Ben Mezrich (03:05):
That’s the thing I’m always looking for, money, an exciting locale, something juicy is always important to keep the story going. But the themes for me are always this Robinhood, I guess, in a way, that the way of taking on and trying to do something, not necessarily the right thing or because it’s good, but trying to beat a system in some way or another. Those are the themes I really look for.

Trey Lockerbie (03:29):
Quickly on that, we got a question on Twitter about this, but I’m curious as well, covering Facebook and then covering Bitcoin billionaires. You had the Winklevoss twins overlapping on these two stories. What was it like working with them on that research? Having gone through portraying them in one book and then in another?

Ben Mezrich (03:47):
The Winklevoss twins to me are really amazing people and amazing characters. When I did the book, Accidental Billionaires and it became the social network. I never thought I would be writing about the Winklevoss twins again. Honestly, they were the bad guys in the story, they were the big guys dressed in a skeleton costume, chasing the karate kid around in the gym, the archetypal ‘80s bad guys from every movie I had seen growing up. I thought that’s who they were going to be. They were the guys who took on Zuckerberg. They believed they came up with Facebook and Mark stole it from them, and they received a huge settlement, and I thought, that’s it. You’ll never hear or see from them again.

Ben Mezrich (04:19):
But the reality was something very different, and Bitcoin billionaires came about because I saw a headline in The New York Times, which said Winklevoss twins are Bitcoin billionaires. Suddenly they’d gone from the bad guys in one movie to being worth billions. I called them up, and amazingly, they were not angry at me. They didn’t like their portrayal in the movie so much. It was a one-note trial, but at the same time, they’re smart guys. They understood how Hollywood works. They understood how they were viewed, their caricatures. It’s hard not to view them that way because they’re gigantic, really good-looking Olympic athletes. But the reality is something much more.

Ben Mezrich (04:55):
After I spent a year hanging out with them and learning about crypto and Bitcoin, really from the ground up, I didn’t know anything thing about crypto when I started hanging out with them. I learned that they were much more than they had been in that movie. There was much more to them, so I think they really liked the process and really ended up liking the book Bitcoin billionaires. Overall, I don’t think they are particularly angry at me or anything like that after the fact, so it all worked out.

Trey Lockerbie (05:21):
But while they may or may not have founded Facebook, it all worked out for them seemingly in the end. Much like your other books. When I was reading this new book, it really felt like I was watching a movie. The visuals you display in the book, the writing itself, just flows just like I’m watching a movie. The first few chapters shine a light on some of the players in the story. Many of them discovering wall street bets for the first time. Walk us through the players you chose to feature in this story and let’s set the stage for our listeners.

Ben Mezrich (05:51):
There’s the story that everyone’s heard of. The one that was in the news, was this Keith Gill guy, this guy from Brockton mass, which is a working-class neighborhood outside of Boston. He’s the guy who fell in love with GameStop when it was a nothing stock that nobody really should be buying. It was a few dollars a share, of this dying brick and mortar company. We all know about Keith Gill, who called himself roaring kitty on YouTube and DFV. I don’t know what we’re allowed to say on your podcast. Read it, and he just kept posting about GameStop. “I love GameStop. These are the shares I bought.” He bought $53,000 worth of shares when it was trading at a few dollars a share. Then you have the other side, you have wall street, you have Gabe Plotkin and Melvin Capital, which is this hedge fund, very stayed, very smart, who was shorting GameStop because it made sense.

Ben Mezrich (06:38):
GameStop’s going to go to zero. Why wouldn’t you short that company? Then you have Citadel and you have Ken Griffin, which is at the center of the American economy. They’re the market makers for Robinhood, and that’s the other main character. Vlad who we’ve all seen again and again in different interviews has placed the tools of wall street in the hands of every American. That’s what they’ve done. That’s the, A story. What I wanted to do was find some of these people on Reddit, who either made a fortune or didn’t make a fortune, who got caught up in GameStop. My main characters are a college kid who in the book I called Jeremy, put a few thousand dollars into GameStop and ended up making a quarter-million dollars as he rode the stock up with everyone else.

Ben Mezrich (07:19):
Another character I have is a registered nurse named Kim Campbell. Who’s a wonderful woman, a single mother of two, who struggled. She hasn’t had the easiest life, and she’s a rabid Trump supporter. Really believes that she’s been screwed over by everybody and that Trump was going to be a savior, and that didn’t pan out. Then she gets into GameStop because she wants to pay for her kids’ braces. Then there’s another character who’s a young woman, who 2020 was going to be her year. She was going to get married, she was pregnant, and of course, the pandemic hits and ruins everything. She doesn’t get her dream wedding. She has to end up sweeping hair in a beauty salon as her job, things didn’t pan out, and she sees GameStop as this way of fighting back or having something for herself.

Ben Mezrich (08:01):
That’s thematically to me, the story here is much, much bigger than this ridiculous company that is suddenly worth as much as Apple or whatever. The real story is that all of our lives were thrown into mayhem over the last two years, and we were all stuck on our couches, either in quarantine or isolation or socially, or we lost our jobs or whatever, and what do we do? We suddenly have tools of wall street in our hand, and we have a stimulus check or whatever, a few dollars, and we all dive into GameStop. That’s the story, and there’s this anger underneath. This wall street is just full of people who’ve made these massive fortunes, and even though the world has come to crap, they’re making even more money.

Ben Mezrich (08:40):
Wall Street, people have been doing great during the pandemic and the stock market actually was flying during the pandemic. There’s this bubbling-up anger that I think came through on Reddit and on Discord and on Twitter, and we see it every day and via Trump as well. There’s this internal anger towards the establishment that’s screwing everybody. I think that that’s what powers this story along. I’ve chosen these characters and I set them up and they’re all real people, by the way. This is all real, We just exemplify the story I’m trying to tell.

Trey Lockerbie (09:11):
That’s what I love so much about this story is that it touched everybody. It’s seemingly just everyone seemed to get involved from everyone, from the nurse practitioner to even Elon Musk, Mark Cuban, Chamath, they were all throwing in voiceover, and you do squeeze in a chapter on Elon in the middle of the book that I just loved because he comes across like this bond supervillain. It’s actually hard to gauge what amount if any of that chapter is fictitious.

Ben Mezrich (09:37):
Can’t wait until Elon reads this, and I’m really curious what he’s going to think of it. Here’s my view about Elon Musk. We all know who Elon Musk is. You don’t need to read a biography to have in your head an image of Elon. We’ve all seen it. He’s out there on Twitter every day. I wanted to take him and place him where we all already know him, but go a lot farther than that. A lot of that chapter is real, but a lot of it obviously goes a lot farther than the reality, but what is definitely real is his feeling that he hates the short seller. He feels like short selling is just wrong. It’s something that almost destroyed Tesla. He takes it personally because, in a lot of ways, it is personal.

Ben Mezrich (10:14):
When you’re betting on a company to fail, you’re betting on the people who run that company to lose and go bankrupt and maybe lose everything. When you’re betting against Tesla or shorting Tesla, you’re hoping Elon Musk is a massive failure and disappears. I can see why someone like him would take it very personally. When he saw what was going on with GameStop, he immediately identifies with the Reddit people, with the people who are fighting wall street, because he seeing the same shorts aligned against GameStop that were aligned against Tesla, so that chapter, I think, resonates for that reason. But yeah, he’s larger than life character I’m always interested in pushing further because I feel like the boring story is the one we all could look at Wikipedia for.

Ben Mezrich (10:53):
We all know who Elon Musk is and what he’s done. We all know what Tesla is. But what we don’t really know about is what’s going on under the streets of LA in the boring tunnels. And with his AI stuff and the simulation stuff and the Mars stuff. That’s the fun stuff so I want to take it a little bit farther because that’s what I do anyway. When you pick up one of my books, it’s not the same as picking up Walter Edison’s book or someone else. It’s going to be a slightly different experience, and hopefully, people experience that going here.

Trey Lockerbie (11:19):
I’m glad you touched on short-selling or short squeeze because this is crucial to understanding this story. I want to just quickly cover what short selling is, and also what a short squeeze is because, for those who don’t know, it’s imperative to understand.

Ben Mezrich (11:36):
Short selling is a way of betting that a company is going to go down. We all know what long is. A company’s going to go up, you buy the stock. The stock goes up in value. You can sell, you make a profit. The way you bet against a company is you do something called short selling, which is you borrow a share. Let’s say a stock is trading at $10 a share. You borrow a share and you sell it on the market for that $10, and you promise to return that stock to that person at some point in the future. So if the stock goes down, as you believe it is to $5, you then rebuy the share for $5. You give it back to the person you borrowed it from, and you pocket the difference, which would be $5. But the problem with short selling is that your losses are not capped at anything.

Ben Mezrich (12:19):
They’re actually unlimited. Because if you buy it at $10 and the stock just starts going up, you still have to return that share. If you have to buy it back at $20, you’ve lost $10. If you have to buy it back at $100, you’ve lost $90, and it can go on theoretically forever. If you buy a ton of shares, if you sell a ton of shares shorts, that means you borrowed a ton of shares, and at some point, you have to return those shares. What happens with a short squeeze is, let’s say you short sell, meaning you borrow a bunch of shares. You sell them on the market and let’s say for whatever reason because good news comes out about the company, or suddenly for whatever reason, everyone on Reddit wants to buy that company’s stock, the stock starts to go up.

Ben Mezrich (13:00):
You’re in a tough position because you need to buy shares, which also pushes the stock price up. If there’s a bunch of short-sellers, suddenly they squeeze this. They try to reach the exit. They all dive in at the same time trying to rebuy those shares. The price keeps going up, they keep trying to rebuy, and it just gets worse and worse and worse. That’s essentially a short squeeze, and it’s happened a number of times in history, and it can be very, very dramatic because it happens very quickly. If something happens to make a stock start to skyrocket, all of the short sellers have to dive into the market at the same time to get out, or else they could lose everything. You don’t just lose $100 dollars, you could lose a billion dollars if the stock goes up shares.

Ben Mezrich (13:40):
That’s essentially what happened here. What’s really interesting about this story with GameStop is the people on the other side were attempting to make a short squeeze hat. They weren’t buying the stock most of them, because they believed GameStop should be worth $1,000 a share. They were buying the stock because they saw that wall street had this huge short position and they knew if they bought it, they could force a short squeeze. At one point in time, 140% of the shares of this company were short, which means that more shares were short than exist. This means that what happened when people borrowed it, sold it, and then borrowed it again and sold it multiple times. That’s a very dangerous position for people on the short side.

Ben Mezrich (14:20):
A lot of the hedge funders I talked to who were not on the short side, couldn’t believe that people were still shorting a stock with that much of a short, because it’s crazy. You are going to get killed at some point. It’s very easy for something bad to happen. That’s what happened. There’s a lot of reasons behind why hedge funds continue to destroy a stock. The basic reason was, is that GameStop as a company looked like it was in a lot of trouble. This is a company that brick and mortar in malls, selling video game consoles in a world that’s gone digital, in a world that doesn’t go to malls anymore, especially during a pandemic. You would look on paper and say, “Okay, GameStop’s in a lot of trouble.” This company’s probably going to go the way blockbuster, or you can name a dozen companies that have gone out of business and think this is just the next one going out of business.

Ben Mezrich (15:06):
But the thing that I think wasn’t taken into account beyond the whole Reddit mob was that GameStop did have some outs. One of them being the video game market is actually booming, and GameStop has a community of people that love video games. Just separate from the fact that it’s this brick and mortar store, it also has this million and millions of people who nostalgically love GameStop and buy and sell video games. Their pivot to the digital world is actually not that hard for them to do if they could just figure it out. That’s where the value proposition comes into this. But the reality is what happened was, it turned into a massive short squeeze. It turned into this massive let’s takedown wall street, let’s stray strong and stay apes together strong, it was the thing that would go off on Reddit. Let’s look at this, that way. Let’s all stay together on this, and the short-sellers are going to get killed.

Trey Lockerbie (15:56):
Most of this activity, this cohort of folks who wanted to ‘they don’t stick it to the man’ by running up the price was happening on Reddit, on wall street bets. I’m assuming that you spend a good amount of time on Reddit and wall street bets researching for this book. I’m curious, what were some of the most surprising things you discovered on the site?

Ben Mezrich (16:17):
First of all, on its surface, when you just look at it and the reason I call the book, The Anti-Social Network is it’s just a dirty free for. The language is horrific. There are some people who are just trolls. Reddit as a whole is a world full of people who are just having fun and taking the piss out of everyone else and just trollish. But as you look deeper into wall street bets specifically, what I found was number one, there’s a lot of really smart people on there. People who know much more about investing than I do. They might be amateur investors, but some of these people really understand this stuff and do some really good research. The other thing I noticed was that it was a very group of people. It wasn’t the view you have of white trollish guys sitting on the internet.

Ben Mezrich (16:58):
There are lots of all sorts of people on Reddit and on Wall Street bets. By the end, it hits swell to 9 million people, and you have to weed between the bots and the people who work for hedge funds and the people who are just out crazy and a lot of college kids and things like that. But as you dug deeper, you definitely saw a lot of interesting analysis. But what I also loved is the way people would put up pictures of their accounts, their wins, and their losses, and people were almost more excited to put up losses than wins. There were people putting up things where they’d lost $100,000 in two days, and everyone makes fun of them.

Ben Mezrich (17:31):
But at the same time, it’s this comradery, it’s this like that I think was very unique to wall street betting, is people putting up their losses more than their win. I think when DFV, when Keith Gill started out, he was being ridiculed because he had put so much money into GameStop and he lost, he was losing, it was falling apart and people were making fun of him. When he starts to make money and suddenly he puts up this screenshot which shows $47 million in profits, it’s this incredible moment where it’s almost like let’s rally together. This is actually possible. I don’t know. I had a lot of fun with it. I spent a lot of time on it. I’m on Twitter a lot already, and I’d always looked at Reddit and stuff like that, but this was the first time I really saw the power of a community.

Ben Mezrich (18:13):
It’s pretty impressive when people get together, it’s incredible what power they have. I think that’s something wall street is still trying to deal with to try to figure out how you work around the idea that these loosely affiliated groups can be more powerful than a wall street bank. You’ve got 9 million people who each have a $2,000 stimulus check or whatever. That’s as big as any wall street bank right there, so it’s intriguing. It’s an intriguing thought.

Trey Lockerbie (18:39):
I think there’s something there that we could all learn from actually. There’s a book I love called Mindset and it touches on this, like flipping an issue on its head, celebrating your losses. I found this in my own business with trying to raise venture capital. You can get 100 no’s before you get a yes, and it can really wear you down. Or if you’re an actor and you go out for an audition, you get told no all the time. It’s this idea of celebrating those no’s. Flipping this on its head, and because really at the end of the day, persistence is all that matters. This idea of celebrating losses is intriguing to me.

Ben Mezrich (19:13):
I agree entirely as a writer obviously. Your life is until you make it, it’s so much rejection. When I was a struggling writer, I got about 190 rejection slips before I sold my first book, and I would tape them to the walls. I had just walls covered in rejection slips because it was like, it powers you forward. It’s like you live in that misery and it’s romantic. It’s an interesting point. I’m sure actors it’s even worse because it’s to your face. You go in and do something in front of someone and they reject you. That’s a hard thing to get used to. But I do think the more you revel in it, the stronger you get. I think that was going on for sure on this port, is people who were willing to take risks because even if they lost, they still had something to post.

Ben Mezrich (19:52):
You could post your massive loss and get some level of feeling of comradery out of that. People were willing to take risks that on paper made no sense at all. The whole Yolo investing comes out of this. The whole idea that, and I explained it in the book for like a college kid, who’s got a couple of thousand dollars. The idea of making 5% of that is pointless. Why take a safe investment that you might make a little bit on, rather than just bet it all on something that you could get a 10X on? Any college kid agrees with that. Always go for the 10X, never go for the safe bet, because it doesn’t change your life. But a Yolo bet does change your life. It makes sense to me, as someone who’s been involved in gambling my whole life, going to Vegas, and the idea of just doubling your money is not that exciting.

Ben Mezrich (20:36):
When I used to go to Vegas all the time, you would see people sit down at a blackjack table with $1,000 dollars, and when they hit $2,000, you’d say, “Oh, you should leave. You just doubled your money,” but that’s not exciting. Nobody leaves doubling their money. Nobody and Vegas know this and they count on it, and that’s how they make all their money. No one will leave doubling their money. People need to make 10 times their money before they stand up from the table because doubling your money just doesn’t feel like a win. I think wall street doesn’t necessarily understand that’s what’s going on here. They think people made 10, 20%, now, we can short it because they’re going to go back down. But that’s not how the people on Reddit think.

Ben Mezrich (21:09):
20% is meaningless to them. They want to make 2000% before they would walk away. I think that’s something that someone has to figure out now, is how do you analyze when people are crazy? When people are not thinking straight, they’re thinking I want 10X.

Trey Lockerbie (21:24):
I certainly agree with the idea of having a concentrated portfolio of sorts to grow wealth. Then once you have wealth, then you can diversify and-

Ben Mezrich (21:31):
See now you’re being rational. When you’ve got nothing, you have nothing to lose. If all you’ve got is $1,000, you’re not trying to make $100 dollars on that $1000, because it’s meaningless, it doesn’t change your life in any way. Even though the rational thing of course if you only have $1,000 is to be careful. The reality is you go buy 1,000 scratch tickets because the one scratch ticket can change your life, but $100 dollars isn’t going to do anything. I think that’s something that people don’t understand. When you look at people who just have a little, they’re the biggest risk. The people who have a lot are usually not the big risk tickets, because 10% is fine for them. That they’ve already got a lot, but if you’ve got no money, you’ll risk everything, and that’s what we saw happening.

Trey Lockerbie (22:12):
The story also had a lot of irony in it. We need to talk about Robinhood. A lot of these players, as you mentioned, were discovering Robinhood, even for the first time. Part of the appeal of Robinhood is that is commission-free trading. I love this quote in your book where when the product is free, you are the product. Walk us through how Robinhood manages to make money off of commission-free trading in the first place.

Ben Mezrich (22:34):
Then it gets a little complicated, but the reality is, so Robin hood has this incredible app, which I love, with anybody who picks it up loves because it’s like a video game, and it hands everyone the ability to trade like they’re a wall street banker. There are no fees. You can put whatever a little amount you want in there, and you can instantly, and almost immediately start buying stocks and options and all sorts of things at the push of the button. When you buy something, confetti goes off. It’s fun. It turns it into a video game. The way they’re able to offer it free to everybody essentially is the way they actually make their money, is they take all of these aggregates by themselves, and they sell them essentially to the market makers, the people who actually put these trades through.

Ben Mezrich (23:17):
So, the majority of their trades, or at least a good percentage of it goes through Citadel, which is the giant market maker, which is at the center of retail stock trading in the United States, pretty much the world. That’s what happens when you buy and sell stocks, those trades go through this other company and Robinhood takes a little piece off that, so they don’t have to charge you anything. The reality is, even though you are not paying anything, you are actually the product. They’re making money off of you. It comes to a head in this story, because what ended up happening was people were buying GameStop on Robin. Because every retail guy sitting in their house, that’s the platform they all use. It’s an easy smartphone platform.

Ben Mezrich (24:00):
There’s something called clearing, and this is where it gets a little complicated. But when you buy a stock, there’s this process that takes place between the moment you buy it, and it actually becomes your stock, which is something called clearing, and it takes two days actually. It’s not instant. Even though you buy the stock and it seems to appear immediately into your, and, the reality is there’s this two-day clearing period. During which point, Robinhood has to put up a certain amount of money as collateral against all of the trades that go through it. That number it turns out can get very, very large, and it’s separate from the amount of money they take in. If I buy a stock for $5, they have to find a different $5 or more, to be as collateral to that $5 trade.

Ben Mezrich (24:44):
It turns out the more volatile the stock is, the larger that collateral number becomes. What happened was on around January 26 to 28th, people were going crazy buying GameStop. The short sellers were going crazy trying to cover, and it became the most volatile, the most traded stock on wall street. Suddenly Robin hood got a collateral call for $3.7 billion, which they did not have. They needed to show $3.7 billion or else they could just get shut down. That’s why they had to freeze trading on GameStop. They stopped everyone from being able to buy GameStop on their app. You could still sell it, but you could buy it. That moment destroyed the rally basically, it sent GameStop, stock dropping as you would expect, everyone got very, very upset, and then it started to look fishy because we all discovered that all of their trades go through Citadel, and Citadel happened to then invest in the wall street fund Melvin, that was shortening on the other side.

Ben Mezrich (25:45):
They lost not just on GameStop, a number of stocks that were all short, that Reddit attacked basically, they lost went from a 12 and a half billion fund to like a six. It’s still unclear what the exact numbers are, but they lost somewhere in the order of $5 billion, almost overnight, a matter of days. It all got murky and scary and dark. But Robin is at the center of all this because, on the one hand, they’re built around the idea that democratizing finance. They’re giving everyone the ability to be a wall street trader, they’re leveling the playing field. You’re all part of this giant market. But on the other hand, when things got hairy, they immediately shut out the retail buyer. Suddenly, are they Robinhood or are they on the other side? Who do they actually work for?

Ben Mezrich (26:30):
Now, from their point of view, they had no choice. They couldn’t operate unless they came up with this scheme to lower the collateral they had to put down. but from the outside, it just looked like they just said, “Screw you,” to their entire user base, so it’s a tough moment. Afterward, by the way, Robinhood has done fine. All of that anger towards Robin seems to have gone away to some extent because the tool is great. It’s like Facebook in that way, is that every time Facebook does something that pisses everyone off, Facebook actually grows. Everyone gets pissed off and says, “I’m never going to use Facebook again.” Then the next day everyone’s on Facebook, and the same thing happened with Robinhood because the tool is very good. The app is very good.

Ben Mezrich (27:05):
If you’re going to buy and sell stocks, Robinhood is great. It’s right in your pocket, you have the ability to buy and sell stocks. But yes, so that is at the center of it all. I have a lot of fun with Robinhood in the book. I think Vlad is an incredible character if you’ve ever watched him on any video or had him on. If you had him on, but it’s he this prince valiant-haircut and he’s very, almost got the puppy dog eyes and he’s trying to do the right thing. I think he’s got the archetypal Silicon Valley unicorn, of a guy who really believes in this democracy of finance and the idea that what they’re doing is a good thing. I think he really, and truly believes that, and in reality, he does hand everyone the ability to do it, but it also is a game of fun. Although wall street already is a big game. It’s a big casino anyways. He’s just made it very obvious that what we’re doing is playing a video game.

Trey Lockerbie (27:52):
I remember this story, in my opinion, it culminated almost on the clubhouse, because there was a period there, or there was a night wherein the heat of this discussion, Vlad and Elon Musk and Mark and Therese, all these people were on the clubhouse, hashing this out. There was actually an interesting point there where Elon took to interviewing Vlad and turns out Elon’s a great interviewer, which makes sense at his level. But that was surprising a little bit. It was funny because even at the time, it was hard to believe him. It was hard to believe that, oh, we just had this bill we had to pay. Even though at the end of the day, it seems like it was such a logical reason. I feel like there’s still a bit of skepticism around it.

Ben Mezrich (28:28):
Here’s the thing. They had options. The other option they could have frozen the buy and the sell. They could have not forced only you to be able to sell it. Now, their point of view is people would’ve been more upset if they were stuck in stock and it started to drop and were not able to sell it. That’s an issue. Number two, they could have had more money in hand. Could you predict such an enormous collateral call? Probably not. But on the other hand, the volumes and the craziness started the week before. Even though their day to day, so the way they argue it, and I think this is an interesting argument. The week before their collateral call was in the $125 million rates. On that day it suddenly jumped to 3.7 billion. You look at a week of 125 million, 150 million, 125 million, 3.7 billion, and you think, “Oh, how could they cover it?”

Ben Mezrich (29:14):
But at the same time, if you were looking back at that week and you saw what was going on with GameStop, and they were clearly seeing what was going on at GameStop, you might say to yourself, “Uh-oh, there might be some massive collateral call coming at some point in the next week.” The other thing and this is the point I make in the book that I don’t think anyone else has made yet, is that although Citadel says they had nothing to do with it, they didn’t tell Robinhood that they had to stop people from buying. They said that we did nothing like that. That’s what they say, and that’s probably true. They should have been able to figure out what the collateral call would be because all of the trades were going through them.

Ben Mezrich (29:52):
When you think about a company like that’s built on analyzing information and forward-looking on information, wouldn’t they know that Robinhood was about to get a massive call like that and wouldn’t be able to cover it, because they know everything about Robinhood, because they’re running all the money is running through them? Wouldn’t they be able to know this ahead of time, and what would they be able to do with that information? That’s one of the points I make in the book, which maybe I’m sure they will disagree with, and from their point of view, they will say, “Absolutely not. We didn’t know anything.” How could they not know?

Ben Mezrich (30:22):
Maybe you couldn’t predict Elon Musk tweeting GameStop, but you definitely could predict that something incredibly volatile is going on here. So you could wonder why aren’t they better? Why wasn’t Robinhood better capitalized for this moment? Or why weren’t they able to immediately draw a large amount of capital to cover trades that were coming through with no problem? There was no fear that the trades weren’t happening, the collateral money would go back to them, so why couldn’t they raise an amount of money on a guaranteed return? Those are questions that I would ask.

Ben Mezrich (30:51):
I understand at that moment five in the morning, you get a call that says you have to come up with $3.7 billion, and you say, “Well, what if I stop people from buying the stock and then you don’t have to come up with it?” I get that that’s a solution. But the question becomes, why couldn’t you make a different call to someone who has $10 million and say, “I just need this for the day.”

Trey Lockerbie (31:11):
That person could have been someone like Ken Griffin.

Ben Mezrich (31:13):
Yes. That’s why it looks a little fishy. It’s like, was it really the only thing you could do? It’s a hard question, so I don’t know. But on the other hand, I like Robinhood. I’m not one of the people who think that we should not use Robinhood. I use Robinhood. I think it’s a great app. It really is. I love simple, well-designed beautiful apps, and I don’t see them as evil in any way. I think that’s a very useful positive thing. So yes, but it was a very interesting day. I agree Elon was great interviewing and really took it to him, which I think was the best part about being someone like Elon is you don’t have to give a crap about what anyone thinks, and he clearly doesn’t. I think that was awesome.

Trey Lockerbie (31:47):
It was very tempting to certainly point fingers and try and figure out who the bad guy is really in this story, and it seems like it’s still a little hazy because everyone seems to have a very good out, a very good reason behind it. But if anyone were the villain in this story from your book, in my opinion, it seems to be Ken Griffin of Citadel and his chapter especially is just hilarious.

Ben Mezrich (32:08):
He is sitting on a [inaudible 00:32:10] skulls and bones of his people he’s killed. But yes. Let me just put this out where I don’t know Ken personally, we went to the same college at the same time, but I don’t think I ever crossed paths with him. He’s a genius, he’s built an incredible company, but his reputation is very intense, and people you talk to who work with him or work know him or have been fired by him, they have a lot of really dark things to say about him. I think there is definitely a feeling that he is, if this were Lord of the Rings, he would be sitting under the giant eye with his orick army ready to destroy middle earth. I do think there’s a feeling in that respect and we’ll see what Hollywood does with the movie here.

Ben Mezrich (32:48):
But yeah, when I write books like this, I really try and dramatize it and make it a lot of fun. I don’t really pick, okay, this guy’s the villain. You see what he is in this story and what he’s done in this story. I think you can make your own, come to your own conclusion of who the bad guy really is in this story. But everyone I think has its own likability factor to it. I go back to the Facebook story. Zuckerberg, is he the villain in the story? Sure, but at the same time, you don’t necessarily hate Mark Zuckerberg during the host. You might hate him now, but during the social network, he was the bad guy, but he was also a likable bad guy, and I think there’s some level of that in all of these characters.

Trey Lockerbie (33:26):
Also, you go out of your way to highlight the fact that he almost lost everything during the global financial crisis. Even these guys who are somewhat villains, you empathize with them, because you’re like, these are people who have persevered through a lot of hardship, even though this guy is a multi-billionaire and really well off, you don’t get there just by happenstance, you get there-

Ben Mezrich (33:42):
No, and I have a ton of respect for people who, I’m different than a lot of people writers or whatever in that I love [inaudible 00:33:49]. I love people who have succeeded because I know a lot of my friends went to wall street. I could have ended up on wall street. It’s hard, man, the work that people put in to build these careers, and a lot of luck has to happen along the way, but they are geniuses, and they all almost lost it all. Almost anybody you see at an incredibly high level of power almost lost it all at some point. That’s usually what drives them to the next thing. Ken is an example of that, where he nearly lost everything in 2008, 2009, and even had CNBC parked outside his office ready to interview him when he went bankrupt.

Ben Mezrich (34:22):
The pressure these guys are under at certain points in their careers, I think is something you really should take into account, and how they got to where they are, I think is fascinating. Listen, Gabe Plotkin is another character who I really deeply like. I actually think Gabe is a really smart, good person. On Reddit, he’s the bad guy. On Reddit, he’s attacked mercilessly. The people went after him in horrible ways, antisemitism, and all this stuff, but the reality is this is the guy who wins a lot, and he’s won a lot over his career. You dislike him because he wins so much, but he wins so much because he’s smart and he works really hard, and he applied himself in an area where if you win, you win huge.

Ben Mezrich (35:01):
I respect that, and I like Gabe and I think he was caught completely by surprise by what happened with GameStop. He could never have guessed that the most simple short in the world, shorting a company like GameStop, would turn into something that nearly destroys his career.

Trey Lockerbie (35:15):
I think the animosity compounded there because you had people like Gabe shorting the stock, very innocently. Yeah, the fundamentals don’t look good. It’s an obvious trade. But then when wall street bets started driving the price up, now you say, “Well, this is even better short.” There’s a little bit of hubris that gets involved where these short sellers come in, even bigger and better and doubling down on the short.

Ben Mezrich (35:40):
I talked to hedge funders who weren’t short and they were like, we could not understand what Gabe was doing here, because the stock was obviously not tied to the fundamentals anymore. It was skyrocketing, and he doubled down on his short position. The only reason to do that is that you need to win here. It’s no longer based on logic anymore. This company’s price, maybe it’ll turn around at some point, and go back to where it should be. But obviously, some other forces are working here, and he probably should have gotten out earlier than he did. He did get out before Elon Musk’s tweet according to him [inaudible 00:36:10] and said he was out on the 26th. He was already all out. But couldn’t you have seen this happening a week before, two weeks before when the stock price was a 90, rather than 500. Obviously, this company should not be at $90 a share.

Ben Mezrich (36:23):
Although things have changed since then. Let me say this for the people who love GameStop. Ryan Cohen being involved now, the pivot that GameStop is trying to make, I get why it’s in the 160s now. I’m talking about last January, should it have been at 160? Probably not. But anyways yeah, you do wonder why do you keep doubling down on a short like that, and I try to get into it in the book. This is a guy whose sports have been a big part of his life. He worked with Michael Jordan, he’s a team owner. I think you look at someone like Michael Jordan, and you think these are guys who need to win. These are guys who are being taken on by a bunch of dudes on their couches. They’re not going to back down. I think that plays into it I think.

Trey Lockerbie (37:01):
To use a poker term right, it’s like he went on tilt a little bit. Maybe the lesson here for everybody to take away is that you don’t always have to win the same way you lost. He was doubling down on that trade. Maybe he could have made that money back somewhere else.

Ben Mezrich (37:16):
I definitely think the lesson is, if you don’t really understand what’s happening, you get out, because there are market forces going on that you just can’t, after the fact you might be able to go back and analyze what was going on there. But in the heat of that moment, there were a lot of warning signs that this is not normal, and something really crazy is going on. Robinhood should have seen the warning signs and Gabe should have seen the warning signs. A lot of people could have seen what was going on.

Trey Lockerbie (37:40):
Part of the story is reminiscent of the global financial crisis to some degree because there were bad actors involved and no one seemed to go to prison at the end of the day. Do you feel like there should have been more ramifications or anywhere around, or do you feel like it was all almost circumstantial?

Ben Mezrich (37:54):
Great question. There’s a lot of civil suits going on that I know about. I don’t know how everything’s going to pan out. I know there are multiple investigations still and there are suits going on. I know Keith Gill has completely clammed up like it’s impossible to talk to him, so I’m guessing there are some actions going on, because he made a fortune and you could wonder while he did have a series six license, he was on the internet promoting his stock. How does this all pan out? Then Melvin Capital is I don’t want to, anyone near what’s going on [inaudible 00:38:23] because I have no idea what’s going on over there. So there might be more ramifications down the line. The question becomes, could Congress, could the SEC, could they do something to protect both sides here?

Ben Mezrich (38:35):
Is there something that should be done about short selling in certain situations? Is there something that should be done about people conglomerating together to buy a stock? That I don’t think so. I don’t see anything wrong with a million people on Reddit going after a stock because they like the stock. I think that’s fine. That’s no different than a wall street guy walking into a club somewhere and telling his friends how much he likes a stock. He’s not really trading on this information, it’s just rallying behind something. It’s a community. I don’t see a problem with that. I think Robinhood obviously has to be well regulated and there has to be a lot of care taken in terms of, I see a lot more advertising towards younger and younger people in finance.

Ben Mezrich (39:13):
There are accounts now for your high school kid. I don’t know if this is a good angle here. I think this is a, as someone who comes from the world of gambling a little bit, there definitely is a point where people are not as rational as they should be, and I fear the gamification of wall street to younger and younger people. Because of the way people sports bet in college, now they trade in college. That’s not a bad look. I love it. If I were in college right now, I’d be doing it too, but I can see how quickly you can get in a lot of trouble.

Trey Lockerbie (39:42):
To that point, you highlight in the book that a lot of these players on wall street, they don’t have to do much to win. They’re almost like the house in the casino. While these retail traders are out there, very actively trading, it seems like a lot of these wall street firms don’t have to do much. They can sit back and know that in a matter of time, they will ultimately come out on top.

Ben Mezrich (40:02):
That’s the scary thing is that if you’re a college kid with $4,000 in the bank and you go on Robinhood and bet that $4,000, you could lose everything, and you could be left with nothing. But if you’re a wall street banker who has a position on GameStop, the reality is it’s not a big deal, and you could lose at that, or you could just hold it longer. There’s a lot of things you could do to get out of that situation that’s not going to ruin your life. I do think that the risk factors are so much higher for the retail people, the regular main street people. There has to be some protection over them. The idea is that Robinhood can just democratize and say, “You now have the power of a wall street bank, but you also have the risks 10 times what a wall street banker had.”

Ben Mezrich (40:42):
So there has to be some level of control over that, and whether it’s limits or things like that, people don’t like the idea of things like that, but there does have to be some level of protection to the average person because they can get screwed very easily. You look at GameStop, which runs all the way up to 500, and then drops all the way back down, and a lot of people, if you’re a wall street banker, you could hold through all that. But if you’re a regular person and you just lost everything you were going to pay your rent with, what are you going to do? You can’t just hold that loss. It’s a different level of risk, I think.

Trey Lockerbie (41:11):
This started populating in other stocks as well. AMC seems to be one and a few other meme stocks as they’re called, but it’s seemed to die down a little bit. Maybe it’s just the stimulus checks have run out or-

Ben Mezrich (41:22):
There will be meme stock, and I do think there are fundamental changes that have happened here, and I think you’re going to see it in crypto. You’re going to see it in doh, you see it, the idea that the value of something is no longer linked to fundamentals and doesn’t need to be in any way. Every stock or whatever in a lot of ways is like a social network. If people love it, it’s going to go up and nothing else really matters. It doesn’t have to make anything. I think that’s what Doh is showing us, is that it doesn’t do anything and there’s an unlimited supply and it will still go up if people like it. GameStop, any stock could be that, so that has to be taken to account.

Ben Mezrich (41:57):
But I do agree that this book and I couch it in that, is that this was a moment in time in some respects, had we, not all be sitting on our couches, had life not been normal and you couldn’t just leave and go do something. That’s why I chose a college kid and someone who works in healthcare and someone who works, someone who’s just starting out in life, because those are the people I feel exemplify all of us over this two year period now, is that if you were going to college during the pandemic, it was not a normal college experience. That was a moment where day trading and using Robinhood really took off because everyone was sitting at home dreaming about a better life than they’re living right now.

Ben Mezrich (42:33):
I think we all identify with that. Yeah, it is a story of the moment in some respects, and at the same time, the whole meme thing it’s died down to some respect, but I also think it’s carrying forward in a lot of different ways. I don’t think people analyze stocks the same way anymore, and I don’t think you should. I don’t think you can look at a stock and say, “Well, the fundamentals are great and this and that, that means it’s going to go up.” I don’t think those are connected anymore. Another big component of it is, do people on Reddit like it, do people on the internet like it? Do regular people, are they in love with this? Is there a nostalgia factor? Is there a reason why this could go up that has nothing to do with fundamentals? I think that that’s where it gets really intriguing.

Trey Lockerbie (43:11):
I’m curious about if there are any other ramifications from all of this. One might be that in my opinion, hedge funds might be a little bit hesitant to go 140% short interest on anything anymore, and maybe they’re hiring full-time Reddit analysts nowadays.

Ben Mezrich (43:26):
Both of those things are happening for sure, and there are a bunch of short-sellers who are getting out of the short business, simply because it’s just too dangerous. There will always be shorts, and it does have a place. If a company is being poorly run or is scamming people, or there are reasons why a company should have short pressure against it, and people should bet against it. But I do think, people are more cognizant of what they’re shorting and also being public about it. I think this will make people more secretive. One of the problems that Plotkin and Melvin had, is they bought public options. They had to actually release information in the SEC, so that caught the attention of people on Reddit.

Ben Mezrich (44:01):
You could have shorted a stock without people knowing if you hadn’t bought these particular options. That’s where it gets interesting. You want to keep, if you’re shorting something, you don’t want to be too public about it necessarily, because you don’t want to catch, get that bullseye on you. Yes, actually all the funds are hiring people to scour Reddit and Twitter and make sure they’re not missing something on social media going on.

Trey Lockerbie (44:22):
I’m curious about Keith Gill because he’s such an interesting character and a great underdog for this story. In that testimony he says, I like the stock. You highlighted here that at 160 bucks a share, you get it. They did turn cash flow positive after a brutal 2020, they’ve got Ryan Cohen. I got to ask you, Ben, do you like the stock?

Ben Mezrich (44:43):
You know what, first of all, I love GameStop the company. I say it in my beginning acknowledgment somewhere, that I have little kids and they are like nothing better than to go to GameStop. I walk by there, there was one I live in Boston, there’s one on Boylston Street. I was in there every weekend. What I love about GameStop is on one shelf, you’ll have stuffed little toys and then there’s a chainsaw dripping blood. It’s the oddest conglomeration of stuff. It’s just a fun store. Nostalgia-wise, I love video games. I love GameStop, and the idea that they have a community is worth way more than anything else. Their main problem I think has been leadership, but if they can get a hold of that, and Ryan Cohen is very smart. I do like this stock, but what is the price really worth?

Ben Mezrich (45:29):
What is the value of it? I’m not a guy who could tell you that number. When it was running to 500 towards 1,000, obviously that was crazy. Without a short situation going on, that made no sense at all, but should it go bankrupt? No, I don’t think this is a company that should go bankrupt. But then again, listen, I love blockbusters too. I used to spend a lot of time in a blockbuster. I don’t know. To me, because I’m old, I’m not 22. There’s something about GameStop that to me would be sad if that company ever went under.

Trey Lockerbie (45:57):
Do you see any chance for a sequel to this book, given the activity on the stock market nowadays?

Ben Mezrich (46:03):
Yeah, there’s a lot of possibility to the sequel. We’re making the movie, so MGM bought the rights, and MGM, the people who did the social network, and Mike Deluca are running it and Aaron Rider who produced Arrival and Memento is a genius and the screenplay is in. I believe we’ll get a movie underway pretty soon. There are so many ways you could go with this story. I do think it’s a possibility and I guess we’ll see how well the book does. I’m always happy to write sequels. It’s just a question of whether the audience is there for them. But yeah, I’m fascinated. I wrote Bitcoin billionaires, so the whole crypto thing is always interesting to me. NFT’s I think is a really cool field, and I don’t know what the story is there yet, but I’m dabbling in it.

Ben Mezrich (46:40):
I’m looking into how I can get involved in NFTs because I’m a big fan of that. I think the idea of digital collectibles of a whole economy around that, it’s brilliant and that’s the world we’re moving into. I look at my kids and they’re more interested in buying clothes for their character on Fortnite than they would be buying real clothes. It’s more real to them than real things are, and that’s the direction we’re all moving. I do think that there’s a lot going to happen in the next five to 10 years.

Trey Lockerbie (47:12):
We can agree on this. The future will not be boring.

Ben Mezrich (47:16):
I’m really looking forward to the pandemic being over so that I can actually get out and start signing books for people and doing this all face to face. I think I do have one of the few careers where being locked up for a year is good for your career. But in general, I think it’s just, it’s good to hopefully see a light at the end of this tunnel. We’ll see how it goes.

Trey Lockerbie (47:34):
Ben, congratulations on the new book. It’s incredible. Congratulations. I can’t wait to see the movie that comes out. This is just another winner. For those who are listening, it’s called The Anti-Social network. This was a lot of fun.

Ben Mezrich (47:45):
Thanks so much. I appreciate it from you too, and this was awesome, so I look forward to seeing it.

Trey Lockerbie (47:49):
All right, folks, that’s all we had for you this week. If you’re loving this show, don’t forget to follow us on your favorite podcast app, so you get the episodes automatically every week. Feel free to say hello on Twitter at Trey Lockerbie, and if you’re curious about if GameStop is a buy right now, you might want to check out TIP Finance and see what the tool has to say. Go ahead and Google TIP Finance, and it should pop right up. With that, we’ll see you again next time.

Outro (48:12):
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