Take two generations of burned-out young people, wounded in equal measure by 2008 and 2020. Add a proliferation of online, easy-to-use brokerages. Subtract the market regulation of pre-80s America. Now add a growing number of high-risk financial instruments that just about anyone can use from home. What do you get?
Jaime Rogozinksi’s answer: The biggest casino on Earth, built by boomers for boomers, now being stormed by Millenial and Zoomer retail traders out for blood.
Rogozinki’s book, WallStreetBets, was published a year ago this week. Let’s harken back. Late January, 2020: Markets were booming, the Democratic primary was raging, COVID hadn’t yet reached America. Hedge funds were running legacy businesses into the ground as usual, with pod shops pulling off gigantic shorts (mostly) unchallenged. Very few were going long on GameStop, AMC, or Nokia.
Already, Rogozinki, an information technology consultant based in Mexico City, was writing about the absurd past and future potential of r/WallStreetBets.The forum he created back in 2012 wasn’t yet making daily front page news, but its participants were finding new and exciting ways to exploit loopholes in our financial system every day. In his book, he catalogues the most eye-catching trades, takes us through how the huge profits or catastrophic losses were achieved, and provides a little context about the financial instruments being used.
Gamifying Wall Street
WallStreetBets is a moderately helpful read if you, like me, have a working knowledge of stocks, know little about WSB, and don’t want to ask questions on the subreddit out of fear of messing with the traders’ flow. It doesn’t feel in the spirit of the current moment to interject between rocket ship emojis and ask about the intricacies of an inverse ETF, so Rogozinki’s words will have to suffice.
Central to this book is the key fact that, unlike Wall Street investment institutions, the retail traders Rogozinski writes about don’t try to lie or soften the nature of their game. These traders are betting on numbers rising or falling like they’re playing a game in a casino, and they’re proud to be doing it. WallStreetBets is at its best when the author and the redditors he quotes are unpacking what that means for them as traders. Rogozniki uses the metaphor of gamers crash testing the newest software.
“For millennials, life resembles one big software development cycle,” he writes. “Rules or parameters are set by governments, organizations, businesses, or social norms. Once deployed, millions of users find a way to test them out in real time and search for bugs.”
This philosophy recently took on a new name, thanks to Elon Musk, who boosted the idea on Twitter. The “gamestonk” play seems like the most novel intervention WSB has under its belt, and is decidedly the intuitive spark that eventually set off this week of short squeezes. WallStreetBets gave a snapshot of that idea before it reached maturity this week.
One of the more interesting examples of the gamestonk mindset comes halfway through the book, when a WSB user discovers an “infinite money cheat code.” Sorry in advance for my oversimplification:
The “infinite money cheat code” succinctly gets to the point of Rogozinksi’s book: younger traders are hip to the fact that the financial system is there to be gamed.
In late 2019, redditor ShapeTheMessaging (who actually goes by ControlTheNarrative, but Rogozinski changed certain names for privacy) devised a strategy to get potentially millions of dollars of leverage by only putting down a few thousand dollars. He started by opening a margin trading account (where a broker loans the user twice their deposit to trade with) and put down only $2,000. He then purchased 100 shares of a stock that cost him $4,000 dollars and offset that by selling a covered call of the same stock. The broker (ostensibly an old-money boomer) missed the fact that this was a senseless trade and ShapeTheMessaging’s account registered it as a neutral bet, effectively doubling his leverage.
After repeating this process a couple of times, he had $50,000 worth of buying power. The broker hadn’t caught the mistake yet, so STM used that sum to go all in on a very risky trade that WSB calls an FD. He lost all of it. However, other redditors picked up on this strategy, and were soon turning thousand-dollar investments into millions of dollars of buying power, which most of them lost as well. In the end, the brokers finally got wise and stopped the process, but not before sinking $100,000 of their own money into paying off losses.
The “infinite money cheat code” succinctly gets to the point of Rogozinksi’s book: younger traders are hip to the fact that the financial system is there to be gamed. They are more frequently learning new ways to game it, and are increasingly willing to risk whatever funds they have available to do it. It’s a good point to reiterate and demonstrate at length.
I won’t get into all the financial tools Rogozinski offers to would-be traders, but suffice to say he includes enough to give readers a good overview. In doing so, he illustrates an equally important point: if a few guys trading on their phones can get away with stuff like this, we can assume what kind of monstrous bets that hedge funds worth infinitely more leverage are getting away with.
The new meta
What is the appropriate response to runaway markets? Rogozinski correctly points out that Millennials and Zoomers already tried to grapple with it through politics. They set out to Occupy Wall Street (referenced positively a few times in WallStreetBets) where they were laughed at on the news and beaten by the NYPD until they left Zuccotti Park. When a popular movement like that is crushed so mercilessly, cynicism and stagnancy kicks in. The most logical choice left is to play the game and, when possible, make things miserable for the people who've gotten used to winning it.
Perhaps the better one understands different methods of gamestonking and can adopt even more creative workarounds as opportunities arise. This is not the point of WallStreetBets, but an inevitable conclusion many readers will draw, given the exciting market chaos of last week that is likely to continue into the future.
The WSB headcount has jumped from 2.1 “degenerates” to a 7.9-million-user degenerate army at the time of writing. That’s viral growth - eclipsing the number of people involved in Occupy Wall Street by many millions. As much as this moment might formally resemble OWS, I fear the comparison might be a weak one. The cast of enemies only seems similar enough if you don’t squint. Take the simple fact that the single largest individual holder of GME remains Donald Foss, the billionaire pioneer of subprime auto finance. Still, in the degenerate worldview, the growth of their army comes with the ability to further impose the will of the retail trader on the market and to make hedge funds lose billions of dollars in days. Whether they are correct in the longer term, or if this will all simply redound to the benefit of the same celluloid villains, is beyond the scope of this review.
Still, in the degenerate worldview, the growth of their army comes with the ability to further impose the will of the retail trader on the market and to make hedge funds lose billions of dollars in days. Whether they are correct in the longer term, or if this will all simply redound to the benefit of the same celluloid villains, is beyond the scope of this review.
Either way, long-time WSB users readily admit they never thought they would have this kind of power. In the GME frenzy, many have already forgotten that WSB used to be a forum mostly for people to brag about how much money they had lost on trades. As Maximillian Alvarez, Editor in Chief of The Real News said, the most instructive in that it showed “how dizzying/exciting/confusing it is when regular people—who live in a society that systematically disempowers us—have any sort of noticeable impact on the world.”
So what comes next, after the short squeezes are done? Surely the hedge funds will get wise and cover their asses so nothing like this happens again. Regulators will get rid of the most loss-making flaws just as a video game releases a new patch -- but Rogozinski says that Millennial and Zoomer gamers are experts in finding new bugs, learning new metas. Maybe reading about the strategies, successes, and failures of the early r/WallStreetBets era could in some way help the degenerate army to decide their next moves while we wait for a Volume II that covers the new era of viral stocks.
Who's the boomer now?
Most likely, that second volume won’t be written by Rogozinski. Little did anyone know that in the year after he published his book, those same young Wall Street Betters would be coming after him, too. And not without cause.
Lately, many of the moderators and redditors on the page take every opportunity to disown Rogozinski and his opportunistic support of r/WallStreetBets. Every day there are multiple highly-upvoted posts accusing Rognozoski of attempting to sell out the subreddit. Users point to early 2020, when he started to market WallStreetBets on the page, along with an esports-style betting tournament he tried to set up. They say he needlessly endangered the forum by breaking Reddit’s rules against moderators profiting off of subreddits, all for his own personal gain. This is what led to his ban from the platform.
As of Jan 31, 2021, a video relentlessly making fun of Rogozinski was pinned to the top of the WSB subreddit by the very moderators that usurped him. It was the most-liked post this week, with 100k+ upvotes at the time of writing. The video references the verifiable and pretty lame fact that Rognozinski recently tried to trademark WallStreetBets, confirmed by business and tech attorney Dan Ravicher.
“I supplied a space for trading,” he says at one point, “but the community demanded a place to gamble.”
If you read WallStreetBets with current events in mind, the warning flags about Rogozinski are all there. His portrayal of the WSB community itself is very neutral throughout the book, almost annoyingly so for someone claiming leadership of it. Even as he praises the intuition of the traders, he tries to distance himself from the forum. Throughout, he gets caught in the wishy-washy inbetween and takes on a removed, anthropological tone that doesn't match the dynamism of the subreddit or the bets stemming from it. He even ends the book by laying out several ways it could be regulated into passivity.
“I supplied a space for trading,” he says at one point, “but the community demanded a place to gamble.” It’s a weird point to make in a book subtitled How Boomers Made the World’s Biggest Casino for Millenials.
Before the crazy week of Jan 25-29 was over, a few journalists jumped on calls with Rogozinski and asked him to “grapple with the legacy” of r/WallStreetBets. In doing so, a crucial point the media largely missed is that Rogozinski no longer has any place in the thing he helped to start. Not only is he now barred from the subreddit, the ethos and fundamental drive of it all has accelerated and left him far behind.
He also still can’t seem to make up with his mind about how he feels about the whole thing. Rogozinski’s interviews to the media about the short squeezes this week have been characteristically distant. The cutting analysis he provided to CNN, The Guardian, and elsewhere boiled down to, “There is no precedent for what is happening on the page,” and “This is not what I intended it to become.”
As someone on the WSB page might put it, he sounds like a total boomer, overly serious in the face of a ridiculous situation and, having carved out a nice place for himself in the world, risk-averse in the most boring way.
To give some credit where it's due, he still supports his former comrades from the sidelines. “I’m proud,” he told Forbes. “I’m proud in the sense that WallStreetBets has the potential to force the hand of the entire system.”
Still, it must be said that WSB would never have become the force it is now if Rogozinski had wrested control of it. With him leading the way, it might have been a company, an esports competition, or its own weird little ETF - all of which would have degradations of the army’s true potential.