Moment of inertia is a place where give more of my commentary, in a longer form, on select topics I cover in my newsletter Magnitude and Direction. The goal is to give you 10 to 15 minutes of interesting reading on a topic while you're still in bed - your moment when the inertia of being cozy in bed keeps you there, even though you're awake and getting ready for the weekend morning. I hope you enjoy hearing what I have to say about the topics I cover in M&D and encourage you to participate in the discussion as well.
Whether technology mediates a paradigmatic change, or simply amplifies existing behaviors, when societal changes approach a critical mass, they can seem equal parts outrageous and foolish… until they’re not.
Planet of the Apes
A lot of people have taken issue with the “stonks” antics that have been perpetuated by casual retail investors over the past 6 months. They’re not without reason. By their CEOs own admissions, both GameStop and AMC (and possibly a litany of other meme stocks) are overvalued. Nevertheless, the “apes” are by and large sticking together — and leaving an impact on the stock market (or small parts of it, at least).
At what point does something go from being a joke to being a legitimate business consideration, though? Regardless of what happens to $GME, $AMC, $BB, or any of the other meme stocks, the Internet is certainly not going anywhere. At the end of the day this new “Ape Market” is an emergent property of the Internet itself, more than it is the master plan of any individual or group. As the meme hints at, there’s nothing stopping a stock’s price from going up forever, so long as everyone is in on it. The only problem has been that level of coordination wasn’t really possible before. Even with the hyper-connectedness of the Internet it’s not really here and it probably never will be in an all-consuming way. However, it is certainly “here enough”1 to facilitate things like the GameStop share price jumps that have happened several times this year. It’s comforting to say that the bedrock of business deals has always been business fundamentals, but there’s more than enough examples over the past 400+ years to suggest that it was really more like “people’s perceptions of the fundamentals”, a slipper slope of abstraction that only lends itself to more abstraction, much like the Internet itself.
As the Fortune article states, “it was always a popularity contest”. Is it really so surprising, then, to see that the Internet would also consume the realm of finance on its journey to “eat the world”? The World Wide Web, especially in its contemporary form, is nothing but a popularity contest. The biggest difference between this popularity contest and those from previous eras is that it’s easier than ever to enter contestants — and harder than ever to anticipate who will win. At this point, the Internet’s ability to spontaneously create and latch onto trends2 (and oftentimes boost companies, brands, stocks, or conspiracy theories) isn’t so much a consequence of the interconnectedness, but an emergent property of the system itself — the whole is much, much grater than the sum of its parts. Getting your 15 minutes of fame isn’t a new thing, but as that “attention economy” has been amplified by our ever-increasing interconnectedness trading in eyeballs is becoming just as important as trading in shares (not to be mistaken with… shares). “Apes together strong” may be a reddit meme, but it also accidentally captures our shifting perception of value. It was always possible to leverage showmanship, emotion, and community to disrupt market forces, it’s just never been easier to do it — and to do it at scale. At a certain point, though, you can’t just dismiss the phenomenon as a side show anymore. If we’re not there yet, we will be soon, and I’m not just talking about the stock market.
Paywall (sorry ☹)
And spontaneously abandon them — this trend is roughly a week old and it’s already old news