The Role the Web Plays on Changing Behaviors: The Gamestop/Reddit Phenomenon

The power of the internet is growing all the time. People spend hours every day scrolling through our news feeds, posting pictures and videos, and even chatting to people we’ve never even met on sites like Reddit, TikTok, Snapchat, and Twitter. At this point, it seems like the impact of all of this has yet to be fully seen. But we are already experiencing major changes. That’s the case with the recent Reddit user uprising.

The GME/Reddit Story

Reddit recently took center stage when shares in GameStop surged over 400% within a week, causing a huge short squeeze. Subreddit r/wallstreetbets users coordinated the event, signaling the first time that retail investors made a premeditated shift in the market on this scale. Hedge funds lost billions and retail investors became millionaires overnight.

GameStop was reported to have as much as 121% of its stock shorted, with many contracts due to expire at the end of January/early February. One user, known as u/DeepF***ingValue had purchased multiple call options of the company as early as December 2019 and because of it had become somewhat of a Reddit sensation and meme. He’s now being questioned by congress due to his multimillion-dollar profits.

This whole story had us think about the role the internet plays in changing behaviors. Back when u/DFV started posting his #YOLO options in the subreddit, barely anyone took notice. Yet less than 12 months later he developed something of a cult following which then exploded in January this year.

People who’d never traded stocks and shares before were suddenly logging into cheap online brokerages like Robinhood, WeBull, and Trading212, and placing their life savings into a store’s stock that they’d probably not set foot in since childhood.

So why are we so impressionable online? If a group of strangers were to walk up to you in the street and tell you to put your life savings in one stock you’d think they were crazy. Yet, online this is totally acceptable. Just look at YouTube and TikTok and you’ll see thousands of influencers doing it daily.

A lot of it could just be down to the bandwagon effect, a scientifically proven set of cognitive biases which can be heavily fuelled in the modern era by social media. Nowadays, many people are riddled with FOMO and will have felt an urge to get involved in the Gamestop saga without taking a minute to assess the risks.

Reddit is the driving force behind a movement

Scrolling through the WSB subreddit at the time though, it seemed that many were treating this whole thing as a movement, a way to stick it to the banks. Meaning these behaviors could have been fueled by something deeper. The story put the wealth gap in the spotlight in a major way, not only in the US but around the world. Reddit users weren’t backing down, they wanted to be heard and they didn’t care if they lost money in the process; the web merely facilitated this.

Nevertheless, there have already been several studies showing how the internet changes the way we behave. Not only can the internet make us do good and bad things, but it can also radically affect our mood; especially when we spend all our time looking at people’s filtered versions of their lives and comparing them to our reality. Perhaps it’s this that made some Reddit users throw all their money into a stock…maybe they wanted a quick shot at getting rich and living an insta-worthy lifestyle. There are many potential reasons why this happened. But the short answer is simply: the internet.

The web has unprecedented influence

Even after the crash, many holders still remain optimistic, refusing to sell their shares, referring to themselves as diamond hands. It’s highlighted the power of the web and raised scrutiny of whether or not this type of conversation should be banned on social media. Tech makes it easy for us to jump on the bandwagon and seek instant gratification no matter the consequences. It can warp our perception of reality which is likely the driving factor behind our changing attitudes and behavior.

Simply put, the internet and the general public have a symbiotic relationship that extends into all facets of life. And with the Gamestop event, the financial market got a reality check. Who knows where this herd phenomenon will appear next…