Updated at 11:02 a.m. ET on February 3, 2021.
The story you might have heard goes like this: A group of regular-Joe traders on Reddit took down a hedge fund by bidding up the stock price of the sleepy video-game store GameStop. Their righteous revolution was briefly thwarted last week when Robinhood, the popular brokerage app, restricted trading because it was secretly in cahoots with the hedge funds. This was an outrage: It was as if, in the matchup between David and Goliath, the magical slingshot stopped firing because it was secretly controlled by the giant. So, right-thinking people on TV and social media hailed the common day traders, demanded prison for various Robinhood executives, and generally extolled the salutary populism of stock speculation and day-trading.
Almost every piece of that story is misleading, tendentious, or totally wrong.
First, are the Reddit revolutionaries new populists descended from the radicals of Occupy Wall Street? No. They’re basically a bunch of dudes upvoting memes with cash. Or, to be more generous, they represent an extremely online evolution of Big Finance itself, a kind of decentralized hedge fund duking it out with other hedge funds. The typical day trader is a pretty well-off man in his 30s, and various reports so far show that some of the Reddit group’s leading members are current and former finance workers, some of whom make enough money to live in gated communities. By using a message board to move markets and cream billionaires, they’ve done something truly fascinating. But while some Redditors made millions recently, the largest holders of GameStop stock, like the giant asset manager BlackRock, made billions. None of this has anything to do with “the little guy”—a moniker that, by any reasonable definition, refers to the roughly 50 percent of American adults with no money whatsoever in the stock market and who probably shouldn’t kick off their investment career by buying into a mania.