I, like many, am a fan of the underdog stories. Perhaps it is rooted in a sense of empathy and a yearning for justice and fairness. Thus, I felt some excitement when I first heard about the GameStop investment story. Recently, GameStop, a loss-making chain of game retail stores, saw its share price suddenly jump from about $20 at the start of the year to as high as $483 last Thursday. Sounds incredible, right? Yet it did happen. It started as crowds of amateur investors, organised through social media, decided to take on the billionaire hedge fund titans. They have poured money into buying stocks of the failing chain, which caused the stock price to rise, after Wall Street hedge funds had bet against it.
Beyond the financial technicalities, this ongoing event conveyed some deeper messages that may be worth pondering upon. First of all, it highlighted that each individual’s effort, when combined together, can become extremely powerful. In our current age of hyperconnectivity, the prevalence of social media makes it easier than ever to organise and coordinate mass movements, exerting a huge influence on society. With an honourable cause and logical planning, it is a tool to bring about positive changes on a scale far beyond what we may imagine. Yet this is a double-edged sword. There are dangers associated with this new-found power. If these movements are ill-founded, then they may threaten and endanger our institutions and daily lives.
Secondly, the Gamestop situation also highlighted the importance of independent thinking and decision making. Given a large movement, the sheer scale of social influence may sometimes mislead us, making it easier to lose sight of our original intention and the rationale behind our own actions. Therefore, when others around us start following a popular craze or movement, we do need to pause and ask ourselves: “Just because everyone else is doing it, does that make it right?” Perhaps more often than not, those around us were right. However, there are chances that they might be wrong. It is up to us to determine the right action to take.
Back to the GameStop tale, despite the initial successes, the stock had experienced several sharp falls this week. Many people, especially those who followed the crowd and joined the game late, will suffer as a result. On the one hand, fuelling a bubble behind struggling companies and making distorted economic valuations may threaten the desired economic stability, as well as cause misallocation of resources much needed during a pandemic. On the other hand, perhaps it was justifiable for the small investors to stand up to the big traders. Right or wrong, I will leave it for you to decide. Nonetheless, we must bear in mind a short-term frenzy should not blind our long-term visions and goals, be it in finance or in our daily lives.
We are, indeed, living in a volatile and interesting time. But the more chaos that comes our way, the more important for us to stay calm and collected. Thoughtful reflection on social influence may help us to better understand ourselves and those around us.