The GameStop™ short-selling drama is one of those rare events in the news cycle where literally every analysis – from the right and the left – is dead wrong. There is nothing wrong with short selling. There is nothing wrong with individuals or companies coordinating actions in order to drive a stock price up or down. Value is subjective therefore price manipulation is a meaningless term. There is nothing wrong with trading platforms suspending trading, for any reason, or none. Pump and dump schemes are lottery analogues: many pay in to benefit a few. No one deserves sympathy, scorn, or accolades for their actions in these events. This entire affair is morally neutral. It’s no different than card-counters winning big and then getting tossed out of the casino.  

Humans denigrate that which they do not understand and short selling is no exception. We can understand long selling (buy low, sell high) whereas the appeal of short selling is more cryptic. In both cases, however, the goal is profit. Entrepreneurial profit is obtained by accurately assessing consumer demand, that is, understanding a market well enough that one can predict its future. Investing profit is similar. An accurate assessment of a company’s market behavior informs the investor as to whether or not it is being well run. If so, then its value will rise, whereas if not, a decline is on the horizon. Stock trading is in essence betting on yourself: how accurate are your assessments? If you believe a company is well managed then you invest long, whereas if you believe the opposite, then you invest short. The social function of stock speculation is to keep the price (on average) where most believe it should be. Both sides vote in an eternal election guided by profit seeking. That some people profit through this process at the expense of others should not be surprising. Stock speculation is informed gambling, and gambling is a zero sum game. 

If enough people believe a company is poorly managed and act in coordination they can drive the price down to where new ownership can wrest control away from current management and set about repairing the damage. Short selling is the market repairing itself (spontaneous regulation). This price-derived feedback mechanism corrects for misallocation of resources being squandered by poorly run firms. The long sellers should thank the short sellers. They will be the ultimate beneficiaries of an appreciated price contingent on new management adeptly repairing past damage. It is bemusing when such coordinated beneficial market actors are denounced while bleatings about “our democracy” to effect identical coordination in the political arena are lionized. 

If such coordinated action takes place on ones property, then one is within their rights to disrupt it if they believe it to be injurious to their interests. Robinhood™ can limit trades, kick users off their platform and otherwise impede site functionality if they desire to do so. Were I such a user I would be quite angry about it – but it would be their right. But it would also be my right to ditch the platform. One can be both angered by the actions of another while understanding one’s “rights” have not been violated. Robinhood™ will likely suffer financial loss due to their actions. And that is fine. Individuals and companies do not have a right to be shielded from the consequences of their actions. State backed governments have created a moral hazard where such protections are expected. We play the game and when we lose we appeal to government to make things more “fair” – for us. We seek anti-trust legislation when those acting in unison might impact our profits. We seek subsidies to protect us from foreign (and sometimes domestic) competition. We seek intellectual property rights to protect us from “unfair” competition. And when those seeking these protection are granted it they become ever more “grateful” to those in power. This “gratitude” helps the political class maintain their grip on power and so the cycle continues. Just sit back and watch. The politically well-connected elites will soon be rewarded with “sensible regulation” to restrict the impact that you, the coordinated individual can have on their interests.