Gamestop, Reddit, and the illusory “Free-Market” of technology
Authors note: When describing apparent abuse or manipulations, I will used the words “perceived abuse” as no investigation has been completed regarding these events. While there is enough money involved that I hold little faith in actual concrete measures taking place in the cases of such abuse, I also am careful not to make accusations where I may not have access to all of the details. I am in no way defending the actions of the hedge funds, companies, or investment firms involved.
If you’ve been living under a rock for the last few weeks, I’ll catch you up. A hedge fund, Melvin Capital, decided they were going to stack shorts on Gamestop, eventually reaching roughly 140% of Gamestop’s actual shares in a bet that the price would plummet. Users from r/wallstreetbets on Reddit pushed back, organizing and raising the stock’s price from approximately $12 to $460, where it briefly held before finishing out the week at $320. What happens now is a bit confusing, as financial media have been reporting that Melvin Capital has closed a number of its positions, that the rally is over, and that retail traders (industry parlance for anyone who isn’t a professional trader) should exit their positions before they really get hurt. The flip side contains the r/wallstreetbets crowd, with a mixture of large and small investors, dedicated to repaying a generation spent suffering at the hands of risky Wall Street behavior. These traders have rallied around the cry of “diamond hands”, usually expressed in an emoji, to indicate their willingness to hold at all costs, if only to support Gamestop and hurt the Hedge Fund Traders.
Again, what happens now is anyone’s guess. But there are many articles about the odd trading circumstances that have likely changed the stock markets forever. Many articles and social media posts have detailed how Melvin Capital is owned by Citadel LCC, which buys stock flow from Robinhood (the popular online trading app).
This fact alone fomented a huge degree of online rage when Robinhood restricted trading on Gamestop (as well as AMC, and BB), purportedly at the behest of Citadel LLC, protecting its ownership in Melvin Capital. While the means and motive add up, a detailed investigation would be necessary to fully confirm the perceptions of individuals in the retail trading sector.
No, this article isn’t about that, this article is about the aftermath. When hordes of retail traders were irate at what they perceived to be Robinhood’s blatant attempts to manipulate the system (the same users point to what they see as misleading reporting from mainstream financial news media sources), they rightfully did what the free market guides us to do: They downvoted the Robinhood App on the Google App store.
Now, if this were a case of tons of repeated user reviews saying “Robinhood SUX”, I would believe Google might have been warranted in culling the reviews. However, many of the posts were articulate, went into depth about the good and then explained the bad, as well as the damage the bad had done to Robinhood’s brand, and left a 1 star review. Not eight hours after Robinhood began their trade restrictions, the app had 270,000 reviews, roughly 100,000 being negative or 1-star reviews.
Google then decided to remove those 100,000 negative reviews, for… reasons.
This highlights an incredible problem in our technology sphere. App A conducts some activity which is viewed as malfeasance from its userbase, who then retaliate with negative reviews to correct the behavior. The service provider does their due diligence to vet reviews (ensuring that reviews aren’t bot spammed, do not contain language outside of the posting EULA, and aren’t duplicated), and then should let the reviews stand, in that bad behavior by a company should be viewed as bad behavior. This is how consumers incentivize companies to adopt more consumer centric policies.
This is NOT what happened. Google gave Robinhood a lifeline, and restored culled the recent storm of negative reviews, ensuring that for a period of time, Robinhood could at least remain at their previous level (4.2 stars).
As of this writing, someone at the Google HQ must have reconsidered their position, as the Robinhood App is currently back down to 1.1 stars, whether the negative reviews were sustained or angry users recreated their previous negative reviews.
The ability for companies to manipulate ratings and products in an obfuscated and unregulated manner has all sorts of social, political, and financial implications to both our society (in the United States) and worldwide. Companies are seeing a limited need to adhere to their own policies and provide that level of transparency to their users. Now, not all companies have had this proclivity, though the enforcement thereof has been inconsistent at best.
This issue represents one of the toughest conundrums facing social media and service providers today. How to remain consumer centric without sacrificing the revenue streams they depend on (they are after all, for profit companies) and how to foster a technology environment that is resistant to outside malice and tampering, as what popular platforms like Facebook and Twitter face every day from international State sponsored groups. The appearance of this issue in the financial sector, exposing the perceived abuse of platforms claiming to “democratize trading” by large investment firms for their own benefit is novel thing, made more so by the perception that multiple laws appear to have been broken by the manipulation.
Rest assured however, that a great deal of the U.S. populace, including politicians on both sides (again with cynicism, but looking out for the little guy here is an easy way for them to try to score some goodwill points) are intent on seeing what happened come to light.
Hopefully justice is done and the technology sectors realizes that protecting consumers should be their #1 priority, not protecting the predatory companies in this sphere. Remember, what comes around goes around and the “little guys” are discovering that collectively, they have much more power than was ever thought before.
