I want to elaborate on this a bit. L'affaire GameStop is being told as a David vs. Goliath story. But the individual investors in question aren't just walking onto a trading floor and making trades directly; they're doing so through for-profit brokers: apps like Robinhood. 1/ https://twitter.com/erinkaylockwood/status/1354829858346418180

To belabor the metaphor, they're not flinging rocks at hedge funds directly but with someone else's slingshot which can fall apart unexpectedly or be wrested from their hands when it's no longer benefits Robinhood and his merry men to keep hurling rocks at fellow Goliaths. 2/

And it's actually more complicated than that: Robinhood isn't just giving out free slingshots, though that's what they advertise; rather, they're contracting with Goliaths to buy and sell rocks on behalf of the Davids they're equipping with slingshots. 3/

And the price of rocks they're offering to the Davids is often worse than they'd get elsewhere. That's why Robinhood paid a $65 million fine to the SEC back in December. 4/ https://www.sec.gov/news/press-release/2020-321

This is coming across as an attack on Robinhood which isn't quite what I intend. Rather, I see this as an illustration of what we might call the false promise of financial inclusion. Robinhood and other gamified investment apps market themselves as democratizing finance ... 5/

... but they're profiting off of including people in a system that is far more likely to harm than help them. A handful of people are going to pay off their debts with quick money from squeezing GME, but a lot more stand to hold a lot of worthless stock when the bubble bursts. 6/

Or worse, to be on the hook for large debts used to finance their GameStop buying frenzy. It wouldn't be the first time that had happened. When the music stops (and it will), you and your app aren't going to beat out a high frequency trading desk 7/ https://www.nytimes.com/2020/07/08/technology/robinhood-risky-trading.html

Some hedge funds will take a hit (good!), but it won't be hard for them to recapitalize, and this certainly won't disrupt the hedge fund business or the massive privilege the stock market enjoys. 8/

At best, GameStop exposes two things: 1) how financial investment is always about speculation and only ever tangential to "fundamentals" and 2) the differential systems of rules for sophisticated and non-sophisticated investors (and potentially why those rules exist ...) 9/

But the David/Goliath framing positions hedge funds as the problem when the bigger villain is the financial system itself, in which companies can profit off people's incredibly understandable sense of injustice and exclusion by selling a false promise of financial inclusion. 10/

The Goliath is much larger and impervious than individual investment firms. And I think many of the redditors know this: they're aware they're basically lobbing pebbles at a fortress, but what else are you going to do when all you have are pebbles and a glitchy slingshot? 11/

That's fair but it's also much bleaker than the fleeting victory of inflicting some pain on Melvin Capital is likely to make up for. That, I think, is the real story here. It's why @mcsardo and I have argued that conventional attributions of blame are ill-suited to finance 12/

In scripture, the story doesn't end with the defeat of Goliath but with the retreat of all the Philistines. The GameStop story isn't over, but while it may reveal something about the nature and extent of financial power, I doubt it will be sufficient to force its retreat. /end