Hyperreality and Meme Stock Behavior
“It can’t possibly go up anymore,” I thought to myself while watching the GameStop ticker climb on January 22nd. By the end of the day, I’d put my entire account into $GME weekly calls.
Two market days later, I had over a 500% gain.
My dad proudly told me he was up 8% for the year. He asked about my portfolio. “Oh, I’m up a little bit,” I replied, listening to him tell me to not invest in GameStop and get caught up in irrational exuberance.
I then threw a quarter of my buying power into $AMC calls.
High risk? Absolutely. Irrational? Absolutely not.
What is Hyperreality?
To make sense of this phenomenon, we must first acknowledge the proliferation of media in our world. From the radio to television to the internet to social media, each successive generation has lived in a more unreal world, one where “…everything that was directly lived has moved away into a representation”.¹
We live in a world where people type more often than they talk, where people tap like buttons more often than they compliment, where people watch scripted romance more often than they express their own love, where people play video games more often than they adventure, where people meet virtually more often than they do in person, where people consume more often than they create. A world where we observe more than we act. The media is more real to us than reality. As we stare into the abyss, the abyss stares back into us. The media has gone beyond merely representing lived experiences to defining them. Welcome to the hyperreal.
Hyperreality — “The generation by models of a real without origin or reality: a hyperreal”²
The hyperreal is the end result of a world dominated by the spectacle, or “…a social relation among people, mediated by images”.¹ As the spectacle expands, the images that compose the spectacle become more linked with each other than reality. This detachment results in new images completely separated from reality. As these detached images proliferate, people begin to mistake them for reality until they become more real than reality itself- or hyperreal.
There are four successive stages of the sign (or representation) as images degrade from direct representation to the hyperreal.²
Four Stages of Signs
First Stage Signs — “it is the reflection of a profound reality.” — Fruit Juice (Apple Juice)
Second Stage Signs — “it masks and denatures a profound reality” BUT one knows roughly what it signifies. — Artificial Fruit Juice (Apple Juice Flavored)
Third Stage Signs — “it masks the absence of a profound reality.” — Artificial Fruit Juice of a Non-Existent Fruit (Star Apple Juice Flavored)
Fourth Stage Signs — “it has no relation to reality whatsoever: it is its own pure simulacrum.” Instead of reality defining the model, the model defines reality. — Artificial Fruit Juice of a Non-Existent Fruit becomes Fruit Juice; real Fruit Juice is no longer Fruit Juice (Star Apple Juice; Apple Juice is viewed as an inferior version or variant of Star Apple Juice)
“What’s this got to do with stocks?”
With the hyperreal explained, let’s go on how it relates to stocks within the Four Stages of Signs:
First Stage Signs — “it is the reflection of a profound reality.” No stocks fit in this description; no stock is ever a direct representation of a company’s value.
Second Stage Signs — “it masks and denatures a profound reality” BUT one knows roughly what it signifies. Most stocks fit in here. A stock’s price is connected to a company’s value but is not a direct reflection; market forces affect a stock’s price, distorting its relationship with a company’s value.
Third Stage Signs — “it masks the absence of a profound reality.” Tesla, GameStop, Palantir, and other “narrative” meme stocks belong here when the narrative is created, but before it comes true. The narrative describes a non-existent reality that may, depending on the strength of the narrative and memes, come into existence.
Fourth Stage Signs — “it has no relation to reality whatsoever: it is its own pure simulacrum.” When the narrative of a meme stock overcomes reality, the stock belongs here. Instead of reality defining the model, the model defines reality.
The Hyperreal Meme-Driven Narrative Machine
The proliferation of Third & Fourth Stage stocks will continue because of demographics. Meme culture is understood by people aged thirty-five and below, but is a foreign concept to anyone older. The younger generations exist in a more hyperreal world than the older generations; it should not be a surprise we are better at navigating the hyperreal. Facebook, Instagram, and Snapchat have led us to follow bizarre trends of unknown origin; why not apply the same to stocks?
The saga of GameStop has displayed the power of meme-driven narratives; it has already spread to $AMC, $BB, and $NOK. r/WallStreetBets is united for now, but once the story of GameStop concludes, dopamine-driven speculators like me will start looking for the next GameStop. It will be difficult to unite the masses again, but when it happens, history will repeat itself. It’s better to prepare to ride the wave than assume GameStop is a fluke. Even if the inevitable fall of $GME burns countless new traders, the meme mindset still exists in our generation’s mind. When we become the leaders of the world, we’ll bring our memes with us.
We don’t have to wait for the future though; current economic conditions fuel these narratives more than ever. The denizens of r/WallStreetBets rapidly shifted from self-proclaimed autists to revolutionaries as brokerages prevented the purchase of GameStop. Growing income inequality over the past fifty years, recent memory of the Great Recession (and subsequent bailout of Wall Street), the current coronavirus pandemic, and the failure to deliver stimulus checks for months as the market reached all time high after all time high is enough to make anyone revolt. r/WallStreetBets is now engaged in an act of detournement, or turning the instruments of capitalism against itself. Options are weaponized to create gamma squeezes, stocks are hoarded to burn shorts, and Robinhood is abandoned to avoid buying limitations. War has been declared by the proletariat. “It’s not about the money anymore” is now a common refrain on r/WallStreetBets. Until these conditions are resolved, more spontaneous attacks against the financial system will ensue; wealth disparity will not be solved anytime soon. So forget fundamentals (for now), ride the meme wave for all its worth, watch r/WallStreetBets collapse our financial system, and buy the fucking dip.
Oh, and my $AMC calls also went up by over 500%. Time to see if my $SPCE calls will take me to the moon.
- Debord, G. (2016). Society of the Spectacle. Detroit, MI: Black & Red.
- Baudrillard, J. (2019) Simulacra and Simulation. Detroit, MI: The University of Michigan Press.