0:06

Hello everyone, we are doing

0:08

a mini-series of podcasts here

0:10

at the Wharton School on

0:12

the Future of Finance and

0:14

today we are going to

0:16

explore a new phenomenon. Behavioral

0:18

and social investing, of course

0:21

behavioral investing is not a

0:23

new phenomenon. We have known

0:25

about it and talked about

0:27

it for a long time.

0:29

The new element that has

0:31

come into it more recently

0:33

is social investing. How behavioral investing

0:35

is assisted by social media

0:38

and the desire of people

0:40

to participate in a social

0:42

phenomenon, kind of like a

0:45

cultural phenomenon. And we saw

0:47

different episodes of this with

0:50

meme stocks starting from Game

0:52

Stop and AMC and others.

0:55

And we have the best

0:57

guest to dive into all

0:59

this. This is Matt Levine.

1:02

who is a columnist at

1:04

Bloomberg and the author of

1:07

the very famous money staff

1:09

newsletter. Hi Matt. Hi, thanks

1:11

for having it. It's great to

1:13

have you and I'm here at Ty

1:16

Goldstein I'm a professor of finance

1:18

at the Wharton School and currently

1:20

the chair of the finance department

1:22

and I will conduct this conversation

1:24

with you Matt looking forward to

1:26

hearing from you. So in your

1:28

May 13 issue of money stuff

1:30

in which by the way you

1:32

generously link to the Wharton NBA

1:34

curriculum you ask the audience is

1:37

this just how life is now?

1:39

So I will turn it over

1:41

to you. Is this the case?

1:43

Are we going to expect more

1:45

of these Game Stop sagas

1:47

or is this just a

1:50

unique phenomenon? My gut

1:52

is that it is more the

1:54

former, that this is kind of

1:56

the way life is now. I

1:59

think that... Game Stop was sort

2:01

of a proof of concept, but

2:03

really ultimately Bitcoin and crypto were

2:05

a bigger proof of it, that

2:07

something like social investing can work.

2:09

I mean, sometimes the way I

2:11

think of it is that for

2:13

most of the history of financial

2:15

markets, people thought of like the

2:17

stock market as this sort of

2:19

social gambling game where you were

2:22

trying to outguess the other person

2:24

and then... there was a almost

2:26

a brief blip of like scientific

2:28

finance where people thought oh stocks

2:30

are worth the present value of

2:32

their future cash flows and we've

2:34

now kind of gone back to

2:36

the old system where stocks are

2:38

worth what you can get someone

2:40

else to pay for them and

2:42

people realize that you could harness

2:44

social media technologies to collectively influence

2:46

the prices of stocks and I

2:48

think that just kind of remains

2:50

true. I don't think you'll see

2:52

game stop again. Like the real

2:55

insanity of that was kind of

2:57

because it was the first time

2:59

and because it was such a

3:01

novelty. But the basic idea of

3:03

like memes can drive the prices

3:05

of financial instruments seems pretty like

3:07

well established in crypto by this

3:09

point to the point that it's

3:11

like not even newsworthy and it's

3:13

you know continues to reverberate through

3:15

the stock market. So this is

3:17

very interesting. So basically what you

3:19

are saying is that our models

3:21

of finance will the value of

3:23

a stock is going to be

3:26

determined by the present value of

3:28

future cash flows. You say this

3:30

is a blip on the timeline

3:32

of financial markets and people are

3:34

used to think about it in

3:36

less scientific terms and this is

3:38

what we're going to see going

3:40

forward? You know, I'm probably exaggerating

3:42

when I say that I mean,

3:44

I think that one thing that

3:46

the Game Stop episode taught you

3:48

is that, you know, there's good

3:50

reason to think that the... present

3:52

value future cash those of an

3:54

asset set some sort of like

3:57

floor under the price of the

3:59

asset because if it goes to

4:01

zero then someone can go buy

4:03

it and extract the cash loss

4:05

themselves. But I think people sort

4:07

of developed this like rational system

4:09

where they assumed that the present

4:11

value of the cash loss was

4:13

also a cap on the value

4:15

of the asset. And like that's

4:17

just there's no real reason for

4:19

that. And if you know a

4:21

lot of retail investors want to

4:23

bid up a thing for years

4:26

at a time, then then I

4:28

think what you learned in Game

4:30

Stop was that. there's not really

4:32

a clear corrective mechanism right it's

4:34

not like short sellers can come

4:36

in and force the price down

4:38

to a rational level and I

4:40

don't know that's like the that

4:42

to me is the lesson like

4:44

there's not a corrective mechanism in

4:46

the shorter medium term for just

4:48

a meme driven price. Right. And

4:50

it's very interesting that you draw

4:53

the parallel to Bitcoin and crypto

4:55

assets because, you know, when we

4:57

talk about Bitcoin in the classroom,

4:59

we say that there is really

5:01

no clear way to price them.

5:03

So there is really no way

5:05

to tell what is the right

5:07

price for Bitcoin. So you think

5:09

basically that Bitcoin and other cryptocurrencies

5:11

are maybe the central phenomenon and

5:13

game stock was... Maybe one other

5:15

example of that. I kind of

5:17

think that, yeah, I kind of

5:19

think that like Game Stop being

5:22

a stock that moved on like

5:24

a coordinated social movement for a

5:26

few months was really interesting and

5:28

like sort of brought it to

5:30

closer to the financial mainstream. But

5:32

that's also true in a less

5:34

silly but more important way. of

5:36

Bitcoin, right? I mean, like, you

5:38

know, when you talk about, like,

5:40

how you value Bitcoin, it is

5:42

like any, any, any, any sort

5:44

of legitimate, any real effort to

5:46

value it is going to be

5:48

based on its social adoption, right?

5:51

If people buy it, then it's

5:53

worth a lot of money. And

5:55

if no one believes in it,

5:57

then it's not worth a lot

5:59

of money. And that is the

6:01

sort of core of what happened

6:03

in Game Stop. that was also

6:05

a company, but like the sort

6:07

of real meme-driven stuff was was

6:09

about just like the its popularity

6:11

in that in the in a

6:13

social investing universe. I think that

6:15

Bitcoin is the clear illustration of

6:18

how strange this is and how

6:20

like enduring it is right? I

6:22

mean, Bitcoin has has had a

6:24

five-figure valuation for years now. It's

6:26

it's social adoption is enough to

6:28

drive the value in a way

6:30

that it wasn't really for the

6:32

long term for GameStump. Yeah, so

6:34

you know. When we talk about

6:36

it as economists, we would think

6:38

about it as kind of a

6:40

coordination problem, where if everyone thinks

6:42

it's valuable, it will be valuable.

6:44

If no one thinks it's valuable,

6:47

it will not be valuable. And

6:49

then it can kind of end

6:51

up anywhere in terms of price.

6:53

And you're right. And Bitcoin is

6:55

sort of like self-consciously that, right?

6:57

It's like it's meant to be

6:59

a currency, right? So it's like

7:01

sort of everyone understands that it's

7:03

a coordination problem. Right, yeah, exactly.

7:05

And this is, I think, where

7:07

the deviation is, that with Game

7:09

Stop, there is a way to

7:11

price it that is not based

7:13

on coordination. With Bitcoin, there isn't.

7:16

But the fact that this migrated

7:18

into Game Stop and AMC was

7:20

really the new thing and maybe

7:22

the very interesting element here. So,

7:24

you know, diving a bit deeper

7:26

into that, what do you think

7:28

are the sort of psychological and

7:30

social triggers that... will be behind

7:32

the AMC and Game Stop saga.

7:34

How would you characterize them? I

7:36

do think that there is a,

7:38

there is a cultural moment that

7:40

is somewhat pandemic driven, right? I

7:42

mean, people were, a lot of

7:45

people were stuck at home. They

7:47

had a lot fewer entertainment options.

7:49

They were sort of turning to

7:51

the internet for entertainment because, you

7:53

know, supporting events and television shows

7:55

were canceled. events were canceled. And

7:57

so it was easier, you know,

7:59

there's like a lower bar for

8:01

entertainment. So like going to a

8:03

message board and talking about trading,

8:05

Game Stop Options was relatively more

8:07

entertaining than it would have been

8:09

at any other time. And it

8:12

was just like a real, you

8:14

know, it fed on itself in

8:16

the sense that like, people were

8:18

having fun trading Game Stop, Game

8:20

Stop went up. This got attention.

8:22

games that went up more and

8:24

then it became like a truly

8:26

insane event where people were making

8:28

you know 10,000% returns in a

8:30

couple of days and so that

8:32

attracted a lot of people right

8:34

it was a combination of like

8:36

people were making a lot of

8:38

money very quickly and also they

8:41

were just very evidently having a

8:43

lot of money very quickly and

8:45

also they were just very evidently

8:47

having a lot of fun doing

8:49

it that attracted a lot of

8:51

people. So like one thing that

8:53

happened in games that the stock

8:55

went up a couple of days.

8:57

And that just, you know, it

8:59

was a, in a time where

9:01

people were starved for entertainment and

9:03

starved for like social interaction, that

9:05

was a very fun place to

9:07

be socializing. And like the coin

9:10

of socializing there was you buying

9:12

and holding game stop. Right. So

9:14

this is all sort of pandemic

9:16

era driven as you say, but

9:18

then when you saw this coming

9:20

back in May of this year,

9:22

what were you thinking? One thing

9:24

I was saying is this can't

9:26

work as well again. just for

9:28

like entertainment reasons, right? Like, it's

9:30

just not as fun the second

9:32

time, and it wasn't, right? I

9:34

mean, like, people were interested in

9:37

it, and, you know, what happened

9:39

is that, that Keith Gail, the

9:41

sort of, like, Influencer, who was

9:43

the main driving force behind the

9:45

first Game Stop rally, I'm not

9:47

sure that's true. He was the

9:49

mascot of the first Game Stop

9:51

rally. He came back to Twitter

9:53

to sort of tweet inscrutable things,

9:55

and to sort of, Try to

9:57

get the band back. together and

9:59

people were interested in the stock

10:01

shot up and Game Stop was

10:03

able to do an out-the-market stock

10:06

offering, but it was never, it

10:08

didn't have anything like either the

10:10

financial or the cultural impact that

10:12

it had the previous time, right?

10:14

I mean, it just, the stock

10:16

did not go that much, and

10:18

it got attention in like the

10:20

financial press, but it wasn't, you

10:22

know, the sort of original Game

10:24

Stop rally was, you know, it

10:26

was on good morning America. It

10:28

was like the biggest news story

10:30

in the world. Keith Gill coming

10:32

back was like a financial niche

10:35

news story. Right. So, you know,

10:37

when we analyze financial markets, we

10:39

tend to think about retail investors

10:41

and institutional investors. And the usual

10:43

thinking is that institutional investors are

10:45

going to be... more sophisticated, they

10:47

are the experts, they have time,

10:49

they have money to do the

10:51

research, and at the end of

10:53

the day they will know how

10:55

to pick the stocks. And then

10:57

the retail investors, those who are

10:59

maybe more naive, they don't have

11:01

the financial resources to make the

11:04

right investment. At the end of

11:06

the day, they might be taking

11:08

advantage of. This was not exactly

11:10

how things played out in these

11:12

episodes. Did these episodes lead you

11:14

to reconsider the way you are

11:16

thinking about institutional versus retail investors?

11:18

I think that it suggests that

11:20

retail investors have more power than

11:22

you would have expected, right? Like,

11:24

I have read for years people

11:26

saying, you know, on read it

11:28

or whatever, people talking about gamma

11:31

screens, right, like saying, if we

11:33

all buy. call options, then that

11:35

will force the price of the

11:37

stock up and dealers will have

11:39

to hedge their call options by

11:41

buying more stock and then the

11:43

stock will keep going up and

11:45

the dealers will have to buy

11:47

more to keep hedging and the

11:49

stock will sort of spiral up

11:51

infinitely. And I would read that

11:53

and say, okay, like, there's no

11:55

perpetual motion machine, but also like

11:57

how big of an impact on

12:00

a big liquid stock can retail

12:02

call option buying have? And the

12:04

answer is like much more than

12:06

I expected, right? It's just that

12:08

you think of like retail investors

12:10

as being like. dispersed and kind

12:12

of random, right? Because they're, you

12:14

know, traditionally don't have access to

12:16

a lot of information, but they're

12:18

also just like individuals with small

12:20

accounts. And one thing that you

12:22

learned in the Game Stop saga

12:24

is that retail investors can kind

12:26

of coordinate around one thing where

12:29

they're all buying the same call

12:31

options of the same company at

12:33

the same time. And then the

12:35

stock really does go up. And

12:37

the stuff about gamma screws that

12:39

sort of like looks like an

12:41

urban legend turns out to be

12:43

kind of true some of the

12:45

time. So I think that has

12:47

been that has been. an interesting

12:49

shift where retail investors like just

12:51

have the power to move markets

12:53

in a way that nobody really

12:56

expected. And you see that in

12:58

like institutional investors being much more

13:00

cautious about short selling and particularly

13:02

like you know vocal activist short

13:04

selling because they worry that if

13:06

they go after a company they

13:08

short a company so you know

13:10

some retail investors on a message

13:12

board will say you know let's

13:14

go after that hedge fund and

13:16

like it turns out that if

13:18

they all do that then like

13:20

it can have a material effect

13:22

on the hedge fund. You know

13:25

your question you talk about like

13:27

you know retail investors being less

13:29

sophisticated and having less access to

13:31

information. I don't know that like

13:33

the retail investors like in the

13:35

long run look particularly smart from

13:37

the Game Stop episode right like

13:39

Game Stop is killing it in

13:41

their business. I think there's

13:43

like interesting effects where like Game

13:45

Stop and AMC were able to

13:47

raise so much money and sort

13:49

of like get some runway from

13:51

their retail involvement and like that

13:53

has interestingly shifted the dynamics of

13:56

the underlying businesses. But like, ultimately,

13:58

I don't know, like, like, you

14:00

know, the hedge funds who were

14:02

short in Game Stop, I don't

14:04

know, the hedge funds. sort of

14:06

game stop at like $14 maybe

14:08

they were wrong, but that's one

14:10

sort of game stop at, you

14:12

know, $80 seemed right, but they

14:14

also got blown up. And I

14:16

don't think that like this is

14:18

a story of retail investors being

14:20

better analysts of companies than professional

14:22

investors, but I do think it's

14:24

a story of like retail investors

14:26

coordinating in a way that is

14:28

much more impactful on the market

14:30

than anyone really thought. Yeah, I

14:32

completely agree. I mean, it's it's

14:34

not that they did the underlying

14:36

analysis, but it is that when

14:38

they come together they managed to

14:40

move markets in a way that

14:42

puts institutional investors in a bind

14:44

in a way that they didn't

14:46

really expect. So I think in

14:48

that sense, it's a little more

14:50

subtle than the traditional story we

14:52

had about retail versus institutions. Yeah,

14:54

you know, I read a lot

14:56

about like market structure and about,

14:58

you know, like, like, like, like,

15:00

uh, High frequency trading firms market

15:02

making to retail traders and like

15:04

everyone's model there is that retail

15:06

traders are sorry I shouldn't say

15:08

ever as much. The popular perception

15:10

is that retail traders are sort

15:12

of random noise traders where like

15:14

they'll buy a stock or sell

15:16

a stock but there's no like

15:18

overarching coordination among retail traders and

15:20

so you can like make a

15:22

lot of money market making to

15:24

retail traders because like they are

15:26

like, you know, buying at the

15:28

at the offer and selling at

15:31

the bid and not. not like

15:33

predictive of prices. And you see

15:35

in like, I don't really know

15:37

how market makers did in this.

15:39

I think they did very well

15:41

for the most part, but like

15:43

you see in this that retail

15:45

trades are like much more predictive

15:47

than people would have thought, right?

15:49

Like that they are, that retail

15:51

trades are like much more predictive

15:53

than people would have thought, right?

15:55

Like that they are, that there

15:57

is like a sign that is

15:59

going to keep going up because

16:01

a lot of other retail traders

16:03

are going to buy it. And

16:05

that's just like an interesting. shift

16:07

where you know like a retail

16:09

trader is not an atomized individual

16:11

buying stock sort of like independent

16:13

of all the retail traders, there

16:15

is like this ability for retail

16:17

traders to coordinate. Right. So you

16:19

mentioned the fact that AMC and

16:21

Game Stop were able to raise

16:23

capital out of this increase in

16:25

stock price. And at the end

16:27

of the day, you know, for

16:29

example, in the case of AMC,

16:31

this... led them to avoid bankruptcy,

16:33

which I think was a real

16:35

concern at that point. And I

16:37

think this is a very interesting

16:39

question, because at the end of

16:41

the day, if this just stays

16:43

in the financial market, some people

16:45

make money, some people lose money,

16:47

you know, you can say it's

16:49

okay. People go to the financial

16:51

market at their own risk and

16:53

they should be... prepared to lose

16:55

money. But when this kind of

16:57

spills over to the real economy

16:59

in the way that it did

17:01

here, because you have a firm

17:04

that is able to raise more

17:06

capital and stay in business, even

17:08

though maybe it shouldn't have, then

17:10

I think this raises deeper questions.

17:12

Are you worried about that, that

17:14

firms are using this phenomenon? I

17:16

sort of put myself in the

17:18

shoes of the CFOs, I'm thinking,

17:20

well, how could you not try

17:22

to raise money here? I also

17:24

think that, you know. It's an

17:26

interesting, I mentioned earlier, the idea

17:28

that there's no mechanism to cap

17:30

the price of a company at

17:32

its like cash flows, right? Like

17:34

there's no mechanism for if retail

17:36

investors all want to buy a

17:38

stock, there's no mechanism to prevent

17:40

the price from going to, you

17:42

know, as high as they want.

17:44

But of course there is, which

17:46

is the company can sell the

17:48

stock, right? And you see a

17:50

little bit of that in some

17:52

of the meme stock episodes where

17:54

like, if the price gets too

17:56

high, the company is going to

17:58

hit the bid, and then the

18:00

price will come down to a

18:02

more reasonable level in part because

18:04

like there'll be more supply but

18:06

also in part because like it

18:08

sort of deflates the social phenomenon

18:10

if like if everyone's like we're

18:12

buying and holding and then the

18:14

company's like we're a seller at

18:16

this price it's like sort of

18:18

bad for the meme. But, you

18:20

know, I think it's probably bad

18:22

if financial markets are allocating capital

18:24

on retail whims, but it's not

18:26

that bad, right? I mean, there

18:28

are other like forms of gambling

18:30

and that are probably, you know,

18:32

equally expensive and, you know, like,

18:34

there's something interesting about AMC, right,

18:37

because like, on the one hand.

18:39

their business was struggling and they

18:41

got a lifeline from meme stock

18:43

investors. On the other hand, like

18:45

this meme stock investors were not

18:47

driven by like pure irrationality. They

18:49

were driven by like nostalgia for

18:51

movie theaters, right? And their business

18:53

was struggling in part, like. there

18:55

were other problems but in part

18:57

because they were in a pandemic

18:59

where they couldn't show movies right

19:01

so the idea that like these

19:03

retail investors driven by nostalgia were

19:05

sort of bridging them through a

19:07

difficult business period like I like

19:09

it doesn't seem that bad right

19:11

it seems like in some ways

19:13

like the retail investors like made

19:15

a sort of like rational allocation

19:17

of capital there I do think

19:19

that you can look at some

19:21

of these There's like a real

19:23

cynicism to some of the capital

19:25

raising off of meme stocks. But

19:27

at the same time, like, you

19:29

know, the most cynical looking of,

19:31

well, I shouldn't say that, one

19:33

very cynical looking trade was when

19:35

Hertz raised money from meme stock

19:37

investors while it was in bankruptcy,

19:39

which is just a crazy thing

19:41

to do, but also like. It

19:43

emerged from bankruptcy with equity value

19:45

and those meme stock investors made

19:47

money which is again like it's

19:49

a pandemic driven thing where like

19:51

the business crashed and then recovered

19:53

and the meme stock investors sort

19:55

of bridged them through the pandemic.

19:57

There are other cases I mean

19:59

bed bath and beyond is a

20:01

case where they raise money from

20:03

meme stock investors all the way

20:05

to zero in a way that

20:07

looks really cynical and looked really

20:09

like a transfer of money from

20:12

retail investors to essentially bondholders. But

20:14

I don't know how big of

20:16

a misallocation of capital is because

20:18

they did go bankrupt in pretty

20:20

short order. No, you're making good

20:22

points here. I mean, I think

20:24

it is clear that this meme

20:26

stock phenomenon can help firms go

20:28

through a bad time. Whether this

20:30

is good or bad, it's not

20:32

clear. It depends on whether the

20:34

underlying stress was efficient or not.

20:36

And yeah, certainly there was. some

20:38

business proposition behind AMC staying alive.

20:40

So in that sense, maybe the

20:42

investors did them a favor. If

20:44

your model is that like the

20:46

retail investors doing this are just

20:48

always like systematically less rational than

20:50

institutional investors who normally fund companies,

20:52

then yeah, this is bad. I

20:54

think that model is like, you

20:56

know, largely correct, but it's not

20:58

like so obviously correct, right? I

21:00

mean, institutional investors make mistakes too.

21:02

Yes, absolutely. I would be the

21:04

first one to agree with that.

21:06

So if you are a regulator

21:08

sitting and watching all this, what

21:10

are your main takeaways? What do

21:12

you think should be done to

21:14

make financial markets more orderly? I'm

21:16

sympathetic to the actual response of

21:18

regulators, which was kind of that

21:20

this is all fine, embarrassing, but

21:22

fine. Like, like, when the game

21:24

stop thing originally happened, there is

21:26

a lot of... interest in whether

21:28

there was some sort of like

21:30

secret coordination pump and dump where

21:32

the people on Reddit touting Game

21:34

Stop were like secretly, you know,

21:36

doing something nefarious. And it doesn't

21:38

ever look like that was true,

21:40

right? It just looked like they

21:42

liked the stock. There was maybe

21:45

an awkward amount of coordination, an

21:47

awkward amount of cheerleading, but like

21:49

no one was lying really. And

21:51

that's like the main thing that

21:53

the SEC is concerned about is

21:55

like people misrepresenting things relying. This

21:57

strikes me as like kind of

21:59

an emergent phenomenon of retail traders,

22:01

and one that like kind of

22:03

can't be regulated away because it's

22:05

like, you know, if people want

22:07

to put their money on this

22:09

thing, then they're allowed to. Now,

22:11

you see like, you know, there's

22:13

tinkering at the edges, right? I

22:15

mean, like, one thing that came

22:17

out of this was, was the

22:19

move to T plus one settlement,

22:21

which is a really arcane response

22:23

to the Game Stop. like phenomenon

22:25

led to increased credit risk of

22:27

clearing because everyone was buying the

22:29

stock at like, you know, this

22:31

is an incredibly volatile stock at

22:33

like increasing prices. And so that

22:35

led to like hiccups in the

22:37

system of like stock settlement where

22:39

like Robin Hood was getting giant

22:41

margin calls from the clearinghouse. And

22:43

so the SEC subsequently moved to

22:45

T plus one settlement to kind

22:47

of like tab that down. Another

22:49

response you saw. is that the

22:51

SEC sort of expressed very clear

22:53

skepticism about companies raising capital off

22:55

meme stock things, and they sort

22:57

of demanded that companies put a

22:59

lot of like dire warnings and

23:01

their perspectives when they did these

23:03

offerings. But of course, when you

23:05

do a retail at the market

23:07

offering, you know, zero of your

23:09

investors read the perspectives, so it

23:11

doesn't really matter. I don't know

23:13

that there's much that they can

23:15

do and I do think that

23:18

like again this was like a

23:20

thing that happened during the pandemic

23:22

as a sort of like entertainment

23:24

substitute and you look at what

23:26

Entertainment options are available to people

23:28

these days like it's a lot

23:30

of gambling and so like I'm

23:32

not sure that like investing in

23:34

Game Stop options is is that

23:36

much different or that much worse

23:38

than you know betting on sports.

23:40

And so like the regulators are

23:42

in a bit of a bind.

23:44

I think it's very embarrassing for

23:46

the SEC to have this occur

23:48

because they would love for financial

23:50

markets to just look more orderly

23:52

and rational and less like an

23:54

insane entertainment product. But people are

23:56

coming to the stock market for

23:58

a lot of reasons and one

24:00

of them is glue entertainment. Right.

24:02

Yeah, and I think they will

24:04

have a problem thinking about the

24:06

stock market as a casino. They

24:08

would like it to be a

24:10

place where allocation of capital is

24:12

being done and I think this

24:14

is why they look at it

24:16

and not a little worried by

24:18

that. I think that's right, but

24:20

I also think like, like, the

24:22

SEC has such a, um, bias

24:24

and mission in favor of retail

24:26

investors and that includes letting retail

24:28

investors do what they want, right?

24:30

I mean, like, if you're, if

24:32

your goal was efficient allocation of

24:34

capital, you might be sort of

24:36

skeptical of a lot of retail

24:38

investor decision making, right? You might

24:40

be like, everyone's got to put

24:42

everything in index fund and only

24:44

professionals can trade stocks, but that's

24:46

like not the American way. And

24:48

I think that there is a

24:50

bias towards letting retail investors do

24:53

what they want, even if the

24:55

SEC is sure it's bad for

24:57

them. I also think that like,

24:59

I talked about Hertz, the SEC

25:01

stopped the Hertz equity offering, and

25:03

that offering like turned out to

25:05

be a good idea for the

25:07

people who were buying it, right?

25:09

I mean, like the stock in

25:11

the sense that the stock went

25:13

up, right? So the SEC like,

25:15

it doesn't always know what is

25:17

irrational for retail investors. Yeah. You

25:19

know to close our conversation I

25:21

want to ask you more broadly

25:23

where else do you think we

25:25

are going to see episodes like

25:27

this and I want to bring

25:29

up something that is related but

25:31

also different in many ways and

25:33

this is the Silicon Valley Bank

25:35

that you know had the biggest

25:37

bank run in history and it

25:39

was also driven by social media

25:41

of course you know this is

25:43

not the stock market it's a

25:45

bank people pulling out deposits but

25:47

at the end of the day.

25:49

there were some similarities because of

25:51

the contagion that happens through social

25:53

media. So do you see some

25:55

connection? Where do you think? we

25:57

are going to see more action

25:59

along these lines. Yeah, I mean,

26:01

SVP, I think SVP is interesting

26:03

because SVP collapsed because of a

26:05

bank run and the people doing

26:07

that bank run were largely like

26:09

very sophisticated, well connected, you know,

26:11

sort of VCs and tech startups

26:13

who were like. you know largely

26:15

the depositors there and people talk

26:17

about it being a social media

26:19

driven bank run but I think

26:21

a lot of like my gut

26:23

sense is that a lot of

26:26

what happened there was not happening

26:28

on like Twitter but on you

26:30

know private text messages or just

26:32

like phone calls between VCs right

26:34

so it's not exactly social media

26:36

driven it's like a fast tech

26:38

intermediated sort of traditional rumor belt.

26:40

The interesting bank run from a

26:42

social media perspective was credit suisse

26:44

before it collapsed, like not the

26:46

day before it collapsed, but in

26:48

the months leading up to its

26:50

collapse, there were a lot of

26:52

like, you know, creditors trying to

26:54

take down credit suisse. And I

26:56

do think that like the possibility

26:58

of coordinating a bank run on

27:00

social media is interesting. It is,

27:02

as you say, like the inverse

27:04

of the, you know, mime stock

27:06

phenomenon where, you know, if, you

27:08

know, people on social media can

27:10

get together to drive a stock

27:12

up, they can get together to

27:14

drive it down. And in general,

27:16

you know, as I said at

27:18

the beginning, like the, you know,

27:20

cash loads or a floor on

27:22

a stock price, right? And like

27:24

you can't really come together to

27:26

drive the stock price of like

27:28

Tesla to zero. But you kind

27:30

of can with a bank because

27:32

banks are so like perception dependent,

27:34

and if you have a bank

27:36

run, then like the bank really

27:38

can go to zero. So... I

27:40

do think that like the possibility

27:42

of using shows for media to

27:44

coordinate a run on a bank

27:46

is like, you know, something that

27:48

occurred to people after Game Stop

27:50

and something that like kind of

27:52

sort of tentatively played out a

27:54

little bit in credit space, although

27:56

I think ultimately. was not like

27:59

the causal problem with credit space.

28:01

In terms of more generally like

28:03

where does this go in the

28:05

long term? I mean, I think

28:07

that the two things I'd point

28:09

to are again, crypto is just

28:11

like people have developed a better

28:13

understanding of the social dynamics of

28:15

investing and like that's gonna get

28:17

just keep being reused in crypto.

28:19

And then the other thing I'd

28:21

point to is Donald Trump's spack,

28:23

right, which is. You know Game

28:25

Stop is a real company, which

28:27

like, you know, like you could

28:29

have a range of opinions on

28:31

how much money Game Stop will

28:33

make selling video games in 10

28:35

years, right? Donald Trump's, you know,

28:37

Trump Media Technology Group is like

28:39

a real, like, teeny nub of

28:41

a company, right? It's got a

28:43

social media site that doesn't seem

28:45

to bring in very much revenue.

28:47

It talks a big game about

28:49

like getting into streaming video and

28:51

other things, but it's like not

28:53

clear what they're doing. And on

28:55

it's very, very, very, very small.

28:57

revenue and sort of like minor

28:59

like small negative net income, it

29:01

has like a multi billion dollar

29:03

valuation. And it's just very clear

29:05

that the people buying it are

29:07

not buying it because they're like

29:09

doing financial analysis, but because they

29:11

are trying to get behind Donald

29:13

Trump in some way. And I

29:15

think that like, I don't think

29:17

he'll be the last person to

29:19

make use of this phenomenon, right?

29:21

And I do think that like

29:23

Game Stop kind of proved out

29:25

the possibility here and then. Trump

29:27

media group capitalized on it. Okay,

29:29

lots to think about. Thank you

29:31

very much Matt. It was a

29:34

pleasure talking to you about all

29:36

these issues and I think we

29:38

should all stay tuned to see

29:40

what's next. All right, thank you

29:42

very much. Thank you.