Oh, what a January it was. One incident after another has shown the public in the US (and other countries) that they are conducting all their conversations, public discourse, collaboration and transactions on platforms that are owned by others, and can be shut down at any moment. It is a sort of digital Feudalism, and people are starting to realize that the “real owners” can show up and stop the game any time they want. Whether it’s ad-supported “Free” social platforms booting entire communities from their platforms for wrong speech, or hedge-fund-supported “Free” trading platforms closing down entire stock trades for wrong trades, the story here is that “free” often isn’t. The owners are the ones who pay the bills, and they also play in the casino.
Social Platforms
As the year began, various sectors of the American political landscape became alarmed at Big Tech and their coordinated censorship of free speech, after Parler was shut down by Google, Apple, and even Amazon. A few days later, millions of WhatsApp users were spooked by the company apparently changing its terms of service, leading millions to jump ship and move to Signal or Telegram, which helped it reach half a billion users.
Trading Platforms
Not to be outdone, the financial industry had its own version of that this past week. Online communities 2 million strong, united and coordinated their purchase of GameStop and AMC Entertainment shares to drive the price up and squeeze the hedge funds who had a massive short-selling position, forcing them to buy the stocks back to cover their positions and drive the stock price even higher. In short, the public organized on Reddit, noticed that hedge funds had taken massive short positions totaling 140% of all outstanding stock, and cleaned them out with one continuous, coordinated action. Melvin Capital was given emergency infusions of $2B, which evaporated quickly, and they were left holding the short end of the stick.
But what happened next was a “hold my beer” analogue in the financial industry of what we saw in the social media industry. All of a sudden, Robin Hood, WeBull and other “no fee” stock trading apps blocked any further purchases of the stock, forcing the buyers to “unwind their position” (i.e. sell it) to pretty much the only game in town: the very hedge funds who needed to cover their position before Friday, when many of their margin loans or put options got called. In fact, trading was halted even on other hyped stocks, such as AMC and even Nokia! [1]
Those who pay the bills control the music
All of a sudden, the fourth wall was broken, and the public got a peek behind the curtain. The hedge funds are the ones who pay the bills at Robin Hood: despite its name, Robin Hood makes its money by selling trading data of the retail investors, to hedge funds who get to take advantage and trade against it. When the shoe was suddenly on the other foot, these hedge funds must have placed some calls to the management at Robin Hood and WeBull and reminded them who pays the bills. “If you don’t let us cover those shorts by Friday, your platform will go bankrupt too.” Suddenly people realized something about these “free” markets: they’re actually owned by entities whose buddies play in the casino, and when push comes to shove and you take the other side of the transaction, they won’t let you bankrupt them, no matter how many of you there are.
The same goes for the “free” social networks and media that is supported by advertisers. They – or their algorithms – always select for the content that will make them the most money, regardless of their effect on society.
Whether you’re winning too much against the house at the casino, or you’re saying the wrong things on stage at an event, the pretense of “free speech” or “free trade” disappears for those who break the fourth wall.
How we as as society can solve these problems
Within the same day, Robin Hood was hit with a class action lawsuit for their actions. But State action is just a band-aid on the real problem. While the government argues over whether to break up Facebook, Amazon and Google, and federal courts argue about whether to Apple should kick Telegram out of its app store, the libertarian solution has been in front of us the whole time: build open source platforms that are not owned by a select few elites.
That is what cryptocurrency can bring about. The old way is to sell shares to investors who urge you to own the whole platform, build a monopoly and eliminate competition, as Peter Thiel did with Facebook. The new way is selling tokens, so the network be owned by the participants themselves, after the founders sold their tokens in the initial sale. This ability to release currencies owned by the community is one of the many applications of Intercoin.
[1] Illustrations:
