Before long, the saga of the GameStop run of 2021 will be studied in economics and investment classes. If you were off grid for the last month, and are not up to date on this story, there are hundreds of articles out there that describe the circumstance of how small retail investors got together on a little-known internet forum called “wallstreetbets” and ultimately drove interest and pricing on GameStop’s public stock to unexpected highs. The GameStop stock (Stock Symbol: GME), ended last year near $18 a share but soared as high as $483 in late January 2021 before falling back, trading below $40 and then jumping back up in a “Round 2” ramp, along with and other popular stocks targeted on Reddit, to $110 as of this writing.
Many on Wall Street hedge funds were caught in short selling positions, having to cover the differences in prices between the low price they bet on in their “put” options, and the actual price as their options were set to expire. This forced the hand of the Hedge Funds involved to “cover” their short bets, and purchase the stock at very high prices. One of the hedge funds, Melvin Capital, lost 53 percent of its value, and had to receive an emergency cash infusion of 2.75Billion. Needless to say, these activities cost these hedge funds billions of dollars as the damage reports and aftermath are still coming in. In a recent article “Warnings For Tech Giants And An Ode To A Simpler Web,” I called out the ongoing threat of bots and lack of authenticity that is pervasive across platforms such as social networks and forums such as Redditt, Twitter, Facebook, etc. This is an identity and integrity problem that has the potential to cause untold damage in addition to posing an experience issue.
David vs. Goliath?
The GameStop episode has been labeled as a showdown between Wall Street and Main Street. Events played out on the Reddit forum “WallStreetBest” in a way that corresponded with massive surges of activity, leading many to believe that automated “bots”, or “pretend users” helped exacerbate the conditions that ran up the price. The roots of these circumstances within the forum dated back to the middle of 2020, when interest in GameStop investment began to gather momentum.
Major investment firms followed the track of publicizing the expectations that the stock would soon be worthless, in a similar story as Blockbuster Video. Typically, this is something they can make true through the presence of investment movement and the open positions that occur when this happens. When the short sales options became due and the price did not match expectations, the hedge funds who expected to win), lost big.
Before long, “Big Tech” intervened with a heavy hand as it has been doing lately, shutting down forums and conversations in places where they popped up. Trading firms, such RobinHood, E*Trade, and others even stopped, and then curtailed trading in the stock. This saga rose to such prominence, that culminated with hearings in front of the US congress. However, those hearings were a late damage control response attempt that neglects a major issue affecting the majority of experiences on the web nowadays, which is lack of authenticity. Congress, along with “Big Tech” still missed that point for whatever reason.
An inauthentic web and an authentic answer
The openness of the social media platforms to malfeasance is a persistent issue. It is difficult to ascertain safety and authenticity when engagements on many platforms are completely anonymous and unauthenticated. Who is a friend? Who is a foe? Or the equally important question— who is a bot part of a bot farm with 1000 of other hackers trying to manipulate results? Bot farms exist, and are sponsored not only by criminal enterprises but also by state-actors.
Bots and bot-based activity are a significant threat to not only the personal privacy and security of the average person, but also the valuation of well-known companies like GameStop, AMC, BlackBerry, etc. The public is engaged in a virtual congregation and exchange of information that could literally be anybody, from anywhere or any automated program. These bots open the door to threats that include:
- State-sponsored economic terror
- Foreign intelligence gathering
- Economic and political influence
- Cybercriminal activity
- Market manipulation
- Narrative shaping
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As a population, we have a pretty good handle on malicious email activities, but bot activity must be brought into check now especially in online forums and social media. There seems to be a lack of will by companies like Facebook, Twitter, and Reddit to do so. With a lack of measures to assure a genuine base of users, trolls and opportunists will leverage any crack possible to jump into the stream and corrupt conversations to their needs. Every account should be validated and traced to an actual individual and in obvious cases, an actual business or organization. What we are seeing is the product of nothing but purposeful neglect and a gap in the mission of what online interactions were built for.
It is time to gather around the principles of “ who” these platforms are for. Are online forums designed around the experience of having shapeless, anonymous bots consuming online engagements? Can the same be said for social networks? Do you have any idea who is behind the public comments that drop into your Twitter posts? Many people think they do, but the simple fact is that we engage in a virtual world where there is little validation and the experiences we engage in may not be human or genuine in nature.
Where there is a will, there is sanity
The GameStop situation clearly illustrated that major networks and forums should be regarded as potential risk points. Every one of these risk points should be contextualized in terms of impact and the effort required to ensure a genuine experience and open exchange of ideas. Various technologies can help the effort towards a genuine web. For example, multi-factor authentication, account validation, biometrics, preemptive security monitoring, and other leading technologies provide ways to do this on financial websites. It would only take the will of the social media giants (with the help of technology) to improve the experiences and impact of these public meeting places in a positive manner. Authentication will bring authenticity to our conversation. Authenticity will bring accountability. Accountability will bring sanity.
Emil Sayegh, CEO, Ntirety