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IDEAS

Wall Street attacked by memes

The Internet invents a new way to get very rich.

A GameStop store in Dallas.
A GameStop store in Dallas.LM Otero/Associated Press

Imagine that last spring, when uncertainty about the pandemic had crashed the stock market, you made a little bet on the eventual return of retail shopping by buying $250 worth of stock in GameStop, a struggling company that sells video games and electronics in 5,000 stores around the world. And imagine that you socked those shares away until one moment Thursday morning.

Bam! Your $250 would have transmogrified into $48,000.

GameStop is still unprofitable, and the future of retail stores is no less murky than it was 10 months ago. All that has changed is that GameStop became a meme stock. Its shares have gone viral, like a dashed-off smartphone video that was meant for 11 family members but ended up being viewed 11 million times.

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Meme stocks are anointed in hive-mind Internet forums like Reddit’s wallstreetbets channel. These forums have an affinity for downtrodden corporate entities like GameStop, Macy’s, and BlackBerry, whose shares attract many short sellers — traders who bet that a stock will decline. If enough people decide it would be fun to mess with the short sellers and try to make themselves rich in the process, two powerful forces converge to rocket the share price far beyond an economically justifiable range. One: As the price jumps, short sellers, to reduce their losses, have to buy the very stock they’d bet against. Two: Further increases are perpetuated by the same giddy can’t-miss-out mentality that has inflated bubbles in everything from tulips to dot-com stocks.

The term “meme” originated in “The Selfish Gene,” a 1976 book by Richard Dawkins, an evolutionary biologist. If genes are the fundamental units of biological inheritance, memes are the units of cultural inheritance. They are ideas or behaviors that are easily replicated “from one brain to another,” and they help to explain why human societies change so much faster than our DNA does.

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Dawkins has argued that memes are subject to a form of natural selection as well. A catchy tune, for example, has more cultural staying power than a boring song because it functions as a more readily transmissible meme. The Internet has shown that over and over: From the dancing baby animation to “I can haz cheeseburger?” cats and the “distracted boyfriend,” online in-jokes keep going viral not necessarily because of their underlying genius but because of the ease with which they can be modified and shared at mass scale, making them ever more recognizable and thus worthy of further sharing.

Now we know just how far a meme can travel with an empty payload. Meme stocks are investments based primarily on their self-referential ability to become a moneymaking meme, and yet they’re wreaking havoc on the stock market. Sure, there might be fun in showing the wealthy hedge funds that sell stocks short that other people can manipulate the markets to their advantage too. But regular folks will also own these stocks when their bubbles burst. It’s all a reminder of just how susceptible humans are to transmissible ideas regardless of whether those ideas are good, bad, or ridiculous. Especially when there’s money involved.


Brian Bergstein can be reached at brian.bergstein@globe.com.