The market and the masses: From chaotic corners to social media (re)tail events

Abstract

In this essay, I examine and discuss the relationship between the market and the masses in light of recent retail-driven surges in the stock prices of firms like GameStop and AMC. Using two historical snapshots, I draw out similarities and differences between the way the collective power and rationality (or lack thereof) of the masses was portrayed in late-nineteenth and early-twentieth-century market literature and in recent debates about retail investor inclusion and social media or social trading platform-driven market volatility. The main difference between the historical discourse and the present situation is that the new digital market-expanding technologies enable effective retail investor mobilization and thus, increase the retail swarms’ market-moving powers, which were previously less agile and forceful. However, this eased and widened market access also transforms digital life into alternative data that is subjected to age-old strategies of market exploitation.

YOLO Publics: The Potential for Creative Subversion of an Online Trading Community

“…This dynamic is particularly clear on WSB; the members talk about the stocks they trade, and the more they talk, the more they trade. Although talk does not necessarily or automatically lead to rising prices, the case of GME demonstrates its potential to do so (Hansen, 2022). And this dynamic is by no means particular to publics that deal directly with issues of economic investment as is, for instance, apparent in the monetization of memes, which are sold as nonfungible tokens (NFTs) (Chalmers et al, 2022) and, more generally, in the business model of social media, which make their money on user data and, hence, are geared toward making users stay longer and interact more (Kenney & Zysman, 2016)—clicks, views, and engagements being the name of the game.…”

Not so ‘dumb money’? Constituting professionals and amateurs in the history of finance capitalism

“…The publication of Gustave Le Bon's The Crowd (1896[1895) contributed to the popularization of crowd psychology and provided a polemicized and genericized language of crowds that resonated widely (Leach, 1992). Vivid descriptions of emotional volatility and sudden eruptions of collective irrationality in crowds of people alarmed observers of the busy and indeed often crowded trading floors of the stock and commodity exchanges (Hansen, 2017(Hansen, , 2022Sta ¨heli, 2013). The financial establishment was however torn on whether to keep the 'unruly' and 'unfit' masses at arm's length or embrace the market activity and liquidity that those masses provided.…”

“…Preda, 2009). Especially during times of speculative excitement, the credulousness of the public would shine through and risk inflicting havoc in the markets (Hansen, 2022). As Emery (1896: 188) noted, 'the larger the number of irresponsible persons involved, the more does trading at such times [of speculative excitement] partake of the unreasoning nature of all crowd action'.…”

“…Present market gyrations caused by vast amounts of ‘dumb money’ – as small private or retail investments are sometimes unflatteringly called – thrown after certain listed companies has brought the distinction between professional and amateur back into the centre of the popular discourse on financial markets (Cassidy, 2021; Duterme, 2023). There has been a recent flurry of such ‘dumb money’ incidents, with the GameStop debacle (which saw the trying videogame store company’s stock price skyrocket in early 2021) being perhaps the most widely covered in mainstream discourse (Hansen, 2022; Just and Petersen, 2023; Paliewicz, 2023). The increasing popularity of gamified online trading platforms for speculative value-generation granting easy market access to the broad public is also pushing the retail investor into the limelight and stirring up debates about barriers to market participation and what the consequences might be if some of these barriers are brought down (Davis, 2018; Preda, 2017; Tan, 2021; Van der Heide and Želinský, 2021).…”