The Trolls of Wall Street: How the outcasts and insurgents are hacking the markets

The Trolls of Wall Street. How the Outcasts and Insurgents Are Hacking the Markets is Nathaniel Popper's second book. His previous book, Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money, was a New York Times Editors Choice and a finalist for the Financial Times Business Book of the Year. He covered the worlds of Wall Street and Silicon Valley for The New York Times, dividing his time between New York City and the Bay Area, for nearly a decade. Before that, he worked at the Forward and the Los Angeles Times. A graduate of Harvard University, Nathaniel grew up in Pittsburgh and makes his home in the San Francisco Bay Area.

The Trolls of Wall Street. How the Outcasts and Insurgents Are Hacking the Markets is a fascinating account into the events and the people that led to the events of 27 January 2021, when due to the GameStop short squeeze, some US firms and short sellers suffered losses. It transpired that subreddit group -r/wallstreetbets, also known as WallStreetBets or WSB, where participants discuss stock and option trading - had played a pivotal role in this extraordinary event. "Extraordinary" because it was the first time that it became apparent to many people that the boundary lines between digital and real worlds, particularly markets and shares, were being affected by the behaviour of online users. This subreddit group is a community that is known for its colourful and profane jargon, and aggressive trading strategies.

The extract that is given below is from the introduction wherein the author focuses upon the subreddit groups prior history and to the eventful day of 27 January 2021. A little later in the chapter, he elaborates upon the nature of WSB and the people who formed this community. It is essential to understand this because in 2021 Reddit's valuation soared to $10 billion. It was most likely helped by the existence of a famous brand like WSB on Reddit. This is precisely the reason why in April 2024 the founder Jaime Rogozinski of WSB who was ultimately kicked out off the group sued Reddit accusing it of wrongly banning him from moderating the community and undermining his trademark rights. He claims that was a pretext to keep him from trying to control the famous brand. In fact, Rogozinski had applied to trademark "WallStreetBets" in March 2020, when the community reached 1 million subscribers.

Popper explains this community very well in his introduction. In fact, it is a description of the kind of people, especially young men, who power the internet, have developed a new form of capitalist economy which is fuelled purely by the internet and are complacent in who they are. Popper says that the risky foolhardy trading that was performed on WallStreetBest violated all established rules of investing, which counselled against trying to pick stock or time the markets. The rejection of these ideas on WallStreetBets was a form of rebellion and a sign of the pervasive distrust of the old ways of doing things that had emerged among young Americans in the wake of the financial crisis. Social media gave voice to this distrust and made it worse over time by creating an even more fractured sense of truth.

This is a group of individuals who admire the tech leaders and entrepreneurs who led and consolidated the internet boom of the late 1990s and the noughts. It is an intoxicating mixture of young blood, ambition, and a thirst for money. Popper corroborates this by saying that distrust and cynicism was particularly strong among young men, who made up most of the members of WallStreetBets. He attributes it to the growing body of evidence which indicate that after generations of occupying the top of society's food chain, young men were somewhat suddenly falling behind their female peers in almost every aspect of life that could be measured. In trends that accelerated after the financial crisis, young men were not less likely than young women to have friends, earn good grades, graduate from college, and secure jobs. Many young men didn't know how to fit into a modern world that privileged cooperation and emotional intelligence over the aggressiveness and competition that had been handed down to many of them as part of the traditional vision of masculinity.

Popper believes and has sufficient evidence in his excellent investigative storytelling to state that WallStreetBets offered a satisfying if sometimes unseemly response to young men in this situation. Speculative trading promised an easy way to get out of the financial rut so many young men were stuck in. Even when they lost, doing something so brash felt like a way of flipping off the experts and Boomers who had laid the groundwork for so much of what seemed to be going wrong. The bold conversation about these trades, meanwhile, offered a source of entertainment and company. The markets tourned out to be, in many ways, a better topic for communal bonding than an old-fashioned sports team that played for just a few months a year. There were women who took part in this, and more of them as time went on, but they were often made to feel unwelcome.

The author adds that the universe of WallStreetBets consisted of lonely, often mistrustful young men who had emerged into the public eye in 2015 and 2016. They had brought with them a new laddish, online culture which borrowed heavily from 4chan, the original anonymous web hangout for foul-mouthed young men who wanted to challenge society's polite expectations. But it quickly expanded across the internet, stretching from the subreddits where trading and video games were discussed to the Twitter and YouTube accounts of podcasters like Joe Rogan and Jordan Peterson. The manosphere -as these male-dominated corners of the internet became known -had a reputation for pushing back sometimes in sexist and racist terms, against the progressive ideas that had picked up steam during the Obama administration, especially around gender and racial identity. But these sites gained loyal followings in large part because they were often the only places acknowledging the difficulties young men were facing. Popper assets that the greatest catalyst for the emerging manosphere was Donald Trump's 2016 presidential campaign. Surprisingly, WallStreetBets never became dominated by politics because the people drawn to the site took the anger and energy of the manosphere and directed it into the financial markets.

The Trolls of Wall Street is a rollicking story, well told by journalist Nathaniel Popper. Think of it is having the energy and drive of the two prominent actors - Leonardo di Caprio and Matthew McConaughey-who meet for that one scene in the film The Wolf of Wall Street. Popper's book is able to replicate and infuse a similar kind of zest, energy, competitiveness and insane amounts of ambition that was embedded in the DNA of the WallStreetBets community.

This is a book that is not to be missed. It is immaterial whether you understand stocks and shares. It is fascinating. Read it.

—Jaya Bhattacharji Rose

Extract:

Introduction

On the night of January 27, 2021, Jordan Zazzara, or zjz, as he was known online, realized he had the power to move the American stock market. Jordan was not what anyone would mistake for a traditional financial power player. He spent his days and nights in the dark, cluttered den of an old wooden house on the rougher side of Ithaca, New York, with a boiler that had a habit of giving out in the depths of the icy upstate winter. At twenty-seven, Jordan had never man- aged to hold down a steady job and he had a slight limp from when he had been hit by a car while walking on the side of a road a few years earlier. He didn't have many friends, and the few close relationships in his life mostly came from the internet. He sometimes spent eighteen hours a day online, playing video games and engaging in debates on social media. But his dedication to the internet had landed him a role as a moderator of an online community known as WallStreetBets that was focused on risky financial trading.

WallStreetBets had been built on Reddit, a message board and social network that, while not as big as Facebook or TikTok, elicited more passion and engagement from its tech-savvy user base. One of the most distinctive features of Reddit was that it allowed the people who created individual communities, known as subreddits, to govern those communities themselves. Jordan was the most active moderator overseeing WallStreetBets, and he built custom software to enforce the rules as members carried on their conversations about stocks and trading. By January 2021, this role gave Jordan what amounted to executive power over a community that had grown from a fringe corner of the internet to a financial power center that was suddenly sending billions of dollars into the stock markets and threatening the status quo. In the course of just a few days, the users of the site captured the world's attention by encouraging one another to snap up millions of shares of several big companies, including, most notably, the retail chain GameStop. As the activity peaked on January 27, the traffic became so intense that it threatened to bring down not just WallStreetBets but also the broader Reddit social net- work and indeed, some feared, the financial markets themselves.

"We have grown to the kind of size we only dreamed of in the time it takes to get a bad night's sleep," Jordan wrote to his fellow members that day.

Jordan had a long-standing fear that Reddit or government authorities would use any excuse they could find to shut down WallStreetBets and with it a community that had come to mean everything to him. So, in a hasty, last-ditch effort to preserve the place he loved, Jordan made a unilateral decision to switch WallStreetBets into private mode, a move that essentially turned it off for the public, offering him and his fellow moderators a moment to patch all the leaks that had sprung up over the course of the day.

Immediately after he flipped the switch, Jordan was con- fronted with the unanticipated extent of his own power. Voices of panic flooded social media, and stock prices began dropping precipitously-with the most talked-about stocks on WallStreetBets leading the way down. The price of GameStop's stock fell almost a hundred dollars within minutes of Jordan taking WallStreetBets private.

Most onlookers-including essentially every global news channel and media outlet-assumed the excitement about GameStop on WallStreetBets had sprung up overnight, like so many other inter- net memes that briefly captured the public's attention. But the community and Jordan's role in it had been a long time in the making. The site had been founded back in 2012 by a thirty-year-old named Jaime Rogozinski, or jartek, as he was known on Reddit, who lived in a barren condo in the suburbs of Washington, DC. After Jordan joined, in 2016, he quickly began helping Jaime figure out how to govern the unruly young men who congregated on the subreddit.

Like many young men in America, Jaime and Jordan were struggling to find their place in life. They had ended up on Reddit looking to find company in their loneliness. But over time they fell into sniping and disagreements as a result of their different backgrounds and visions for the community. While Jordan had been raised by a single mother in the suburbs and had not made it through college, Jaime grew up bilingual in a well-heeled district of Mexico City and moved to Washington, DC, where he took a job in the financial industry with a college degree in hand. The tensions rose to the point that, a year before the GameStop frenzy, Jordan worked with others on WallStreetBets to get Jaime kicked out of the site he had founded. For Jordan, this fight-and others that followed-felt like an existential struggle.

"I know when you zoom in this looks like some weird, petty drama on some forum on the internet. Who cares, right?" Jordan wrote to a reporter at the New York Times during one of the battles.1 As he explained, though, to him and many others, it mattered a great deal.

"What it is now is because of me and my friends and I've never been more proud of something. We had a lot of chances to be the bad guys and we never took a single one. How many people can say that?"

In the years after the 2008 financial crisis, the stock market was a serious realm of suits and ties, safely cut off from the frivolity of social media and pop culture. A decade later, when the coronavirus pandemic reared its head, things looked very differ- ent. A motley crew of teenagers and young adults had developed an unlikely obsession with stocks, monetary policy, and financial infrastructure, turning arcane topics into fodder for viral Reddit threads and racy TikTok videos.

At the heart of this growing social and economic movement was WallStreetBets, a bizarre and often offensive message board that could come across as nothing more than a joke. The site often led with its absurdist and crude sense of humor, comedy that frequently concealed the more serious ideas, urges, and experimentation bubbling beneath the surface. This was, to some degree, a reflection of the nature of online discourse in the early twenty-first century. It was hard to tell what was a joke and what was deadly serious-the double-edged nature of any good troll. Donald Trump's successful presidential run made this clear in 2016 when he rode what appeared to be a joke candidacy to the real White House. WallStreetBets brought this same attitude to money, and the young trolls used their ironic pranks to steal the spotlight and sometimes the returns from the grown-ups on the real Wall Street.

The appearance of an edgy online community focused on money and financial trading was unexpected because it grew out of an era after the 2008 financial crisis when young people seemed to be entirely disenchanted with anything that smelled like stocks or finance. Occupy Wall Street was the defining youth movement of that earlier moment, and socialism was the political persuasion du jour. The younger generation's alienation from the financial realm was undone over the course of the next decade. WallStreetBets was at the center of an unprecedented shift that turned millions of young Americans into investors and traders. Most of them were not rich, or anything close to it, but when they came together on the internet, they had the power to send tens of billions of dollars into the stock market and the real-world companies the markets fed. This new kind of online community was consistently ignored or underplayed in the media, but it was one of the most dramatic instances in which new technology brought together an unimaginably large crowd and turned what used to be a fringe pursuit into a mainstream pastime, especially for younger generations.

WallStreetBets, though, didn't just change the financial markets. It also gave rise to a new kind of community and social movement unlike anything that existed before. People hung around after they were done trading because they were stuck at home and eager for company. The brash and aggressive attitude that came to dominate the site looked incomprehensible to many outsiders but it spoke to a deep dissatisfaction and yearning for status and purpose in many of the people who became regulars. WallStreetBets was a place to let it all out, and that brought it to the center of a new style of think- ing and talking about money that influenced how money moved at the broadest levels and also changed the way young people thought about themselves and their relationship to the economy.

When Jaime first breathed life into WallStreetBets, back in 2012, he had modest goals; he was just hoping to attract a handful of people who shared his wonky but obsessive interest in the more complicated and risky side of the financial markets. The site lingered in obscurity for years, but Jaime stuck with it because it gave him a social outlet he couldn't find anywhere else.

The first real signs of life on WallStreetBets came after the appearance of a new phone app dedicated to trading: Robinhood. Using the design and technological wizardry of Silicon Valley, Robinhood took financial trading, an activity that had been the province of a select few, and made it accessible to everyone, simi- lar to the way that Facebook and YouTube opened up publishing and broadcasting to the masses. In classic Silicon Valley tradition, though, Robinhood focused on growth above all else and gave little thought to what happened after it made gambling away a paycheck as easy as ordering a cab. This became apparent on WallStreetBets when posts began showing up describing huge financial losses and their human consequences, crises not infrequently set in motion by errors in Robinhood's hastily built software. Robinhood became simultaneously one of the most important factors behind the rise of WallStreetBets and a common enemy for its members.

The risky, foolhardy trading that was performed on WallStreet- Bets violated all the established rules of investing, which counseled against trying to pick stocks or time the markets. The rejection of these ideas on WallStreetBets was a form of rebellion and a sign of the pervasive distrust of the old ways of doing things that had emerged among young Americans in the wake of the financial cri- sis. Social media gave voice to this distrust and made it worse over time by creating an ever more fractured sense of truth.

This distrust and cynicism was particularly strong among young men, who made up most of the members of WallStreetBets. A growing body of evidence indicated that after generations of occupying the top of society's food chain, young men were some- what suddenly falling behind their female peers in almost every area of life that could be measured. In trends that accelerated after the financial crisis, young men were now less likely than young women to have friends, earn good grades, graduate from college, and secure jobs. Many young men didn't know how to fit into a modern world that privileged cooperation and emotional intelligence over the aggressiveness and competition that had been handed down to many of them as part of the traditional vision of masculinity.

WallStreetBets offered a satisfying if sometimes unseemly response to young men in this situation. Speculative trading promised an easy way to get out of the financial rut so many young men were stuck in. Even when they lost, doing something so brash felt like a way of flipping off the experts and Boomers who had laid the groundwork for so much of what seemed to be going wrong. The bold conversation about these trades, meanwhile, offered a source of entertainment and company. The markets turned out to be, in many ways, a better topic for communal bonding than an old-fashioned sports team that played for just a few months a year. There were women who took part in this, and more of them as time went on, but they were often made to feel unwelcome.

WallStreetBets fed into a whole universe of lonely, often mis- trustful young men that emerged into the public eye in 2015 and 2016. The new laddish, online culture borrowed from 4chan, the original anonymous web hangout for foul-mouthed young men who wanted to challenge society's polite expectations. But it quickly expanded across the internet, stretching from the subreddits where trading and video games were discussed to the Twitter and YouTube accounts of podcasters like Joe Rogan and Jordan Peterson. The manosphere-as these male-dominated corners of the internet became known-had a reputation for pushing back, sometimes in sexist and racist terms, against the progressive ideas that had picked up steam during the Obama administration, espe- cially around gender and racial identity. But these sites gained loyal followings in large part because they were often the only places acknowledging the difficulties young men were facing.

The greatest catalyst for the emerging manosphere was Donald Trump's 2016 presidential campaign. Trump spoke to many of the angry and countercultural impulses that had first led the crowds to WallStreetBets and other parts of the manosphere. It was no co- incidence that Trump's most important online community formed on Reddit, at r/the_donald, which became a sort of headquarters for the online shock troops who helped propel Trump's candidacy for- ward. On WallStreetBets, Jaime and Jordan had both arrived with somewhat traditional liberal political beliefs. But in the course of Trump's rise, they were pulled into the orbit of this unlikely spokes- man, like many other young men on the subreddit.

WallStreetBets never became dominated by politics be- cause the people drawn to the site took the anger and energy of the manosphere and directed it into the financial markets. This gave the activity bubbling up on the site a very different spirit and attitude than anything that had been seen in the markets previously. Initially, the focus was on stocks and other standard financial contracts, like options and futures. Before long, though, WallStreetBets became entwined with the community and ideas that had sprung up around Bitcoin and the other cryptocurrencies it inspired. These digital financial tokens offered a similar fusion of risk and cultural daring, promising a way to get rich while also challenging the financial status quo. Over time, WallStreetBets and the subreddits that popped up around each new cryptocurrency turned into mutually synergistic parts of a broader ecosystem of young traders who kept moving their money to whatever was the most promising and entertaining investment of the day.

By the time the coronavirus pandemic hit American shores, in early 2020, people were already comparing the new surge in amateur investors to the last big moment when ordinary Americans had taken an interest in the financial markets, which was during the dot-com bubble of the 1990s when waves of ordinary people had redirected their savings into newly created E-Trade accounts. While the post-COVID frenzy of small-time traders echoed the earlier mania, the new energy and activity were far bigger and more potent. By the middle of 2020, long before almost anyone in the outside world had heard about it, WallStreetBets was proving that it had the ability to move the stocks of big companies, some- times forcing losses on the world's most sophisticated and power- ful investment firms. The advances in social media technology and financial infrastructure allowed the masses shut inside by the pandemic to share thoughts, egg one another on, and occasionally organize in a way that had not been possible back in the much more fragmented 1990s. When meme stocks like GameStop emerged from the site, the crowds suddenly found themselves with an opportunity to exact revenge on some of the old antagonists on Wall Street who had inspired this whole world in the first place.

This book is, at its core, the story of two young men, Jaime Rogozinski and Jordan Zazzara, and the friends and money they made and lost in the course of a dramatic journey. Through their work toward common ends, as well as in their disagreements, they were as responsible as anyone for creating WallStreetBets and turning it into a community that eventually attracted four- teen million members and helped transform money and trading into a central preoccupation for a generation of young men.

Many people woke up to this new universe during the GameStop frenzy, and then assumed, soon after, that it had dis- appeared just as quickly, like so many other online flashes in the pan. But it is becoming clear over time that the youthful crowds have continued to expand their outsize interest in the financial markets. In early 2023, amateur investors and traders were put- ting roughly the same amount of money into stocks that they had back in the early months of 2021, during the GameStop craze, and a whopping six times as much as had been common before COVID showed up and turned retail trading into a national pastime. In the first half of 2023, this amounted to $118 billion flowing into stocks from amateur traders, compared to $21 billion in the first half of 2019, according to Vanda Research, a firm that tracks retail investors and that provided some of the original data used in this book.2 The percentage of Americans who owned stocks grew to an all-time high in 2022. The national survey that captured this fact showed that the new stock owners came from a wide array of demographic groups that used to show little interest in the mar- kets.3 This was much bigger than WallStreetBets, but the subreddit was part of a cultural sea change that created a widespread interest in investing.

These new investors are not just putting more money into stocks; they have also expanded into new asset classes, fomenting new ways of thinking about money and investing. The generations that came before WallStreetBets generally opted for staid mutual funds. Only some dabbled in trading individual stocks or more speculative bets, like options and cryptocurrencies. In contrast to that, among members of Generation Z, the youngest adult generation, the old script has been flipped and they are now most likely to invest in cryptocurrencies; more than half of all members of Generation Z own digital tokens, according to a revealing report by financial regulators and academics in mid-2023. Individual stocks come in next, far ahead of the boring old mutual funds that used to dominate.4

Many outsiders imagine trading as nothing more than gam- bling, no different than going to a casino or playing the lottery. And it can easily be just that. There have been plenty of ugly incidents along the way that demonstrated how trading could lead to deep financial and emotional pain and even suicide. But unlike casinos, the markets are not zero-sum games. Stocks provide a way to channel savings into the economy, where they can be put to work building things and hiring people. When trading is approached correctly, both sides can come out winners. The novel ways that the young traders from WallStreetBets are investing are changing how companies raise money for their real-world operations. And there are early signs that the broadening ownership of stocks among ordinary Americans has helped boost the house- hold wealth of many who did not benefit from rising markets in the past.5

Even when people lose money on their trades, the experience can offer a kind of education that is not available to passive observers who think they understand the world by reading books or perusing the news. There is nothing like losing a week's paycheck to make you realize how an overconfident expert got it wrong or to force you to reconsider your most strongly held assumptions and recalibrate your behavior and ideas the next time around. The new world of online money has given rise to a bunch of self-described trolls and degenerates with an unprecedented knowledge of the levers that make the economy work-knowledge that is going to influence how they spend their money for years to come.

The financial realm has become a part of popular culture, and that is not going away; academics and experts are only beginning to contend with the influence, both good and bad, that this will have on society and the real economy that the financial markets feed. What is clear for now is that this often bizarre new universe of money and trading sets this generation of Americans apart from any that came before. To understand the significance of what hap- pened and what it means for the future, there is no better place to go than the story of WallStreetBets itself.

Publication details: Dey Street Press, an imprint of William Morrow, HarperCollins Publishers, 2024. Pb. 350