More Money Podcast - 313 The Gamestop Craze One Year Later - Spencer Jakab, Author and Financial Journalist

Episode Date: February 2, 2022

January 2021 marked the 1-year anniversary of the Gamestop stock going viral, which led to the birth of meme stocks. To help make sense of what happened during that craze and the time since is my guest, Spencer Jakab whose new book “The Revolution That Wasn't: GameStop, Reddit, and the Fleecing of Small Investors” tells the story of what led to those events and what it says about investing in today’s social media culture. Spencer Jakab is an author, award-winning financial journalist, and a former top-rated stock analyst at Credit Suisse. He also edits the Wall Street Journal’s “Heard on the Street” segment.  In today’s episode, Spencer talks about the rise of people turning to social media for investing advice and the danger of confusing investing with speculating or get-rich-quick schemes. Spencer also explains the initial purpose of the takeover of the Gamestop stocks and why it only made the rich richer. I thoroughly enjoyed talking to Spencer and hearing his take on Reddit threads like r/wallstreetbets and financial influencers, and I know you will too! For full episode show notes visit: https://jessicamoorhouse.com/313 Learn more about your ad choices. Visit megaphone.fm/adchoices

Hello, Lulu, and welcome back to the More Money Podcast. This is your host, Jessica Morehouse. Welcome back to the show. This is episode 313 of the show, and it is freaking cold outside. I don't know where you are, but I'm in Toronto, and it has been nonstop snowing, and I'm cold all the time. I don't know. Maybe this is just like the Canadian in me, or I don't know. But I have like winter amnesia. I always forget how bad winter gets every single winter. Like it won't be that bad. And then winter hits, and it's damn cold. Anyways, but you know, there's nothing quite like listening to a podcast on a cold day when you're, you know, tucked inside warm underneath

the blanket. Am I right? And also specifically listening to, I mean, an episode about this topic. I'm actually really excited to finally share this episode. This was a book that I read. I guess this was back in December or November or something like that. And I feel like I've been telling everybody to read it. And now I finally have the episode to share that goes along with it. So for this episode, I've got the wonderful and super smart Spencer Jacob on the show. He's an award winning financial journalist and a former top rated stock analyst at Credit Suite. And he is currently the editor of Heard on the Street, the Wall Street Journal's financial and economic analysis column. And he also holds a master's

degree in international affairs from Columbia University. and he has a brand new book out called the revolution that wasn't game stop reddit and the fleecing of small investors because we're actually very interestingly enough uh the one year anniversary of the whole game stop mania situation is here this is it it's been i can't believe it was only one year ago that it happened because it honestly feels like so long ago. No, it was only one year ago. It's crazy. So I'm super excited to have Spencer on the show because he, his book and also in this episode breaks down what the heck happened and why is it still happening? Why is it still continuing to happen? Why? And, how did what happened last

January with GameStop and Reddit, which really fueled the whole situation, how has that impacted the world of investing, but also more, I'd say, not investing, but speculation? How has that really fueled the fires throughout the year? Because I feel like it's been one year and it sort of seems like no one's learned anything from the whole situation. But I mean, you know, we should really take some lessons from what happened a year ago. Anyways, I can't wait to share this episode with you. Of course, I'm going to be giving away a copy of his book as well. So make sure to check, listen to the end and find more information about that. But without further ado, just wanted to share a few words about this podcast episode's sponsor, and we'll get right to that interview

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Once again, visit Oxio.ca, that's O-X-I-O.ca, and use promo code MOREMONEY to try Oxio for free for one month. Welcome to the More Money Podcast, Spencer. I'm thrilled to have you on the show to talk about your book, which I could not put down. Thanks so much for having me, and thank you very much for saying that. You're so welcome. So you wrote the book, The Revolution That Wasn't, GameStop, Reddit, and the Fleecing of Small Investors, which I, like I mentioned before, hit the record button, I kind of read it like I was binging Netflix. I read it in a weekend and could not put it down and then kept on stopping reading to tell my husband about it. He's like, yeah, yeah, yeah, I'll read it later.

So I really loved it. You did a great job explaining what the heck happened in January 2021 with the whole GameStop situation. And for me, I really appreciate it because even though, you know, I'm in this personal finance space and, you know, keep tabs on things, I am so not in the world of all of the Wall Street bet situations. I didn't know about Wall Street bets until, yeah, basically GameStop mania happened because it is not really a place for someone like me. Right. In general. You know, when I wrote it, I mean, so there are a few, you know, when you write a book like this, it's for a mass audience. And, you know, I was thinking, you know, about people like my mom or my sister or whatever, you know, and I wanted to make sure that someone who's educated but has do work in finance or even economics professors and things like that. And they liked it a lot, too, because it accurately explains what happened.

And so the way the story is told is that it's such an amazing story. And so it starts at the beginning, which is really before the beginning, before it was on our radar, and tells the story, you know, as it sort of built momentum and people didn't realize until very late what was happening. And then it was the biggest news story that week, basically, you know, even after here in the United States, Joe Biden had assumed the presidency and all this stuff was going on. It kind of overtook that even. All the late night talk show hosts were talking about this. So, I mean, I wanted the book to tell the story of what went on. And that is important. But as the book goes along, I kind of, you know, I don't want to leave people baffled by what's going on. And so there's a bit of an explanation. Every other chapter is basically an explanation of the kind of salient thing that was going on,

either in social media or in finance, that was happening at the time. You know, what's the role of influencers? What is a short squeeze? How did it work? You know, what's a gamma squeeze, which is like a really important part of what happened. So I, you know, was very careful to sort of explain and explain at the kind of relevant time, not to kind of drone on and lecture, but just to sort of not leave anybody in the dark. Yeah, no, and I think you did a really good job with that. I think why people, even people who weren't involved in what was going on, or just kind of from the sidelines, like myself, who just only kind of heard about what was going on when it was happening, will enjoy the book because like you mentioned,

it started years before, you know, January, 2021. But also I think for, for lots of people who, you know, maybe don't go on Reddit aren't involved in that kind of like, because there's a whole weird subculture that I had kind of no idea about. It was, it was this thing that was kind of, you know, bubbling to this boiling point and kind of shocked everybody. And I think what was important that I learned from your book was so many of the kind of news outlets kind of got it wrong what actually happened. It seemed kind of like the overall theme that you were kind of talking about is,

you know, the kind of subculture that was, you know, Wall Street bets, they were very much thinking they were David against Goliath. They're trying to, you know, stick it to the man and they were really blaming hedge funds. But it's there's so many other kind of characters and people and like you kind of talk about, you know, right at the end, it's like the house always wins. You know, I think everyone really thought, oh, yeah, we're finally going to take over Wall Street and And but Wall Street still got rich. And I think that's, that's what I appreciate. It's like, we need to remember at the end of the day, you know, at the end of the day, if you see people getting rich quick, it's not as simple as that. Not only is it not as simple as that, but times when people think that they it's easy to out Wall Street, are the best times for Wall Street. And that's like, you know, there's a saying in investing

that the four most dangerous words are, this time is different. And it's never different. And one thing, I mean, of course, this story is different. It has like all kinds of modern hues to it, like social media and free trading apps and smartphones that didn't exist 10 years ago, 20 years ago, 40 years ago. There are lots of bull markets where a lot of people get separated

from their money by Wall Street. The constant though is when people think that they figured it out, that they've kind of taken on Wall Street. That's a good time typically for Wall Street when lots of people can get into the market with their savings. And the different thing, I guess, this time, other than smartphones and social media and stuff like that, is that the bar has been lowered a lot in terms of a lot of new people got in because of competition and technology. You know, it wasn't possible 20 years ago to open a brokerage account with 50 bucks. No one would do that for you. It wasn't possible to buy 0.2 of a share. You had to buy at least an entire share and you would be paying a lot in commission to do it. It wasn't possible to open up this app on your smartphone and start

trading right away with borrowed money. It wasn't possible to get approved for options trading in two minutes, you know, and then start buying options, which are a complicated instrument that many people don't understand. You know, I had a lot of smart laypeople read the first draft of my chapter explaining how options played into this. And I had to kind of keep going back and simplifying and simplifying, just explaining how they worked and how they – and I think now it is pretty easy to understand, I hope. But I mean, that will tell you like these, these smart people who are reading this who don't dabble in options, I had to kind of really explain pretty carefully how they played a role and how they work. And then you have people signing up for it in two minutes who are 19 years old, you know, who have never had a stock account, you know, and then they're, they're using them. And they're just doing dumb, dumb stuff, you know, you know, and so it's, it's kind of sad to see.

And that's my main feeling from all this is that it's sad to see a new cohort of people coming in and kind of feeding their savings to Wall Street. Yeah, and like you kind of mentioned too, I feel like especially with the young investors getting in and their first interaction with investing is actually speculation and then getting burned they may then halt any kind of future endeavors to invest to like you know save it for retirement because they have such a bad taste in their mouth which is for me really worrying which is why i like having people you uh like you on

the show to kind of talk about you know what you what you should not do, which I think is also the other theme of your book. One thing since you kind of mentioned it, I'd say a big catalyst to how this all happened was the, you know, brokerage app Robinhood in Canada, we don't have that. But we do have similar apps that are basically replicating Robinhood. And there's a lot more people demanding commission free, you know, brokerages, most of the brokerages here in Canada do have commissions. There's a few that do not. One big bank has finally gotten rid of commissions. So we're always a little bit further behind in terms of our financial industry and products and things like that. But I kind of feel like, and my sentiment has always been, if something looks

too good to be true like oh this app makes it so easy and accessible and so it'll get a lot of new people in to invest and you're you know like you kind of mentioned that the uh robin had kept on saying oh we're democratizing you know uh the investing uh world and making it more accessible for people which sounds all good on the front of it but um then it also, yeah, like there's no barriers and people can borrow and make some really questionable investment decisions because they think it's a game because again, these apps work like they're games, which is really scary. I mean, you know, there were speculators who got in over their heads in the 1920s and in the 1990s

and in the early 2000s. And so that's nothing new. And you can even go back to the, what, the 1720s in England or the 1630s in Netherlands, I guess, if you go back to the beginning of stock markets. You know, that's kind of a never-ending story. And it was a lot more expensive. And the barriers to entry were a lot higher. And people did things that kind of enriched the people

who kind of were in finance and not themselves. So that's not new. But when you make something free, then you kind of cross a Rubicon. First of all, of course, nothing is free, right? I mean, it's like people, we learned that about social media. And there's a real parallel there. Facebook is a lot of fun to be on, but it isn't free because you are the product. The more active you are, the more you are the product.

And really the same thing applies to these quote-unquote free trading apps. You are the product. First of all, it's not free. It does cost something to process a stock trade, and you just don't see it. It's called free, but then it goes through a whole series of people taking their cut, including and especially Robinhood, which that's how they make their money. 80% of their money comes from you trading. They would like you to trade a lot. but recklessly and to buy stocks that are not, like maybe not Apple, but to buy some stock like GameStop or like AMC,

something that's not as big of a company that has a bigger spread because they get paid kind of on the back end for that. And when something is free, the thing is that like, think about things today that we think about as free that weren't free in you know, in history. I mean, you're a bit younger than me, but I remember when I was a kid and, you know,

you had to call somebody long distance, you know, and my family didn't have a lot of money and somebody would call long distance, like the whole family would be lined up and then you'd have to talk, you know, talk really fast to get on the phone and whatever. I remember a lot of business calling. Yeah, right? Yeah, I was like, oh, are they calling long distance? You call your friend halfway around the world. on the phone and whatever. I remember a lot of business calling. Yeah, right? I mean, and now it's like, if you don't even think about it, you call your friend halfway around the world. Put the phone down. I spent a lot more time talking to friends in other countries and other cities than I used to, for sure. And many multiples more than I would

have thought because it kind of is, I mean, you pay something for it, but it is kind of free. And stock trading, when, you know, there's an economic theory about this called the zero price effect. But when something goes, even if it costs very little, you're still going to have to think about it. Even if it costs a buck to trade, you're going to say, well, it costs a buck. Do I really need to do this? Do I care? Is it important? When it costs zero or when you think of it as zero in your mind, then that barrier is gone.

And if it's something that you enjoy especially, and people seem to enjoy stock trading, it kind of became a national pastime during brokerage account, who were home, bored, had a bit of extra money, got stimulus checks here in the United States. When the pandemic began, suddenly there were no sports to bet on. And there's been a huge upsurge in online sports gambling here in the US since 2018. And many of the very same people started gambling on stocks, basically. And gambling is really the only word for it because they were not doing any fundamental analysis. They were basically sort of betting on the direction and doing it with small amounts of money that didn't seem very meaningful to them. And that's what began to set the stage for the story that's told in this book. Yeah, the one like, thing that kind of worries me, because now we're like, okay, that happened last January, it's been almost 12 months, you'd think that with how things played out, people would have taken some lessons from it, like, don't do this, this is gambling, people did lose money. But I think we again, the more sensational story is the people like, who mentioned Gil,ill who was i'm gonna names i

just laughed so hard reading the book of some of the terminology i'm like oh my gosh so it's like reddit name was deep fucking value and his youtube name was roaring kitty i can't it's just ridiculous anyways he he got you know he was the one of the people who became uh you know a multi-millionaire but there's and then there's people that were following him, even though he didn't necessarily say, do as I do. But I mean, if you're on Reddit, it is kind of implied, I'd say. They lost money. And you'd think that these people would then take an account of like, okay, well, this was a bad situation. I'm not going to repeat this, but I've seen throughout the year. No, if anything, people are like, no, we're just going to find the next GameStop, the next situation to get rich quick. And for me, so just a little background, I started my personal finance blog,

which started as just like, oh, you know, budgeting and just like very basic stuff. And then, you know, it has evolved. I started it 10 years ago. And so it's been very interesting to see the evolution of what people have been talking about, either just like regular readers or, you know, people in the media. And for a good chunk of time index funds was like the cool like maybe not cool but like it was like the thing that people talk about and I feel like in the past two years since the pandemic in like March 2020 no one's really talking about indexing as much besides like the people that have always been talking about it like myself but it's all about especially for younger people in their 20s I've had so many conversations uh over these past

several months about this is the idea of getting rich quick, getting that thing to 10x, cryptocurrency, of course, you didn't really talk too much about it. But it's very similar, I'd say, to the GameStop situation. We're about getting that to get rich quick. And I think a lot of it probably has to do with the fact that there's a lot of uncertainty in this world. A lot of us millennials, too, have been burned or our parents have been burned by, you know, the previous stock market crash and recession in 2008. It's interesting, but also for me, again, very worrisome that lessons haven't necessarily been learned. And I'm seeing so many, I'm seeing so many repeat situations happening. And especially too, and you do talk about this in the book, the rise of kind of financial influencers, like I'm kind

of technically one, but again, I'm talking, I talk about boring stuff like index investing and paying down your debt and budgeting and being responsible. But a lot of the people on like YouTube and TikTok and Reddit are just talking about the hot stocks and uh really speculative stuff which is really crazy so when i'm having these conversations with these young you know people that is actually what they think investing is they've never even heard of you know buy and holding or just index investing what are your kind of thoughts well that's so interesting so you said that you're a financial influencer and you are and you're a really benign influence by recommending that people buy and hold and think long term and buy low cost products like index funds. Yeah, not sexy stuff. things happen. And I mean, that's not that you can outlaw social media, but I mean, you can see how this happens. So let's say that, you know, you go on some investing forum on Reddit and

this, a lot of the story plays out on the, probably one of the wildest investing forums, which is our WallStreetBets. And then you go on it and then another person goes on it and you say, hey, you know, I put 10% of my money into this index fund. I think it's really good, good value, da, da, da. Another person gets on and says, I took out a second mortgage on my house, put, you know, made a heavily leveraged bet into short-dated out-of-the-money call options on a meme stock. You know, which one of you, I mean, aside from what's more exciting, obviously that is more exciting. It's not just that that is more exciting. It's that your post is not going to become visible and his post is going to become visible. So

now pretend that I'm someone who doesn't know much about investing. I've heard about this forum about investing. I go on it on Reddit because I want to learn something. I'm not by nature a gambler. I'm not going to see your post. Your post has not been upvoted. It might not have been downvoted, but it hasn't been upvoted. Whereas the reckless persons, just by sheer dint of their recklessness and it being kind of an interesting, crazy thing, whether or not they actually did that or not, they might not have. They might just be because the currency of social media is as attention is that they got attention and you didn't and so if i'm looking for a role model or trying to figure out how this thing is done well that's that's what i see and so uh it it is um really unhelpful and you asked earlier

you know so what's the upshot of this? Like what happens to these young people? I mean, and I think they're probably going to fall into a few different buckets. I think there are some people, I mean, obviously a few will have made quick money, but I mean, you know, they say success is the worst teacher, right? I mean, if you made, there are people who send me like, you know, hate mail when I write about this and say, screw you, I made all this money, you're just jealous, who were you working for? The thing is that even if you make money early in one of these things, if it convinces you to keep on going back to the casino and they're out treating it like a casino, then the long-term results are unlikely to be good. Then there are people who lost money, but who might keep on going back to casino, as many degenerate gamblers do, even though they regularly lose money. And I mean, I hate calling stock market casino. It generally is not. But I think in this case, it's a more apt

description, right? And the stock market is a place to match up savings with companies that need it, right? I mean, the stock market is not a bad place, but that's kind of not how they don't really kind of have not learned that. And then there are people, I think, who will have lost money and learned their lesson. But then what lesson do they learn? There's some who are going to say, you know what? I'm just going to buy something simple and forget about it, which was the best lesson to take away from this. And if you have an early bad experience and that's the lesson you take away, then that's

great. I hope more people do. It's an expensive lesson, but it could be worse. And then there are people who unfortunately are going to have a really expensive lesson, which is the stock market is crooked. It's rigged by fat cats, and I'm just not going to play. I'm going to stay out of this. And they're cutting themselves off from this long-term wealth-creating opportunity, which is too bad. Yeah, it is kind of concerning. And yeah, there's just so many storylines and so much going on that uh under the surface uh of the GameStop situation it was kind of crazy one thing that I think the reason that I was like you know kind of out of the loop uh especially is like I'm a

woman and it is a very male-dominated culture especially Wall Street Bets like was it you said some stat like it was like 98% male or something. It was like very high proportion to men. And I think part of that too, is there's a certain also like subculture of this like stock, like, you know, people know it's like stockbro culture, where it's all about kind of one upping each other. And it is, again, like not about like, building wealth over time. It's kind of just about showing your account, you know, screenshots, even showing the money that you've lost apparently is like a thing that you do. And it's like, is it all just to get attention? Is it all just to get confirmation from your peers?

Is it just to be part of a community? I almost kind of feel like that's part of it. It's like you just want to be part of something. It is part of it. You know, it's that, that part of it is, um, is, is a bit surprising and different is that, yeah, there's this, it's called lost porn where people will, will show screenshots of their accounts. I mean, can you imagine showing, uh, to me, it's a private thing. I wouldn't, I mean, obviously even if you want anyone know, yeah, exactly. Even if your name and account number, and even if you're behind an anonymous thing, why would you show it? But that's the, know, younger people are much more open to doing that.

And so it is what it is. And especially on Wall Street Bets, it became more of a thing a few years back, a few years before our story begins, because there were people who claimed to have made a lot of money or lost a lot of money, done sort of reckless things. And it turned out that they were making it up. You know, they kind of got a lot of money or lost a lot of money, done sort of reckless things, and it turned out that they were making it up. They kind of got a lot of attention, and so the kind of proof of trade is what it's called, you know, sort of showing a screenshot that you actually did it. I mean, I go into the case of a guy who is actually Canadian, who, you know, mentioned earlier in the book, who was one of the real characters on Wall Street Bets and wrote an e-book about it and, you know, and kind of had them all

on tenterhooks, but then made the whole thing up, he says, you know, where he was like, you know, he live streamed himself having a nervous breakdown because he made some huge all or nothing bet with all his money on Apple earnings. So, I mean, it's weird, but yeah, showing that, you know, a million dollars in your account, so in particular if you're showing that you've had a lot of success, that has a deep psychological effect. You know, if you don't know, you know, I don't know if you, I guess you probably have them in Canada or some form of them. They used to be on TV a lot late at night. If you were an insomniac, you know, there are these infomercials where you'd have some guy

pull up on a Rolls Royce in front of his yacht or in front of his mansion with a, you know, beautiful woman on each arm and tell you about how he made a lot of money and you can too and just order these DVDs or these cassettes or whatever. And that's called social proof. And the same thing is at play whether or not that you intend for it to be or not when you show a screenshot of your account. You made a lot of money. You have a lot of money or you made a lot of money. And so clearly you're someone to be emulated, someone who knows what he is talking about because you've made all this money. And the key influencer in all this thing

really did not intend to do that, I don't think, who was Roaring Kitty, aka Deep Fucking Value, who made a tremendous amount of money, who was more sophisticated than 99% of his people, who was really ignored through most of the story as he was building up this bet, and then kind of was discovered and became the sort of the center of attention,

became the most famous person on the internet for a while because he had made this bet and he wouldn't sell. And every day, he was just leaving so much. He had gone from nothing to a huge amount of money, to over $50 million at one point. And he just kept his bet riding. And so he was an inspiration to all these people. And I don't think that his intent was to get rich by having them all ride his coattails. It just bound up that way. I can't say for rich by having them all ride his coattails it just uh just bound up that way oh i i can't say for sure can't get into his mind he certainly wasn't discouraging them like that's the thing he says he wasn't you know he didn't explicitly say do as i

do or hold on like i'm holding on but that's the thing it's like he did obviously have influence and that's the one of the things that i kind of was a bit irritated like he didn't discourage people he didn't say like hey there's these risks involved you know yeah no he he didn't I mean and I I it's hard to to say if there's any remorse there I mean because he was you know of course you know he was sort of oh I'm just one of the kids I'm one of the whatever you know and he was you know you know he actually is a registered broker, although he did not have clients. He had a chartered financial analyst designation, which is a very difficult thing to get. It takes at least a few years of study and about a thousand hours of work to get. You know, so he was more sophisticated than almost anybody else on the board, yet he spoke their language.

And so I think that he probably should have understood what was going on, but of course it all happened at the end. If you kind of look, you go back to when he was, when basically nobody was paying attention to him, it's all there in the record, his videos are there and his posts are there. You know, he was he just kind of assumed he was being ignored. He was just doing it for himself, really. And the couple of dozen people who happened to tune in who probably didn't understand half the stuff he was talking about.

Yeah, well, yeah, that is like the concerning thing is like you'd think he would have known better just that he well first and that's like the biggest issue i think with like you know social media and like people getting their information just from social media and forums like reddit is everyone's anonymous he was anonymous for pretty much the whole time until it all really um you know peaked and he pretended kind of or didn't you know again uh clarify that hey he a CFA, and that's a very hard designation to get, but he also works in the financial industry. So, he is actually part of, you know, he is kind of the man, or he works for the man, but he was pretending like he was, oh, no, I'm trying to work against the man, but he was actually, so I'm just like, it's just one of those things where it's, yeah, I think people just wanted something to

believe in, and another kind of theme that I felt, you know, reading your book was the the idea of like war revolution, you know, fighting against evil. And I think, again, it's like people maybe because of just like, what's been going on in the world the past several years, they wanted something, you know, digital, I guess, because we couldn't really leave our houses to to believe in and to fight against so you felt like you were doing something and um you know yeah we all you know kind of hate you know there's always this kind of hate against the ultra wealthy and we feel like they're evil and they're just taking advantage and we thought this was maybe an opportunity to kind of flip the script but in the end it didn't and like all the characters it's like no one really knew what was going on but just once there's like this kind of group that becomes bigger and bigger it's a huge wave that's kind of difficult to stop you know and people said oh this is like occupy wall street and i mean it kind of is and in terms of the the sentiment that's at the core of it because there's this sort of like let's tear this place down, screw these guys, except you're doing it with your money.

You're not doing it – Your own money. You're doing it with your own money and you're using your brokerage account as a weapon. So this whole thing came to my attention. I've got three sons and my oldest boy at the time the events took place, was a senior in university. And his friend, who was a really, really clever kid, his age I've known since he was a tiny little boy, my son comes over to me and says, oh, Dad, are you going to write anything about GameStop?

I was editing for the Wall Street Journal, editing at home, because we were COVID-19. And I was like, why would I write anything about that? And he's like, oh, my friend Sean bought the stock and he doubled his money in the last couple of days. And I'm like, well, really? And I looked it up. And of course, I had been kind of had half an eye on Wall Street bets for about a year at that point, because some stock would go up a ton. And then later you'd see like, oh, because it had been talked about on Wall Street Bets. And it was all kind of very funny. You know, sometimes bankrupt companies would

double or go up tenfold, you know, stuff that like clearly had no value, like somebody was going to be left holding this bankrupt company at the end, you know. And so I was like, oh, tell Sean, like he'd, you know, probably, I mean, I don't want to give out investment advice to anybody, but like, I would not really hold on to that. I mean, but then the thing that really piqued my interest, he said, no, he's not going to sell. I said, what do you mean he's not going to sell? Like, that's not, that's not what you buy. It's like you buy a stock to sell it, especially one that doubled.

He said, no, no, no, because these people are buying it and they're not going to sell. And so then I started reading the message board and, you know, it was the purpose of doing it was to buy and to not sell because they understood that these hedge funds were totally exposed. And so they were doing it not to make money necessarily, or many of the people weren't doing it to make money. They were doing it so others could lose money because they had used short selling, which involves borrowing stock you don't own to make a profit when it declines and you buy it back later. If people buy and don't sell, then all of a sudden there's hardly any shares to buy.

And so that was the situation that they engineered by buying stock and especially by buying stock options. And so what these people were trying to accomplish, many of them were trying to accomplish, was to cause others to lose money. And that became as important or in some cases more important than them making money. They thought that they would make money in the process, but they were buying the shares and especially buying the stock options of GameStop, and then it expanded to a broader list of companies, that if they made them go up and if they wouldn't sell them, then in theory these hedge funds would lose a ton of money. And they did. I write about one in particular that lost about $6 billion in a few days,

one of the most successful hedge funds on Wall Street, as a result of what they did. And so did they win? Did they stick it to the man? Well, not really, because other hedge funds made a lot of money off of this. So if... Yeah, and the hedge fund managers, too. I think a lot of people think that these hedge fund managers who are like the, you know, they're rich, they've got the yachts, let's stick it to them so their fund doesn't make money. Well, they're still making money no matter what. Yeah. I mean, Gabe Plotkin, who's at the center of this, he had made personally. He personally made the year before this, the whole year that all these young people got into the market and pumped stocks up and created a lot of volatility.

He made $860 million. How would you like to make $860 million? There's no star athlete in the world. There's very few people in the world who have ever made that sort of a paycheck in a single year. And then he did personally lose a lot of wealth. Most of the people who lost money, by the way, were like university endowments, pension funds, and stuff like that. So first of all, you didn't— So really, it's the little guy that still lost money

because those are the people that would benefit from those pensions. Yes, indirectly, they lost money, yeah, because those are the main investors in his fund for what it's worth. But other hedge funds made money. It evened out. So it's not like a zero-sum game where all these people on Reddit made $6 billion and he lost $6 billion. That's not the way it works. Very few of them made money. People who were very early to it and maybe who were cynical and got out did pretty well, but lots of them

lost money. Lots of people on Wall Street made money And by the way, a lot of rich executives made a lot of money because they just, you know, they were like running failing companies. And all of a sudden, their share prices shot up. Well, what do you do? You know it's not going to last. So you cash out. And, yeah, it was really sad, too. I feel like there's a lot of stories. And I even still see them. A lot of them honestly focused with Robin Hood, because I still feel like there's a lot of issues with that app just with people not having because, you know, very well. They're like, hey, we're not giving advice. You can do whatever you want. We're just, you know, here's just a tool. It's up to you to use. And so like, we're not, you know, involved. But so many people, again, just get in there and just start making crazy moves and borrowing and not understanding. And I just see still so many stories of people losing their house or there was that of worth fighting for. But really, it's that the rich people still got rich and the people that actually were probably the most hurt because they really didn't have that much money to begin with. And they're, you know, playing around with like the little money that they did or all the little people that are involved in the whole situation in the first place. Totally. And I mean, and the analogy between Robin Hood and some of the more harmful social media outlets, not the ones that are they weren't designed to be.

Neither one was designed to be harmful. But then when you turn when you become a billionaire, like the founders of Robin Hood did and the founders of Facebook did, and whatnot. And then you have teenagers committing suicide because of the way the algorithms work, or you design Robinhood to be more and more effective. So, oh, let's have confetti. Let's have a lottery ticket-like element when you sign up where you get a random stock. Oh, let's get them to sign up their friends, and then they get another free share of stock. Let's show the most trending stocks. How do we design this thing

to get people as active as possible? I mean, there's many studies have been done that show that the more frequently you check your account and definitely the more frequently you trade in a brokerage account, the worse you do. It's a well-trodden ground, right? And active Robinhood users check their accounts eight times a day. That's like as much as Instagram, you know what I mean?

Yeah. I mean, you probably should check your account not even eight times a year, you know, if you have a brokerage account. I mean, you should kind of as much as you can automate things because the more often you look, first of all, the more often, the way they design their app, you know, you're going to see what's trending, right? 10 most active stocks. Like, well, it's not there because it's a useful service. It's there because they want to create FOMO. Oh, this thing's up 15% and I missed it. Let me jump on the bandwagon. Maybe I can get another last five or 10%. And that's how people again and again described it to me, is like they'd see something moving. They didn't even know what it

was. They didn't even know what the company did. Who cares? You know, it's going up. People are buying it. I'm going to jump on. And then some of them were cynical and said, I'm going to jump on for an hour and get out or a day and get out. And some of them felt like this must be like, maybe this is the next Tesla. I mean, but they didn't know anything about it. And it's designed to sort of to make you have that kind of itchy trigger finger and also to make it really, really easy to make the decision to buy or sell something because you hardly need any money to do it. And the more you trade, the more they make. That's their business model. So just like, you know, people who put, I don't know, conspiracy theories on Facebook and then it rises to the top

and like, well, we don't endorse those conspiracy theories. Like, okay, you don't. But I mean, that's the way it works. That's the way it's designed. You could design it a different way, but you'd lose money if you did that. And Robinhood would lose out to other brokers that have copied it if they made it less desirable to trade. Their whole business is based on how often you engage with it. It doesn't matter if you make money. What matters is if you, they don't want you to lose money, but really what they want is you to use the app a lot. Yeah. And I see that a lot with like basically our version of Robinin hood as well simple trade which um is you know basically replicating what robin hood looks like i have never used it myself

because of everything everything that i know that it's promoting like it is targeting young people it is giving people a free stock when they sign up they also have a um a cryptocurrency you know app as well to make it very easy to trade that and um you know although it was frustrating as this uh company started as a robo advisor which i actually used for a number of years and it very much was all about boring index investing but then obviously they saw wow we can make a lot more money if we just kind of you know jumped on this this train of no commission um trading and all that kind of stuff. And you wouldn't believe how many people I've had calls with and talked to about, you know, asking them, hey, so are you investing? What are you doing? And often I hear,

oh, yeah, you know, I use a well simple trade. And I'm like, what are you investing in? They're like, oh, you know, just playing around with a few stocks. And they usually they use the term playing around. I'm like, but it it's not playing it's your real money and it's if you lose it you lose real money and that's I think that's the thing that I really you know again I'm going to be focusing a lot more conversations in the next year about is just this idea of getting back to kind of the basics of what does investing and wealth you know building mean it's not entertainment I know there was actually a line in your book that I'm like oh I'm gonna underline this.

It's like, if something is, if it feels like it's entertaining or exciting, you're not investing. That is not what investing is about. Yeah, unfortunately. You know, I'd love for it not to be the case, but yeah, it shouldn't be entertaining. And, you know, what I tell people is like,

I have given like a lot of talks to, you know, typically like Wall Street Journal reporter shows up, I don't know, like at an investor convention or something, and people want to hear you talk about stuff. And I talk about personal finance topics a lot. It's an older crowd almost always. But it is people in their, like men, probably three-quarters men in their 50s and 60s and even 70s who are interested in investing. And they're a more conservative bunch, of course, but they also want to – it's a great intellectual exercise to invest, right? And so I get that. I would love to, if I had a different career than being a journalist, to go and, I don't know, be like a hedge fund manager or something. It's fun.

It's great to try to because you're kind of playing this game against everyone else in the world and trying to make money. And so what I tell these people who are very into finding some hidden gem, overturning some rock and finding something is like that's not really going to help you. There's a chance, of course, that you'll hit the jackpot, but the averages are against you. So if you really want to, if you just can't keep yourself away, if you need to do that, if you need to kind of play the game, you know what? Take some, you know how much money you need, take some share of your money, whether it's five or 10 or 20% or whatever that you know, if it vanished tomorrow, you could, you know, eat and pay rent and whatever and live without and use that, make that your play money and then don't go beyond that. And then I wish you the best of luck with that, but don't treat that as your play money to sort of, you know, to go in and invest,

and then have the rest sort of completely off limits and get that out of your system. And, you know, obviously it's not the case with these young people where they're actually using all of their net worth, which is not very much, to do this. Yeah, no, that's very good advice. And that's what I tell people the exact same thing. It's like, there's nothing wrong with buying individual stocks or doing some, you know, speculation or something like that. But yeah, you don't bet the whole, everything in your bank account limit. It's just like the same as like buying lottery tickets. You could win, but also most likely you're going to lose money. So please do not like put your

whole paycheck on them. Just like be sensible about it. Now, before I let you go, because honestly, I really liked your book. I think every young person, especially who is just getting into investing should read it because I think it's so relevant to what we're seeing online today. Just to get a different perspective that they're probably not hearing from some of the platforms that they're on getting this information. Before I let you go, what is like one piece of advice or just something that you want young investors to know? You gave some really great ones, but anything else, like, you know, you said you have some sons, what would you tell them? My sons are pretty tired now of hearing me lecture them. But luckily, they've stayed away from more speculative

stuff because I've kind of, I've droned on and on about it for, I guess, their entire lives. So I guess, you know, my advice would be, you know, if something sounds too easy and too good to be true, then it is. So be skeptical. Be skeptical of people who want your money. Always be skeptical of people who want your money. Be conservative with your money. Don't take flyers. You're unlikely to find a needle in the haystack. So just buy the entire haystack. Buy a really cheap haystack. Have most of your money in an index fund. set it and forget it. Don't worry if the stock market's down 30%. Don't go crazy and borrow money if it's up 30%. Just slow and steady wins the game almost all the time in this world of investing. Oh, that's a great little

kind of clip, audio clip that people should save when they're, you know, feeling like, I don't know what I'm doing. I mean, it's really, for me also, really nice to have you on the show to share your expertise and really breaking down what the heck happened with GameStop, because I even found it difficult to follow and really understanding what all of the moving parts were involved and what the key takeaways that people should take away from it. So I really appreciate you taking the time to be on the show. It was a pleasure having you on the show, Spencer. Thanks so much for having me. And that was episode 313 of the More Money Podcast with Spencer Jacob, author of The Revolution,

That Wasn't GameStop, Reddit, and The Fleecing of Small Investors. Make sure to grab a copy of his book, which is out now. You can also find more information about him at his website, spencerjacob.com and follow him on Twitter, Spencer at Spencer Jacob. Very easy. Also, his last name is spelled J-A-K-A-B. But if you just go to the show notes for this episode, jessicamorehouse.com slash 313 or 313 or 313, all the same thing. Well, you can find all that information linked in the show notes to make it very easy for you. And like I mentioned at the beginning of this episode, I am going to be giving away a copy of his book. Just go to jessicamorris.com slash contest to find it there. Enter to win. I'm also giving away a copy of Money Like You Mean It and a bunch of other books in the

future as I have more guests on the show who have a book coming out. And there's a lot of lot of uh there's a lot of guests that have books honestly I have a pile of books that I'm trying to get through I'm trying my best this year to read every single person's book before they're on the show it's very difficult um because there's a lot of books a lot of authors but exciting times things to look forward to with this season of the show now we do have a few uh important things I want to share with you so So don't go away. One includes a webinar I am doing tonight. Yes, tonight. So don't go away. Just want to share a few words about this podcast episode sponsor. This episode of the more money podcast is supported by Oxio, empathy, radical transparency, simplicity, free spirit. When you hear these words, I doubt the first thing you'd

associate them with is an internet company. Oxio wants to change that. They believe in disrupting the internet provider space in Canada and putting the customer first, finally. And they've been doing just this by providing local and friendly customer service, unlimited internet, no contracts, and competitive pricing to customers in Quebec, Ontario, and British Columbia since 2019. Want more reasons to consider ditching your big telecom provider for Auxio? How about one month free and an Eero 6 router for faster internet speeds and better privacy controls at no extra cost? You can even get $25 credited to your account for every friend you refer to Auxio. That's why I'm making the switch to A Oxio myself. Want to give it a try

too? Well, just visit Oxio.ca and use promo code MOREMONEY to try out Oxio for free for one month. It's as simple as that. Once again, visit Oxio.ca, that's O-X-I-O dot C-A, and use promo code MOREMONEY to try Oxio for free for one month. Okay, so let's get to the really important thing. I'm doing a webinar tonight. Surprise. The reason I have not mentioned it until today is because honestly, I just got the idea for it last week when I was writing up my newsletter for my email subscribers, which if you're not on my email list, that is how you find out these things before everybody else. Just go to jessicamorehouse.com slash subscribe to do that. Anyways, so I was writing, I'm like, I need to do something exciting. I feel like I've just been talking about me moving. And I just feel like I've just been catching up on work. I need something exciting

to happen. So you feel like why am I on this email? So I'm like, Oh, yeah, you know what, one thing that I haven't really done is like set my own financial goals. Like I wrote a little bit during like Christmas time, like when I had a little downtime, but I honestly need to really sit down and organize my life for the coming year. And then I got the thought, you know what? I think a lot of people similar to me are probably really busy in January, just getting back to school and getting back to work and all that stuff. They probably haven't had the time to do this too. So I got the idea to do this webinar called 2022 Your Thriving Year. It is literally just a webinar. It'll be 40 minutes and then 20 minutes of Q&A where you can ask me whatever the heck you want. But it is really going to be about discussing how to set your financial goals, how to stay motivated throughout

the year and just like how to put the wheels in motion to thrive, not just survive with your finances this year. So if you need, you know, some guidance or some some, you know, you want something to kind of kick your butt into gear to get things going. This is why I'm doing this webinar, I want to lay out kind of what I have done in the past and what I do pretty much every year. So I can set my goals. And this can be your financial goals. But this can also be like life goals, career goals, whatever, you can use the same strategy, how to organize it and break it down. So you know, it's more chunkified and more actionable and how to actually then move forward because I will say not to do my own horn. But since I've really been doing this kind of method

for the past, like over five years now, I have been I would say, every every year I'm 80 to 90%. I am successful in crushing about 80 to 90% of my goals, if that makes sense. Which is funny, because as a perfectionist, I'm like, well, it's not 100%. And then you look back and you're like, girl, it does not matter that you are not perfect and you don't get 100% of your goals. I mean, that's very difficult to do. Getting like even 80 to 90% is better than 0%, right? And you would get 0% if you do not create a plan and actually put those wheels in motion. So this is why I am doing this webinar. I would love for you to join me. It is happening tonight. If you're listening to this in real time, February 2nd, 7pm Eastern time,

if you go to the show notes, there will be a link for it, or just go to Jessica morehouse.com slash thriving year. And if you're asking yourself, well, I can't make it or I'm listening to this in the future, that's totally okay. I am going to be really nice. And I'm going to include the replay of this webinar in my free resource library. In case you don't know, I have a free resource library, I'm actually going to be doing some updates to a bunch of things, because I am like updating my website and all this stuff. But right now I've already kind of updated how I'm housing like some of my spreadsheets and just free resources. And if you just go to JessicaMorehouse.com slash resources, you can sign up for free, get access to all of these things. And I will and there's already

some past webinars in there. I'm going to include this in there too, just to make it easy, just to make it easy. So yeah, so you can take advantage of that. So there you go. That's exciting. I'm super excited for it. Let's see what else is going on in my, what else is going on? That is the question, isn't it? I just feel literally like every day I get up and I'm working for, you know, until it's dark and I know it gets dark pretty early, but you know, I just feel like every day I've just been like trying to get things done and catch up and stuff like that. And part of the reason I think is because well, you know, lots of you know, work stuff, right? And take work when you can get yourself employed, you got to take the work. But also, I've been doing a

big update of my wealth building blueprint for Canadians investing course, if you have never heard about this, because you're new, hello, welcome. So this is a course I've created last February. So we're almost at the one year anniversary, which is very exciting. And it was a course that I wanted to create to be a place where you can learn about the fundamentals, the really key things you need to know about investing and creating your own investment plan. But then also, you know, the other side of it, how do you actually start investing and how to invest in a passive way? Because I'm a boring passive index investor. And I have never been more happy that that's what I am during the past like year with all the crazy, you know, I mean, this episode was evidence, there's a lot of craziness going on in the investing world. But

it just makes me feel good, because I know exactly what I'm doing. It makes a lot of logical sense. And a lot of people want to learn how to actually invest and not just gamble and speculate because you know, someone on TikTok told you to or something like that. So anyways, if you want to learn about how to actually build wealth for the long term, invest in index funds, and feel confident about what you're investing in well that's why i created this course wealth building blueprint for canadians if you go to jessicamorehouse.com slash wbb or again there will be a link in the show notes jessicamorehouse.com slash 313 um you can find information about what the curriculum is uh student testimonials and then you can apply to the course once you apply if you're approved then you get on a call with me and then we have a nice little chat to see if this is the right

step for you in your investing journey. So it is not everyone's approved. It really is about people that are wanting to learn this stuff and apply it and that this is like the right fit for you. So if you're looking to learn about meme stocks or NFTs, this ain't for you. We don't do that. But if you're interested in saving enough for retirement through index investing, this is what we're about. So that's the other thing that I've been like, yeah, just spending all my time on and then otherwise just getting amazing guests for this podcast. Honestly, I'm pretty proud of myself. I've booked enough guests to get me all the way till May. And they're amazing guests, I will have to say. I'm

very excited about them. So anyways, I'm going to leave it there because you've got a busy day and you're an important person and I'm going to be respectful of your time. So thank you so much for listening to this episode. A big shout out to my podcast editor, Matt Rideout. And I will see you back here next Wednesday with a fresh new episode of the More Money Podcast. This podcast is distributed by the Women in Media Podcast Network. Find out more at womeninmedia.network.