By Jesse Itzkowitz, and Greg Gwiasda
When former SEC Commissioner Laura Unger compared the short squeeze of GameStop’s stock to the recent storming of the U.S. Capitol, she was mostly referring to the need for appropriate regulation. “If you don’t have the police in there at the right time, things go a little crazy.”
But these the phenomena that lead to the events of Jan. 6 and the GameStop /zigman2/quotes/203755179/composite GME -1.12% stock frenzy have more in common than you might think.
Bar a few Reddit users, it’s safe to say that no one truly expected the meteoric rise of GameStop’s stock value. There are certainly logical and rational reasons behind the initial interest in the stock, most notably that hedge funds had overleveraged themselves in shorting it.
But trading behaviors are not always rational. In the case of GameStop, we’ve highlighted two non-conscious drivers behind investors’ interest in the company.
What’s fascinating about these underlying psychological dimensions is that they also explain another movement affecting America: QAnon. Just like GameStop, the rise of interest in this group has puzzled Americans. How can a set of ideas — factually false and outlandish — have caught on so prevalently and deeply within a sect of the populace?
Similar group dynamics
On face, these two phenomena could not seem more different. But through a behavioral science lens, we can see that the psychological biases that shape them are fundamentally the same.
First, we need to understand the dynamics of groups. Here, there are numerous similarities between the r/WallStreetBets Reddit community and QAnon communities. On Reddit, the members of this group are connected through shared stories of wins and losses, tales of taking wild gambles, remixed internet memes and their own lingo. Reading through many of the posts, there is a clear sense of pride, connection and identity within the r/WallStreetBets subreddit.
This is also true within QAnon. Across their social media presence on Parler, Gab and Facebook, QAnon members have developed shared language and visual artifacts (the “Q” logo). Similarly, there is no shortage of pride or community in QAnon. Members have internalized the beliefs of the group as central to their identity. They also support each other in their battles to “spread the gospel” of misinformation.
From a psychological perspective, when people are members of a group, they do things to promote and protect other group members. Even when group membership is randomly assigned to strangers in a lab, people disproportionately favor fellow group over outsiders. When an ingroup is tightly knit, like the Reddit or QAnon community, these effects magnify. Sometimes, outgroup prejudice even takes the form of denigration – viewing non-group members as others, unworthy of equal respect. The characterization by QAnon of some politicians as “Satan-worshipping pedophiles” certainly reflects this.
Acts of rebellion
Another aspect of group behavior is also in play here — these members feel inherently different than the groups they rallied against. Psychological findings tell us that we should expect greater group bias when the members feel more ‘distant’ from the members of the outside group.
In contrast to the “regular Joe” that many of the Reddit users and recent GameStop buyers identify as, hedge-fund leaders are alien, distant, and more powerful. They could not be more different from one another. For the members of r/WallStreetBets, “winning the GameStop war” is a way for them to validate their independence, equality or dominance over this other, more powerful group.
This also holds true for QAnon. Members clearly perceived differences between themselves and the “elites” who govern us across shared values, power, class and even race and religious background. Unlike the elites, which represented power, QAnon represented “the people.” Just like GameStop, the members of QAnon viewed the DC establishment as something that needed to be toppled in order to properly restore “real American values” which the ruling class had taken away.
While this explains the enthusiasm of the core group members to achieve their goals, why have these movements caught the attention and interest of the general public?
Although we don’t know for certain, we suspect many people are drawn to these groups due to their belief in what psychologists call procedural justice. Simply stated, people want processes that are fair. When processes are viewed as fair, people are more likely to adhere to the outcomes, even if the outcomes are not in their favor. Conversely, when they view a situation or outcome as fundamentally unfair, they may seek justice in other ways.
In one study examining 73 cases of legal arbitration, people who saw the process as unfair were less likely to comply with the arbiter’s ruling. To them, this act of rebellion was justified by their perceptions of unfairness.
If financial markets were seen as favoring privileged hedge-fund managers, then GameStop’s recent investors may not be simply motivated by financial returns but to also mete out justice. Indeed, many feel the market is not acting fairly. Recent Ipsos polls show that only 35% of Americans trust business leaders . Moreover, 60% view Wall Street executives unfavorably while 57% believe Wall Street leaders have a somewhat or significant impact on their lives. For many, they feel their lives are being impacted by those they do not trust.
There is similar distrust for Washington, D.C. and politicians. Ipsos polling shows that 57% of Americans view our elected officials unfavorably. This is coupled with enormous institutional distrust. Our analysis of General Social Survey research has shown that only 23% of Americans have “a great deal of confidence” in U.S. institutions. These sentiments are clearly reflected in the ideology and sentiment of QAnon.
These forces will not disappear anytime soon. All companies and brands, not just financial firms and political leaders, should be paying attention. Despite the differences in the goals of these two groups, both show a desire to connect based on shared values and beliefs. While customers have always tried to fight back against unfair practices, their power to do so has been limited.
While boycotts are not new, the internet, and its ability to connect, organize and move markets creates a new tool at their disposal to mete out justice around perceived unfairness.
Jesse Itzkowitz is a senior vice president in Ipsos’ Behavioral Science Center. Follow him on Twitter @JesseItzkowitz. Greg Gwiasda is a vice president there.
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