GameStop and the Flat Earth

The recent GameStop saga seems to me to be more or less the economic equivalent of flat-earthism. The enthusiastic people going “all in” on GameStop seem to be frighteningly ignorant of such basics as how the stock market works, how options work, why trades in batches of 100 occur, and how Robinhood can offer “free trades” (after all, TANSTAAFL).

When helpful people offer sensible advice, or when an inaccurate model of the world clashes with unfolding empirical data, the discrepancies are all too often explained using conspiracy theories or ignored in a self-reinforcing “echo chamber,” rather than being seriously addressed. I’m thinking specifically of certain corners of reddit.

At the same time, with GameStop, people seem overly greedy for profit and/or for revenge against “evil hedge funds” (both motivations appear to be in play). So much so that the impossibility of pushing GameStop stock up to the desired $1 trillion or so (i.e. 2% of the total US stock market) is simply not recognised. I very much fear that it will all end in tears for many people.