The Game Stop hysteria is about to get worse

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SvD Näringsliv

This column was first published in SvD Näringsliv, in Swedish, on February 18th, 2021.

The hysteria has barely subsided before it is time for the political aftermath. But when the Game Stop mess now reaches Congress, there’s a big risk that things derail again. The legislator’s knowledge about the internet is simply too low, writes SvD’s Björn Jeffery who lists three questions he wishes they would ask.

A nervous Mark Zuckerberg was wearing a blue suit, white shirt, and a light blue tie. It was April 2018 and he was called to testify before the US Senate about the Cambridge Analytica scandal. Facebook’s CEO was a bit stiff, possibly because he had not done very well on previous occasions in these public contexts.

His rescue came from a somewhat unexpected direction.

In the hearing, Republican Senator Orrin Hatch asked the question “How can you maintain a business model when users do not pay for your service?” Zuckerberg paused, thought about it, and then responded with the now classic phrase “Senator, we run ads.”

He immediately appeared superior to the confused politicians, who did not even understand basic Internet economics.

This is what it usually looks like when the tech giants are summoned for hearings of this nature. A political spectacle where many of the questions are just awkward. Expectations are therefore low when a committee from the House of Representatives on Thursday summons Steve Huffman, CEO of Reddit, Vlad Tenev, CEO of Robinhood, and Youtuber, who started the entire Game Stop rush, Keith Gill.

Here are three areas that politicians should dig further into, but that they probably won’t articulate sharply enough to get any real answers to.

1: Who benefits from your business model?

To understand how tech companies prioritize, one must understand how they make their money.

If the Robinhood app, which offers brokerage-free mobile trading, does not charge for buying and selling shares – where does the revenue come from? Well, to a large extent it comes from them reselling users’ share orders to companies such as Citadel Securities. They can in turn use the data to feed their high frequency trading and take advantage of temporary market imbalances to make money.

The question to Robinhood that should be asked is: Are your app users only there to act as a data source for Citadel’s algorithms?

2: Whose side are you really on?

In Robinhood’s case, they have – with their choice of name if nothing else – positioned themselves as an app for all the people. They have gamified options and derivatives trading. But when the their users came together to trade these financial products, then Robinhood pulled the handbrake and blocked several shares from trading. If you position yourself as a stock app for the people – why do you pander to established Wall Street companies and what did the possible pressure that Robinhood got from the giants look like?

3: Whose interests are represented in the forums?

The Reddit forum Wall Street Bets has over 9 million members. Most write anonymously, with an alias. But as we have also seen in Sweden, there are times when these anonymous accounts act in a strict self-interest, albeit disguised as something else. Ola Serneke is currently being investigated by prosecutors for just this.

Being anonymous on the internet may seem like a right. But that does not mean that you have the right to deceive other people. One would therefore like to ask Reddit’s CEO: When more than nine million people follow one and the same forum – how do you ensure that it does not become a place for structured market manipulation? By either large groups of enthusiasts, or even by the companies in question?

Hearings of this kind unfortunately often become a way for politicians to show themselves in public, rather than actually conducting policy. The reason why tech companies end up in trouble all the time is partly because current legislation allows them to continue as they wish.

The question is how long the public, organizations, and other companies that suffer the consequences from this will think it is good enough. And instead, perhaps start arguing as the Turkish sociologist and journalist Zeynep Tufekci does. She summed it all up like this: “We should stop asking questions to these companies, and start giving them answers instead.”

This column was first published in SvD Näringsliv, in Swedish, on February 18th, 2021.

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