Is Our Business Model A Hedge On The Internet?

Show Notes:
Links:
Amy Hoy - Wall Street Bets
Bloomberg - How Will the GameStop Game Stop
Clayton Christensen - Theory of Disruptive Innovation
Art of The Product Podcast - Does Tuple Ever Crash?
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Write for Honeybadger

Full Transcript:
Ben:
Did y'all buy any GameStop this week?

Josh:
I thought about it yesterday while Robinhood was not allowing buy orders or whatever, because my brokerage, I mean, doesn't shut you out. And I mean, it probably would have been a pretty safe bet given the stock today. But I don't do that kind of shit.

Ben:
Yeah, yeah. I'm in the same boat. I want to, just for funsies, but at the same time, it's like, "Ah, that's really not a productive use of my time or money."

Josh:
Yeah. I deleted the Robinhood app after. Because I tried it out just because you got to see what the kids are up to these days. And the last straw with it was when they added this crypto trading interface that looked like a Tron ... Like some kind of arcade game. I was just like, "This is ... Yeah, I don't need a light cycle to buy cryptocurrency."

Starr:
Yeah, it's a little bit weird. My brother was like, "Hey, do you do stocks or crypto?" And I'm like, "Well, I've got mutual funds. But also, you don't have any money."

Josh:
This is how you know that the markets about to just evaporate, when your brother asks you if you trade stocks of crypto.

Starr:
For the past decade, I've just been like ... This is the last straw, global pandemic, 30% unemployment, last straw, market is going to tank. But I guess not.

Josh:
Yeah, this is new. Yeah, people won't let it fail, so let's just hold it or whatever the meme is. It's the new just thing to live by in general I think. Just hold, always just hold. Just never let go, never let go. Whatever it is, never let go.

Ben:
Diamond hands.

Josh:
Yeah.

Starr:
Explain the diamond hands thing to me, I don't understand that. I saw it, but ...

Ben:
You have to check out Amy Hoy's thread, Twitter thread, where she went and did a sale safari on Wall Street Bets. So sale safari is her and Alex Hillman's process where you go and discover ... You basically research a community, and you find out what the needs are, right. And so you can use that to help formulate some ideas for businesses or products that you might want to create. Instead of coming up with an idea and saying, "Hey, I wonder if someone will buy this?" You actually go and look for people who are looking for things, and you're like, "Oh, yeah, I could satisfy that need, okay."

Starr:
That doesn't make any sense.

Ben:
So that's sale safari. And so she does this just for funsies, right. So she went on Wall Street Bets, and like, "I'm going to do a sale safari and find out what's this community all about." And so she just has this analysis on Twitter. It's a great thread, we'll put it in the show notes. But basically, she went and analyzed what their catchphrases are, and what they're doing in there basically. And diamond hands and paper hands are two of the phrases that show up in there repeatedly. And so if you're not familiar with the whole Reddit thing, which I mean, you must be by now if you're on the internet. But it's all about buying GameStop stock, and watching it go up, and up, and up, and putting the squeeze on short sellers who are just panicking because everyone is just buying this stock and making it go up, right.

Josh:
Which is hilarious.

Ben:
So they're all encouraging each other inside of Wall Street Bets, they're all like, "Hey, you got to hold on, you got to buy and hold, you can't sell." So diamond hands is someone who's holding on strong. And paper hands is someone who's chickening out and they're going to sell.

Starr:
Oh, okay, yeah.

Josh:
So I'm a paper hands?

Starr:
You know what this really resembles to me? It kind of resembles a Ponzi scheme in that-

Josh:
Well that's it, that's the thing, it just resembles a Ponzi scheme.

Starr:
For the stock price to keep going up more, more people have to keep coming in and buying at the higher price. And then eventually, there's not going to be anymore people, and then the price is going to collapse, and whoever came in last is going to be left holding a bunch of worthless stock.

Ben:
So Matt Levine had a great article this week. Actually, he's done multiple on this whole thing. Again, put in the show notes. So Matt Levine writes an economics column. But so he talked about the Wall Street Bets. And he was addressing your point exactly about, why would you buy now? Because you're just basically counting on someone who is dumb to come in and buy at some point later, right. Total Ponzi scheme.

Ben:
But he also provides some alternative exit strategies, as opposed to just depending on someone coming in whose dumber, buying the thing. So we'll post it. But it's a good read. I can't do it justice just to paraphrase it. So I'll link it, and you can read it.

Starr:
Yeah, I'll check that out. We'll put it in the show notes.

Ben:
That said, I wouldn't recommend actually buying GameStop right now.

Starr:
Oh, no, no, no, no.

Josh:
It does seem, just in general, that the world ... Society is rewarding true believers of all kinds right now. So it just seems to be a thing.

Starr:
Yeah, I don't know.

Ben:
It does feel eerily similar to conspiracy theorists and-

Josh:
Conspiracy theorists, populous politics, and just hold on no matter what. Doesn't matter what reality is, just hold on and we will win.

Ben:
Yeah, yeah.

Starr:
One thing that I do enjoy about this is that I've seen a number of people in my Twitter feed that are essentially like ... They're like, "I bought GameStop stock. I'm holding it. I know I'm going to lose this money. I'm doing it specifically to hurt rich people. I just really want to stick it to the hedge funds, so I'm going to put $1,000 into GameStop stock and just sit with it."

Josh:
Yeah, it seems to me like just another populous revolt.

Starr:
Yeah, it's like a Boston Tea Party type situation I think.

Josh:
Yeah.

Starr:
Only its weird, because it involves people staking their money. It's this really weird, abstract ... It's super cyberpunky. I could totally see all this happening in a William Gibson novel.

Ben:
Totally.

Josh:
Yeah. No, it strikes you as a Boston Tea Party, but a real one instead of the ones that people act out on the steps of capitals around the country.

Starr:
Oh, yeah, the Tea Party has connotations now, doesn't it?

Josh:
Yeah.

Ben:
Instead of a LARP, it's IRL.

Josh:
Yeah, it's IRL. The IRL Tea Party in the 21st century would happen on the internet I the world of finance.

Starr:
Oh, totally, yeah.

Ben:
Yeah, my only concern is ... I get the whole ethos of, "Yeah, let's stick it to the man." And, "Those evil capitalists and hedge fund managers." Well, the problem is pensions, and retirement funds, and those kinds of things invest in those hedge funds.

Starr:
Hush now, don't think about that. We don't think about that, Ben.

Ben:
If you destroy them, that could affect me.

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