban explorers on YouTube whose
entire channel is about filming dead malls. The founding of this art form is credited to Dan Bell:
Next
came the
gig economy.
Employers had once counted on legions of wage slaves who were their virtual prisoners, but now even during a pandemic, some shifts are hard to fill. Workers
discovered that they could become mercenary employees on their own
terms, thanks to the digitization of industry
and the increasing demand for knowledge work.
Your humble author was one
of the first to break these ranks and run away from office cubicle land to become my own independent agent. "Bosses?" Bah, I have clients! I have a career now instead of a job. I get to make the decisions myself. From my point of view, there's no going back.
Those
two, the Web and the Gig Economy, those were the disruptions that
came courtesy of Generation X. The infamous "latchkey
generation," surprise surprise, grew up
liking their independence and sought out lifestyles where they didn't
have to rely on other people. "Other people" are made out
of Watergate, AIDS, and exploding Space Shuttle Challengers. I'll do
my own taxes, thank you very much.
But
Generation Z would come along with their own disruptions…
Cryptocurrency : The First Disruption of Wall Street
"Cryptocurrency"
was an idea that was actually slow to take hold at first. The big
one, Bitcoin, started way back in 2009. In the beginning, Bitcoins
didn't even tag $1 each until 2011, didn't see the hundred-dollar mark
until April of 2013, and finally built up enough steam to charge into
the infamous 2017 bubble with a top price of just over $20K. Sorry,
you missed out!
Up until then, Bitcoin had been one more thing for geeks to natter about on imageboards, largely ignored by the mainstream. But the world sure noticed Bitcoin after that! Everybody jumped to the media to try to figure out what was going on with the
future of cryptocurrency here, indulging in intense speculation. This was so unexpected, nobody 20 years ago could have foreseen it. Generation Z, just barely graduated from high school, managed to create their own wealth based upon an
invented commodity.
How
often do we see anybody invent a brand new commodity? Look at
history. We can't count any natural resources here because, duh,
they're natural. So commodities we've invented could include the
concepts of "real estate," "bonds," "debt,"
"futures," and the derivatives of same.
The big innovation in commodities rolled along at the dawn of the Industrial
Age, which introduced the modern concept of the
stock market. There are earlier examples, but the Amsterdam Stock
Exchange in the 1700s was the first formal example that we would
recognize as a stock market. Since then, not a lot has changed. Stock
market trading has grown more complex and sophisticated, but it's
still just based on buying and selling futures in companies.
So
cryptocurrency changed that. It's a commodity that exists entirely in
the digital realm, literally made out of nothing but numbers. Who
knows when we'll see another innovation like this? In 2017,
cryptocurrency kicked down the door of the stock market and said
"from now on, we are roomies together!"
Even though day-trading of stocks was something that had gone on for a long time, there has always been something about the stock market that seemed to exclude new generations or the lower classes. It's something for Boomers to play with and for Millennials to protest with #OccupyWallStreet.
As opposed to the protest strategy, Generation Z simply hacked their
way around the barrier by inventing something new and high-tech.
What next? Well, it turns out that the Visigoths would not be sated with the taste of an alternative victory. They came here to sack
Rome, and sack Rome they would.
Stonks! : The Second Disruption of Wall Street
The GameStop
Big Short Squeeze, like Bitcoin, was born from a concept on message boards that puttered around for a while before it took off. The concept was just small-time day-trader stock and options trading, centered at the Reddit forum /r/wallstreetbets.
But it was done with the expectation that this was all amateurs
leading amateurs, people with minor caches of disposable income
basically playing darts with the money.
These were not Wall Street market analysts in pinstripe suits. These were kids at home in their jammies with a plate of chicken tendies at their elbow, playing the stock market exactly like they would play any other cooperative online game, from Old
School RuneScape to Among
Us. Then one day they found out about short
selling. If you've never played the stock market, here's a fuzzy
concept of how short selling works:
Long
story short (see what I did there?), you borrow a stock today, sell
it, and then later pay back the party you borrowed the stock from.
This is allowed. The motive is that you hope that the stock's value
today is higher than it is going to be later, hence you sell it for
its higher "today" price and then buy it for its lower
"later" price. If this sounds sketchy, well, let's just say
that Wall Street had strayed from God's light long before
short-selling became a thing. If it sounds risky, of course it is!
That's all stock-trading is, one big gamble.
Before I left to join the ranks of freelancers, my last "job" in the corporate world was at the headquarters of a multinational bank I'm sure you've heard of. From my experience there, given the choice between a Wall Street suit-and-tie guy and the kid in his jammies with the chicken tendies, I'll pick Chicken Tendies Kid every time! He's less reckless, has more insight, and knows how to Google. Corporate finance gave us the Subprime Mortgage Crisis and economic meltdown in 2007.
Enter GameStop,
a retail chain of video game stores that has been dying from that
retail apocalypse we talked about up above. One of the Reddit
wall-street-bettors noticed that GameStop was a prominent target of
short selling, and decided - strictly for the giggles - to buy up a
bundle of GameStop stock and sit on it. He then shared this idea with
a bunch of other wall-street-bettors, who all chipped in to hold some
more GameStop stock.
Wall Street hedge fund guys had no idea what was going on. They were betting on GameStop going down, but instead as more Reddit raiders bought GameStop, the price kept rising instead. That wasn't supposed to happen!
Brokerages lost so much money on the failed shorting attempt that some, chiefly Robinhood Securities LLC, tried to halt the trading. This resulted in a
thrilling cat and mouse game between Robinhood and Reddit. Government
regulators actually had a hearing about this. And yet the Redditors were technically doing nothing wrong. There are no laws against buying a stock based on something you heard online. It's just that Wall Street was never built upon the assumption that a group of anonymous social media users would band together and act in a coordinated block like this.
This was like Arab
Spring for Wall Street. Social media once again empowered a network of individuals to coordinate on a common goal in a way that had never been done before. Once again, new technology was harnessed to take power away from old hands and transfer it to new hands.
GameStop has since settled slightly, but it's far from the end of the story, which is still developing as of this writing. Bots
are being deployed on social media to hype stocks. Despite the fact that there is still no harm nor foul here, the
SEC (securities and exchange commission) has clamped down on trading
of 15 more stocks based entirely upon the suspicion that they are hyped on social media. The SEC's excuse is "to safeguard the public interest." This is literally saying that "we have to make sure the wrong people don't make money," because there has never been a non-influenced stock sale in the history of stock sales. They're just using a different tool now.
Stock market regulation, let us be blunt, is STUPID. Look at the
definition of market manipulation. Look at the
examples of market manipulation, which includes right here "short or heavy selling" under "bear trading." That's what the short-sellers were doing? If I tell you that a bunch of people were planning to short-sell GameStop, wouldn't that influence you to sell your GameStop stock before the price tanks? If I told you Warren
Buffett bought some shares of a company, wouldn't you want to buy those shares too? What counts as "market manipulation"? Nothing and everything, and the rules are applied arbitrarily. It's like having a law against heresy.
A legal
expert has already pointed out that a stock manipulation charge RE: GameStop would be tough to sustain in an actual court of law. You have to argue intent with these things. But that is *IF* it sees the inside of a courtroom. If the SEC can just randomly stop trades on stocks just because Reddit likes them, the onus is upon some member of the public to haul off and sue the SEC. And what about those 15 other stocks that the SEC has already had to block? What if it's 150 stocks next week? What if Reddit publishes a list of 15,000 stocks it likes? What is the SEC going to do, shut down the whole stock market?
The Gates Are Kicked In; The Visigoths Will Return
In the grand scheme of things, most of us, who do not trade in stocks nor crypto, don't much care. The US Dow Jones Industrial Average said
goodbye to economic reality a long time ago. Wall Street is like a mythical kingdom far away in the hills to most of us. Through recessions, upheavals, a pandemic, war, and peace, the market just keeps going up.
Likewise, cryptocurrency is not tethered to any reality but the digital realm. Dozens
of crypto offerings, including silly ones like
DogeCoin, are trading all the time based on nothing but hunches,
rumors, and for all we know, horoscopes.
Look
at this new 21st century economy, with its eCommerce,
freelancing gigs, cryptocurrency, and social media stock market
raids. We might be tempted to whistle a few bars of Bob Dylan.
Because something is happening here and you don't know what it is, do
you, Mr. Jones?
But is it really all that different? The whole idea of free-market Capitalism is to let people do whatever the hell they want with their money.
- The business is never coming back to the malls, but eCommerce has made a billionaire of Amazon CEO Jeff Bezos.
- The labor market is more scattered than ever and the very concept of a "job" may be up for re-definition soon, but UpWork seems to be handling the transition well.
- Cryptocurrency continues to be a circus of volatile trading, but in its absence, we'd be trading Beanie Babies or Magic: The Gathering cards instead.
- Robinhood LLC (NO stranger to controversy, mind) may sob over its lost revenue, but what was the stock market ever founded on, if not vultures in cahoots to get rich anyway?
What we're seeing here is nothing more nor less than the new generations and lower classes prying those fabled means of production out of the hands of the old generation and upper classes. History is one long story of the struggle between the
proletariat and the bourgeoisie. You know what
happens after the Visigoths sack Rome? They set up housekeeping and
become the new Rome! Happens all the time in history, regular as
clockwork.
Here's
cryptocurrency going mainstream now.
Facebook is launching its
own cryptocurrency. UpWork, the current vanguard of the gig economy, has
become a publicly traded stock, doing quite well in fact. And what perfect metaphor could we have for the bridge between the old economy and the new? Tesla
CEO Elon Musk egging on the Dogecoin surge to the point that the SEC is even rattling a saber at him. Elon would love to have that go to court, and so would the rest of us, so we get to see "good boi doge" memes with "Wow! Much coin, very regulate!" uses as exhibit A in a federal case.
Mark my words: The GameStop Short Squeeze is not the end. It is the beginning. Wall Street will have to reform or get plowed under, and there's a stopwatch ticking down right now to this decision point.
In
fact, we're due for a new perspective: The more things change, the
more they stay the same. Money has to go somewhere, so if there are
losers on the one side, there are winners on the other. All that's
happening is some wealth and power changing hands, and a new
generation getting a piece of the action. Bet your bottom dollar that
they, too, will someday be desperately trying to hold onto what
they've got when the generation after that one comes to stake their own claim.
