GameStop, Bitcoin and QAnon: How the Wisdom of Crowds Became the Anarchy of the Mob

WallStreetBets has become the communications hub for a phalanx of bored-at-home, stick-it-to-the-man retail traders who have cast themselves as the heroes in a David-versus-Goliath battle against hedge funds, big banks and other avatars of America’s elite. These include the “blue checks” on

Twitter,

talking heads on CNBC, even Robinhood, the trading platform on which many of them had been buying options, until it halted some of those trades Thursday morning. (The financial machinations of this battle have been described in fascinating detail by my colleagues, including an interview with the man who started, then subsequently lost control of, WallStreetBets.)

But this is a tale of something much bigger and more consequential than the fate of a single stonk, I mean stock, or even, as homebound day traders look for other quick wins, a handful of them. What’s happening on WallStreetBets is of a piece with other internet phenomena, from bitcoin mania to the online conspiracy theories of QAnon, and the events leading up to the Capitol riot.

Research on how innovation happens has revealed that small groups of people, not large networks of them, are often the best at incubating new ideas, which only later spread to the world at large. But in the case of recent collective manias, people are developing ideas that may carry a kernel of truth, but are largely fictions, often crafted in defiance of authorities—and of authoritative information.

Once cultivated in small, anything-goes online forums, these fringe ideas-turned-movements are amplified by a powerful complex of social-media giants, including Facebook, Twitter, TikTok and YouTube. The algorithms on these platforms that select for the most engaging content—that is, content that moves, inspires and/or terrifies us—push these notions in front of as many people as possible, and eventually into the mainstream.

Whereas these phenomena might have once remained virtual, bounded by the internet, they’re now breaking into the “real world.” What begins as idle forum chatter now has the power to rock political and financial power centers, at least temporarily.

The process, in its current form, privileges a kind of gleeful anarchy, whether it’s the blow-up-Washington populism that led some to participate in the Capitol riot, the end-the-global-monetary-system mind-set of some bitcoin enthusiasts, or the idea that by continuing to buy and hold

GameStop

stock and call options, an army of keyboard warriors could simultaneously end wealth inequality and bring down “predatory” hedge funds.

In this case, their method was buying shares and options of GameStop in order to squeeze short sellers who were betting the stock would drop. The result was a buying frenzy that lofted the stock’s value into the stratosphere, well beyond any price at which it reflected a plausible future for the fundamentals of GameStop’s business.

That might sound like hyperbole, but it’s precisely the hyperbole that, for the past few days, has been splashed all over the WallStreetBets forum, the Discord chat server associated with it (before it was shut down for what Discord said was repeated hate-speech violations), Twitter, and corners of TikTok and YouTube.

Thousands, perhaps tens of thousands, of the retail traders behind the rally in the price of GameStop’s and other stocks clearly see themselves as revolutionaries. And their fervor is so intense that politicians like Rep. Alexandria Ocasio-Cortez, member of the House Financial Services Committee, declared her sympathy with them. When Robinhood and the other trading platforms that had enabled this run-up in the value of GameStop disabled the ability of traders to continue buying it, Ms. Ocasio-Cortez called for an investigation. Sen. Ted Cruz, rarely a fan of Rep. Ocasio-Cortez’s policy prescriptions, tweeted “Fully agree” in response to her declaration. (Donald Trump Jr. and Sen. Elizabeth Warren have also sounded off—on the same side of the topic.)

“I do think this is a seminal moment. I don’t think we go back to a world before this because these communities, they’re a byproduct of the connected internet,” Reddit co-founder

Alexis Ohanian

said in an interview with CNBC on Thursday. “Whether it’s one platform or another, this is the new normal,” he added.

As GameStop’s stock price continued to climb, these investors egged one another on to continue buying and holding the stock, posting screenshots of their gains, jibes about the consternation their mania was inspiring among Wall Street traders and career stock-market observers, and memes borrowed from Batman and Lord of the Rings.

On WallStreetBets, one popular post, typical of the genre, urged investors to “Buy High, Sell Never,” a subversion of standard investing wisdom that was reminiscent of the Bitcoin ideology “HODL” (a meme variation on “hold”). Some cryptocurrency investors believe the key to getting rich from bitcoin is never to cash out, since its value will only appreciate in the long run. In line with that thinking, another popular WallStreetBets post declared that at its current rate of appreciation, GameStop’s stock, which had been trading at less than $20 a share at the beginning of January, would eventually be worth $5,000.

The way in which WallStreetBets members convinced themselves that their quest was just and good echoes the logic, if not the sentiment, found in QAnon forums. Both are what philosophers call “closed epistemic systems,” worldviews that are unaffected by information that contradicts them. It’s confirmation bias on steroids. It’s also the logic of a cult, achieved with some of the same psychological tricks.

Those tricks are amplified by the mediums on which they spread. Ample research has described the addictive potential of social media, and apps like Robinhood, which make trading stocks feel like gambling, also have the same potential. Put the two together, drop them into a stew of sensation-seeking young people with limited entertainment options during a pandemic, and it’s hardly surprising that all of this has come to pass.

That the price of GameStop’s stock would likely peak and even crash, leaving some of these gung-ho investors with heavy losses, was not a headline that made it to the top of WallStreetBets. Commentators who brought it up in other forums were attacked. The usual mechanisms of online harassment—trolling on social media, even menacing and sharing the contact information and addresses of short sellers and their families—have also come into play.

Meanwhile, as the GameStop buzz built, attention seekers with large followings but no particular qualifications piled on, from a self-described “verified nobody” with over 200,000 followers to rapper and failed Fyre Festival impresario Ja Rule. In unison they amplified the message that what was going on was a popular rebellion, and anyone who said otherwise was a shill for the systems that oppress the majority of Americans.

In a meme recently appropriated by the WallStreetBets crowd, the Joker, portrayed by the late Heath Ledger, sets fire to an enormous pile of cash. “It’s not about the money,” he says. “It’s about sending a message.”

As we see internet-fueled, alternate-reality manias continue to proliferate, the lesson is this: These freak outbursts are not going away. From the Rohingya ethnic cleansing in Myanmar and WhatsApp-related killings in India to the Capitol riot and the stock-market takeover, these individual phenomena are each unlikely, but social media all but guarantees more of them. The leverage the algorithms provide for those who wish to spread these ideas, however extreme, gives them the ability to reach us all.

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Write to Christopher Mims at christopher.mims@wsj.com