The Revolution That Wasn't: GameStop, Reddit, and the Fleecing of Small Investors

by Spencer Jakab

The saga of GameStop and other meme stocks is revealed with the skill of a thrilling whodunit. Jakab writes with an anti-Midas touch. If he touched gold, he would bring it to life. --Burton G. Malkiel, author of A Random Walk Down Wall Street

From Wall Street Journal columnist Spencer Jakab, the real story of the GameStop squeeze--and the surprising winners of a rigged game.

During one crazy week in January 2021, a motley crew of retail traders on Reddit's r/wallstreetbets forum had seemingly done the impossible--they had brought some of the biggest, richest players on Wall Street to their knees. Their weapon was GameStop, a failing retailer whose shares briefly became the most-traded security on the planet and the subject of intense media coverage.

The Revolution That Wasn't is the riveting story of how the meme stock squeeze unfolded, and of the real architects (and winners) of the GameStop rally. Drawing on his years as a stock analyst at a major bank, Jakab exposes technological and financial innovations such as Robinhood's habit-forming smartphone app as ploys to get our dollars within the larger story of evolving social and economic pressures. The surprising truth? What appeared to be a watershed moment--a revolution that stripped the ultra-powerful hedge funds of their market influence, placing power back in the hands of everyday investors--only tilted the odds further in the house's favor.

Online brokerages love to talk about empowerment and "democratizing finance" while profiting from the mistakes and volatility created by novice investors. In this nuanced analysis, Jakab shines a light on the often-misunderstood profit motives and financial mechanisms to show how this so-called revolution is, on balance, a bonanza for Wall Street. But, Jakab argues, there really is a way for ordinary investors to beat the pros: by refusing to play their game.

Genres: Nonfiction, Economics, Business, Finance, History, Audiobook, Politics

320 pages, Hardcover

Published February 1, 2022

Reviews

[Hadrian · Rating 4 out of 5]

In January 2021, which now seems like about 3 years ago, the price of the stock of Gamestop, a video game and electronics retailer, soared to over $480, when it was all but left for dead earlier that year. It had become a heavily traded stock on an active day, and there were limited cases of suspended trading on some retail platforms. On social media, there was a wild ruckus at the prospect of retail traders having upended a hedge fund, and some of the more frenzied commentators on social media said this may have been an act of revolution. (If you believe that last one a year later, I have option about a bridge in Brooklyn to sell you.) With all the ruckus, Congress made a grand show of a hearing. What happened?

Jakab writes a summary of events for the general reader but one with an interest in finance. He brings up the vulgar slang of Reddit but also what a gamma squeeze is- the interaction of some terms that are less known to the layman or some experts. He points out how an interest in retail investing began over the pandemic - boredom and a desire to earn some money - and how ideas spread among social media outlets such as Reddit, and the subreddit /r/wallstreetbets.

At the time, there was a genuine desire among retail investors on Reddit and elsewhere to stick it to the big hedge funds and especially short-sellers; the fact that they were excited by the prospect of huge gains by users such as /u/DeepFuckingValue also got the crowd excited. But boosters and retail investors were not the only ones who benefited - while some hedge funds such as Melvin Capital had short-sold Gamestop, others had also bet on the stock rising shanking others for short selling is not new, and Jakab is sure to point this out. Business books, where they do any investigating at all, tend to refer to details about closed-door meetings, where this was all in view of the general public, or at least anyone who knew where to look.

At the close of trading today, March 11th, Gamestop was down to $92.69. If you look at other subreddits such as /r/superstonk, you may find some more conspiratorial traders still looking to imprison their imagined opponents, or some hoping that Gamestop's price will have a comma or two in it someday. The book closes with some sensible advice for the new generation of retail investors - although the new set of investors are skeptical of anybody with credentials or a big name, it's still a valiant effort. Get a good mix of holdings in your portfolio so no one thing can bring you down, and have "diamond hands" - don't panic and sell everything at every downturn. And remember that winners tend not to keep quiet about their gains, those who lose a lot tend to be awful quiet about it.

[Kirsti · Rating 4 out of 5]

My favorite analogy in this book: Shorting stocks is like picking up nickels in front of a bulldozer. There's a little money to be made, but some people end up crushed.

Favorite terms that some online traders use:
tendies: profits (from a childlike pronunciation of "chicken tenders")
diamond hands: a stubborn refusal to sell
loss porn: a method of commiserating that involves posting screenshots of one's own ruinous trading decisions (sometimes the result of having diamond hands as a stock or option went into a tailspin)

In a nutshell, Robin Hood and the "GameStop Revolution" were supposedly a chance for regular people to stick it to the man. But the vast majority of Robin Hood investors were naive and ended up out of the money, instead lining the pockets of the rich men they despised. The author's conclusions: House always wins. Establishment usually wins. To have a better chance of making money, invest in an index fund with ultra-low fees and then leave it alone instead of making multiple trades per day.

What's the difference between individual stocks and index funds? Buying shares in an individual stock is like betting on a racehorse. Buying shares in an index fund is like placing a small bet on every horse in the race. You won't be the biggest winner at the track, but you'll come out ahead of most other bettors.

[Eustacia Tan · Rating 5 out of 5]

“Journalists, as they say, write the first draft of history, and the first draft is the only one that most of the public remembers, not the more nuanced, better-informed one that comes after the dust has cleared.”

This was one of the books that the library featured in Libby when I opened the app, and since I (and I suppose, almost everyone else) followed the GME squeeze as it happened, I was curious to read more about it. Especially since the subtitle says “Gamestop, Reddit, and the fleecing of small investors” – wasn’t this supposed to be the moment where small investors took on the hedge fun giants?

As it turns out, Jakab is looking at it from a slightly different point of view. The Gamestop short wasn’t just about small investors ‘sticking it to the man’, but also about how investing apps like Robinhood encourage people to trade dangerously and frequently (thus making them money) in a way that closely resembles gambling. And in gambling, it’s always the house that wins.

By using the months leading up to Gamestop as the focus of the book, Jakab manages to cover a fairly wide range of topics – how apps like Robinhood work and why they can offer free trades, investing “influencers” who may not actually know that much about investing, why people were angry, and why short-selling isn’t actually completely evil (it helped exposed Enron, so there’s that). Some things, like why people were angry and how Keith Gills became a legend are specific to Gamestop, but quite a lot of the topics covered are more general to this time period that we’re living in.

Spoiler alert, but as the title puts it, the people who ultimately benefited from Gamestop stock rising were a few lucky individual investors, a few Gamestop insiders, big investment banks, and all the other mutual funds who had Gamestop stock or who stepped in after Melvin Capital, Andrew Left and a few other mutual funds made a loss. On the whole, it does seem like the establishment benefited more from this than the individual investors.

Overall, I found this an interesting book that explained the events and factors behind the Gamestop stock rise and short squeeze in an easy-to-understand way. If you followed the events as it happened and you want to understand what was happening, I think this would be something that you’ll want to read.

This review was first posted at Eustea Reads

[April Lundquist]

TW: ableism

Guys, stop using the R word. Not necessary. At all.

[Fred Forbes · Rating 4 out of 5]

You know the old saying that if you don't know who the patsy is at the poker table, it's you!? Well, the financial services industry often works the same way and for those who swallowed the idea that a group of reddit commentators using meme "stonks" brought professional Wall Street to it's knees will probably find this book enlightening. Spencer Jakab, the Wall St. Journal columnist is known for his clear, erudite explanation of things financial and he carries that style into this book.

So, how did the pros make money even as short sellers went down in flames? How did the current world of commission free trading come about if there is no free lunch? Ever heard of "payment for order flow", said orders permitting some large order matching firms to make fortunes slicing off a piece of the stock's bid-ask spread? Fortunately, Spencer explains it better than I can.

Not in 40+years in the financial services business have I seen anyone pick, choose and trade individual stocks beat the index funds. A few money managers, yes, but it is a rare skill and even if they have it, the costs often change the outcome significantly. This book helps explain why so if you have an interest, you will probably find it well worth the read.

[Tc · Rating 1 out of 5]

This author is out of touch with reality.

[Les · Rating 4 out of 5]

The whole Audre Lorde quote about the master's tools not destroying the master's house is in full effect here. Preachy and informative.

[Ietrio · Rating 1 out of 5]

A moronic book, as every minute there goes by another ”revolution that wasn't”.

Worse, this is written from the point of view of a scribe who has dedicated his life to the establishment, and the text is predictably deceitful when possible.

[Rayfes Mondal · Rating 3 out of 5]

A good retelling of the events that happened but not much insight. Redditers did stick it to some hedge funds but many still made (and do make) a ton of money.

Democratization of trading has been good but if it leads you to be a day trader or trend follower just know that you're speculating, not investing. Have fun with a portion of your portfolio but please don't YOLO. We already have a homeless problem.

[Greg Talbot · Rating 4 out of 5]

Frenzy, frothy, fanatical. Inside the ape jungle of reddit's irreverent community WallStreetbets, or an outside observer, the Gamestop spectacle was a massive attention eater . In Spencer Jakab's "The Revolution That Wasn't", the conditions of a perfect storm came into effect. The pandemic, reduction of consumer spending, elimination of commission fees on trades by firms like Fidelity, Schwab and Robinhood, and a perceived war on Wall street Hedge Funds; the beginnings of a social movement appeared to form.

Not unlike Michael Lewis's "Big Short", key players and the broader economic environment that lead to an unfathomable event occurred. While Lewis's book focused on the domino effects of things that went wrong: CDOs, dodgy watch dogs, irresponsible selling of homes to people who couldn't afford it; the forces at play here are the democratization of trading platforms and unchanging human psychology. In “The Revolution that Failed”, Jakab shifts the WallStreetBets (WSB) narrative from “david and Goliath” to ‘Goliath vs Goliath”. Through publicly visible social media, some in WSB crowd were able to profit against the initial short positions of hedge funds. Ultimately he concludes the influx of new investors are victims to their own hubris, and are playing into Wallstreet’s volatile hand.

Robinhood, a platform that brought an influx of new investors to trading, contributed to gamifying the experience as well. Using a philosophy of radical simplification, designed off of ideas from betting platforms like Draft Kings, and even providing visual rewards like confetti, investing becomes more aligned to spectacle than valuation. Born of Silicon Valley, and capturing some 18million users after the GME surge in January 2021, Robinhood like other social media firms capitalized on their user base’s evolutionary wiring. As stated in the beginning of chapter three
“If you told people half a century ago, you would have streaming social media , instant access to news, sum of human knowledge, you would have investors salivating (p.21). The dark side of easy money and loose options trading was documented to crater peoples lives, and no small part of this was due impacted by Robinhood.

Here we look at Robinhood’s role, it’s relationship to Citadel for order flow revenue, some of the large Hedge Funds like Melvin Capital Management, the Reddit heroes like Keith Gill who seemed to act on some mix of principal and vision for Gamestop. The memes and boy humor of WallStreetBets brought an emotional and ridiculous edge, and paradoxically a shared sense of purpose against a financial system with little interest in retail investors.

Overall a really fascinating book, and enjoyable to read. Has all the elements of a great drama - personalities, risk taking, hopes and yearnings. I wonder if the birth of meme stocks and the coordinated invest retail online communities will bring new challenges to the financial establishment. Congressional panels are already in works to regulate and discourage the type of frenzy that occurred from the GME short sell (https://www.reuters.com/legal/transac...). Like many revolutions, it may be too early to know if has played its hand or simply coordinating for a larger overthrow.

[Ryan Manganiello · Rating 5 out of 5]

This book was amazing, and extremely similar to "The Antisocial Network" by Ben Mezrich in case you wanted to read something similarly great.

One of my favorite things about this book, and the author Spencer Jakab is that he is not afraid to play the middle and admits to his shortfalls, which is very rare (I really have no idea) for a Wall Street Journal writer.

What I mean is that he blames every party for the stupidity that was the meme stock extravaganza by simply highlighting all of the idiots and bad actors involved in the black swan event.

There are no heroes in this tale, and sadly, such is usually life. All parties had an agenda, and even the Wall Street Bets god like figure Keith Gill took some money off the table just to secure a little something in case the trade went south, which of course... it later did.

I really like how Spencer pointed out the truth from all angles, and especially got a kick out of how the meme stock executives were soothsaying the Wall Street Bets crowd to buy more of their shit stock, while they were simultaneously dumping it as their army of retards pushed the price of it to the Moon.

All in all, a great book for sure, and if I had to take one thing from it, it would be this:

Myopic Loss Aversion - Occurs when investors take a view of their investments that is strongly focused on the short term, leading them to react too negatively to recent losses, which may be at the expense of long-term benefits.

[Louis · Rating 4 out of 5]

In January 2021 Gamestop, a company many consider to be antiquated an on the verge of bankruptcy, experienced a rapid rise in its share price, enriching a few who had the perfect timing and causing losses to some funds who had been shorting the stock.

Although the narrative quickly became retail investors sticking it to Wall Street, Spencer Jakab’s The Revolution That Wasn't: Gamestop, Reddit, and the Fleecing of Small Investors explains why, just as the house always wins at a casino, Wall Street always wins in the long-term.

In essence, many retail investors invested in Gamestop thinking they were going to stick it to the hedge funds and get rich in the process when, in reality, they were sold a bill of goods and are likely to lose big time, in some cases much of their life or retirement savings.
Although I knew the basics, I still found this book to be an interesting read with useful insight into not just how this happened but why this fantasy of retail investors sticking to hedge funds is just that: a fantasy, and will always be a fantasy.

[Anisha Alluru · Rating 4 out of 5]

I found out about the GameStop short squeeze just after it happened—and like so many others, I was instantly hooked. Who doesn’t want to make a quick buck and take down a hedge fund while doing it? In the months that followed, I jumped into AMC and got swept up in the mania. I was scrolling through Reddit multiple times a day, obsessing over short interest updates and looking for reassurance that people were still “HODLing on.” I truly believed we were “sticking it to the hedgies”.

Years later, I finally got to finish reading this book—and it gave me a whole new perspective. I had no idea how much options trading had contributed to accelerating the squeeze, or just how much of the movement’s energy ended up playing right into the hands of the very institutions we thought we were fighting. Jakab breaks it all down with clarity and wit, offering a fascinating look into how markets really work—and how Wall Street, somehow, always finds a way to win.

If you were even remotely part of the hype, this is a must-read. Highly recommended for anyone curious about meme stocks, market structure, or how little revolutions often end up benefiting the same old players.

[Yves · Rating 3 out of 5]

As good a summary of the Gamestop short squeeze. Jakab is a former investment banker turned writer who summarizes the ins and outs of hedge fund investing for the layman. Far from a conspiratorial event, he shows that the squeeze is something that was bound to happen then, and could happen again in the future. He touches on the subsequent meme stock frenzy, but doesn't go into many other stocks. He briefly details the AMC Ape phenomena, but this book is about Gamestop, and he pretty much sticks to that subject. He doesn't go into details about the company, though, such as how it started and why Keith Gill identified it as a deep f***ing value stock. So this book operates more of a history of a moment in time than a deep analysis. If you've seen HBO's Gaming Wall Street or the more recent Eat the Rich: The GameStop Saga on Netflix, this follows a similar path.

[Tony Comer · Rating 3 out of 5]

This book was okay. It is weird to write a review about a book covering a historical period I clearly remember. In some ways, I feel like Jakab revealed his bias and was a bit condescending towards WallStreetBets and Redditors. He exposed some good points. The media narrative surrounding the actions of RobinHood in late January 2021 definitely fit into the larger political narratives of both the Left and the Right, and it was hard to see past these frameworks. Jakab dove into exactly why Tenev took the actions he did. I appreciated the insight.

Overall, it received a three from me because it was alright. The writing was a bit choppy and jumbled, and it seemed like it glossed over some parts of the news story in January 2021. Part of the problem comes from writing a first draft of history about recent events. But overall I read the book and left somewhat unsatisfied.

[R. · Rating 4 out of 5]

Good - but not great - analysis of the r/WallStreetBets, Robinhood and Gamestop incident of January 2021.
Jakab provides much more insight into the action - on all sides - than was available as events unfolded. And he offers a different take than the widely-presented view at the time.
His thesis is that the finance industry writ large continues to make money even when large numbers of retail investors seek to "stick it to the man" by coordinating a squeeze on a shorted stock like GameStop. He supports that thesis well.
I say "not great" because the book would have benefitted from better editing, and because Jakab did a poor job explaining some of the investments employed in the attempt to bring down shortselling hedge funds.

[Saint Rose · Rating 5 out of 5]

The book bestows upon itself the moniker of being the cynical take on the GameStop short squeeze. The cynicism is mostly found in that instead of focusing on the singular company that lost out on a small amount of profits, the manner in which larger groups were able to make money off the small individual investors is actually examined and explained in great detail. Oddly, the protagonists of the more heroic takes on the situation comes out of the situation for the most part unmarred.
The book proves its worth as the event starts to become mythologized in media, with all the various moments in which everyday people were manipulated and taken advantage of slowly being tossed away in favor of a story that is only true in the briefest of sense.

[Matthew Aujla · Rating 3 out of 5]

An important message from Michael Bolton:

Break up with your brokerage: https://public.com/breakup

How Am I Supposed To Trade Without You?

I could hardly believe it
What I saw on Reddit today
Was hoping that I’d get it straight from you
They told me ‘bout order flow
So I Googled, now I know
I think I gotta find somebody new

So tell me all about it
Tell me who you sell my trades to
Then tell me one thing more before I go

Tell me how am I supposed to trade without you?
My stocks been in your app for oh so long
How am I supposed to trade without you?
I think it’s time I must be moving on
Gonna transfer all my stuff and I’ll be gone...

[Patrick · Rating 4 out of 5]

The title says it all. Sad, but very informative explanation of various populist, internet, and institutional forces that collided in the huge stock bubbles. A very small number of institutional short-salers suffered, a number of regular internet forum Joes made money on the bubble, but most institutions made huge profits while thousands and thousands of other regular internet Joes were left holding the bag. Most of their individual losses were not huge house-type original investments, but that type of potential paper profit lost when they missed the timing and the overall wealth transfer overwhelmingly favored the big, bad financial guys.

[Jason Vicknair · Rating 3 out of 5]

Decent book, but never really grabs you. I think the writer tries too hard to go down a path to really "mansplain" the intricacies of Wall Street, trading, and stocks in general - but just too much, too fast. You can't really tell which side he was on, which I think is OK for a book like this. But what I did like is we all just thought the meme stock era (mainly GameStop and AMC, BlackBerry, etc.) really stuck it to the man on Wall Street.

It did not. This book explains why and really did enjoy that aspect but wish it would have told more stories about some of the common day trader folks who won, would have made for a better book. Decent overall though!

[Essence · Rating 4 out of 5]

I was on Reddit during the GameStop squeeze, and this book showed me that there was more wrong than just betting on meme stock. The people that made crazy bets were out here wildin’, and I couldn’t BELIEVE that you were allowed to trade stocks with borrowed money or that Robinhood had a chance to be in financial trouble, and THAT was the real reason they had to stop trade. Additionally, I wasn’t aware of the class war people tried to wage with trying to stick it to the man with meme stocks. It’s a wild ride and spender does a good job.

[Rick · Rating 3 out of 5]

Spencer Jakab does his best to tell the story of the meme stock revolt but just like the revolt he aims to tell the story is just not that exciting. He really sheds no new light on the populist nature behind the revolt but focuses on it as a business story with a few exciting people leading the way before it devolves into a story about greed and excess. I wish he had chosen better material because he seems like a very good writer.

Good writing, bad topic so pass on this one!

[Simone Scardapane · Rating 3 out of 5]

It's hard to extend what is supposed to be a journal-length article into a full fledged book and I am afraid this failed. The content is interesting, the author is knowledgeable, but in general by one third of the book you are wondering what is left to say and the answer is "not very much". Still interesting if you are curious about this peculiar incident in the financial markets and you don't mind the overlength too much.

[Mark Hillick · Rating 3 out of 5]

This a fun and easy read of early 2021 with the mania around stocks such as

- GME
- AMC
- Hertz
- Silver

detailing the interested parties

- Robinhood
- Citadel
- Melvin Capital
- Wall Street Bets & the Reddit Crowd

The book describes what happened, why it happened and how, along with the winners and losers.

[Tara · Rating 3 out of 5]

It felt like the type of book that could've been a long magazine article. I did enjoy going through the day-by-day of the major players in the GameStop squeeze, but his thesis -- that it led to nothing -- was one chapter, and the rest felt like filler. (It almost felt like he wrote this book just to have a permanent platform for the common-sense investing advice with which he ends it.) Though it also would've benefitted with more hindsight -- he shows how the GameStop squeeze didn't start in a vacuum, but because his timeline ends a month later feels almost like it ended in one. It will probably be more interesting to study market trends five or ten years from now when we see better what young investors do outside a post-pandemic frenzy. The rich will still get richer, but the speculative bubbles may change. 3***1/2

[Michelle · Rating 5 out of 5]

I really enjoyed this book. It was a surprisingly quick read. Jakab explains the players well. The technical pieces are understandable. The story feels truthful not inflated. And the bonus chapter is a must read.

[Yuni Amir · Rating 4 out of 5]

[audiobook] a good, straightforward and quick catch-up on what happened in early 2021. There are forces trying to change the system but so far, it appears as if the forces just profiting the usual players.

The author succinctly summarised the event and touched the surface of market players.

[Tim Morrissey · Rating 3 out of 5]

A quick easy read about a topic I find interesting. I didn’t learn much I hadn’t already known from general press articles. I saw this on the new releases At the lib and went for it. It was an easy enough read that I don’t regret reading it, plenty entertaining but not highly educational.

[Steve · Rating 3 out of 5]

Good but drags on in places. I don't think social media caused the short squeeze as much as implied; once blood was in the water the pros piled on. Overall entertaining, though I think the bulk of my takeaway was in the last 2 chapters of the book. Worth reading.

[Ramesh Naidu · Rating 5 out of 5]

A great read but I do wish the author had spent a little more time on explaining the need for Robinhood to come up with $ billion overnight which caused them to suspend training on the meme stocks but otherwise it is a great read / listen on the GameStop saga