“Strive not to be a success, but rather, of value.” – Albert Einstein
I’m pretty sure Einstein wasn’t talking about meme stonks. For starters, meme stonks weren’t a thing back then. Go figure.
For most of recorded time, the connection between the current or potential future success of a business and the value of its stock was at least plausible. Sure, there were manias and bubbles – there’s plenty of great books documenting history’s many absurdities – but there’s something unique about today’s bubble. In bubbles of old, people mostly just fell for stories that a certain company (or industry) was well-positioned to bathe in fantastic future growth and profits, or that the government was never going to allow stocks to go down, or some other nonsense. Mix in a little greed and the devastation of watching your neighbors get rich (otherwise known as “fear of missing out” or FOMO), and you had all the ingredients for things to get a bit out of control.
The literal definition of the word stonk is “a concentrated artillery bombardment.” A meme stonk is a stock that a bunch of people on the internet have conspired to bombard with concentrated bids to buy, thereby driving the price to heretofore unheard-of valuations, even compared to the bubbles of yesteryear. The role of the meme in all this is simple – it has long been known among professional propagandists that memes are a powerful tool of influence and manipulation. They pack an incredible amount of information in simple, digestible form. I could write an entire Doomberg piece on memes (I just might!), but here is a simple insight: three-word memes are extra impactful. Orange man bad! Stonks go up! This is one of my personal favorites:
Forget for now that coordinating with others to artificially push a stock price higher is blatant illegal manipulation. I’m more interested in what it means for society and markets going forward, especially after listening to the brilliant and prolific Demetri Kofinas discuss the subject.
Kofinas is the creator of the wildly popular podcast Hidden Forces – a weekly must-listen for this chicken. Both as a host on his own show and as a guest on others, he has discussed the concept of market nihilism to describe what happens when people not only invest in something that is essentially worthless, but they invest in it because it is essentially worthless, assuming only that others will follow them into the scheme. There’s a purposeful emptiness in the decision. They know it is a Ponzi, or effectively a Ponzi, but they invest anyway, both because the prospect of huge returns is irresistible (even if it comes at the expense of others) and because they want to protest “the system.” Kofinas was a recent guest on the equally brilliant show The Grant Williams Podcast – another must-listen. If you don’t subscribe to Grant’s offerings, I don’t know what else I can say to you other than stop reading this now and go do so. I quote from the transcript here:
“I wish I could tell you what I think is going on other than to say that there’s rot, there’s a kind of societal decay. And also, I think technology plays a role… It’s all about narrative and that narrative can be very empty. It’s only skin deep. I did an episode with Lily Francus where we talked about this in the case of GameStop. And it’s not the only time I’ve done this. I did a recent episode, actually, on Ethereum and a thesis that someone had put forward for why its price was going to increase by over 10 X or 30 X, and none of these explanations actually deal with, I would argue, really, fundamental reality the way that you and I would think about it. In some ways it’s an advanced meta-conception of the world, which is that the reality is what everyone else thinks it is. And so, if I want to make money, I simply have to try and get ahead of the curve of what that narrative is going to be. And what’s dangerous is that in such a world, you can actually co-create reality. You can play a role in shaping that reality.”
And it is in this way that hyper-interconnectivity amplifies powerful propaganda techniques and makes this bubble different from all the others. Yes, yes, I know. Saying it’s different this time is normally quite silly, but I don’t think the bubble ends any differently (i.e., it ends in tears), I just think it has meaningfully different characteristics that give it unique and potentially disturbing properties. Historically, people who participated in Ponzi schemes usually did so unknowingly and were called marks. Today, the game is to predict the next Ponzi and to be early. It’s just another variant of the shitcoin rug pull.
And what is something worth anyway?
The concept of valuation is a deeply fascinating philosophical rabbit hole. The traditional way of valuing a security (i.e., determining its worth, or intrinsic value), henceforth known as The Stupid Way™, was to estimate future cash flows and maybe a terminal value and then discount the value of those flows back today using a risk factor. Many investors used these principles to buy securities judged to be selling for less than their modeled value and to sell short securities (gasp!) judged to be overpriced. Colloquially known as value investors, we shall henceforth refer to them as Money Haters™.
The new way to value a security is to simply look at the last transacted price and then try to guess what the crowd will do. There’s no need to even think about factors that used to feed into The Stupid Way™ of looking at stocks. What is this stock’s stonk potential? Can it be aped? Has it already been aped and has the crowd moved on?
This has led to some fascinating and truly unprecedented securities prices. In the coming weeks and months, I plan to write a series of Doomberg pieces under the Super Stonks moniker where I playfully compare the current price of a meme stonk to The Stupid Way™ of analyzing things. Of course, nothing you read on Doomberg should be considered investment advice – I’m a paranoid chicken, after all, and I won’t have a position in any stonk I profile, long or short. I simply can’t play these markets, so I largely don’t. For example, as a no-coiner, I’m having fun staying poor.
To further keep things on the up-and-up, I won’t give away which stonks I’ll profile.
Hang on…my Tesla robotaxi just arrived. I’ve programmed it to take me to the nearest AMC theater where I plan to binge on a Beyond Burger and wash it down with some Oatly Milk while I watch a movie streamed in partnership with Netflix but somehow powered by Nvidia.
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