The financial needs of millennials are not understood or provided by Wall Street

This article was published by the TranspilerLab.DAC.

A few days ago, the #GME incident left us stunned again, as a group of retail investors rubbed Wall Street hedge funds into the ground. There were many comments, and it wasn't until the weekend quieted down that I realized I actually didn't understand the movement initiated by the new wave on r/wallstreetbets.

Do you know about MEME? Many experts or executives in the financial circle probably don't. I saw many interesting MEMEs in the Reddit forum (r/wallstreetbets), and through these expressions, I realized that Millennials or Gen Z are both adorable and formidable; they are not just retail investors staring at candlestick charts. Why do they dare to do this, and ultimately create history?

MEME (translated as "模因" in Chinese, "迷因" in Hong Kong and Taiwan) originated from Richard Dawkins' book "The Selfish Gene," published in 1976. The concept of "meme" was proposed to explore the social evolution model of cultural information dissemination. Despite much controversy in traditional fields, the multidimensional values represented by MEME, including religion, rumors, news, knowledge, ideas, habits, customs, and even slogans, proverbs, phrases, words, and jokes, may have evolved into a new species in the information dissemination methods of the internet age. In fact, MEME is also established based on the concept of "genes" as referenced by Dawkins in Darwin's theory of evolution. He believed that human genetic evolution has nearly stagnated or slowed down, but cultural evolution requires a MEME to carry cultural thoughts, symbols, or units of practice.

When we understand that they (Millennials or Gen Z) have culturally evolved into a new species, we will find the reason they dominate Wall Street is similar to a dimensionality reduction attack or cannon against spears. The internet has validated the concept of MEME to some extent. Like genes, MEMEs self-replicate and spread; this process on the internet is "viral dissemination." The life of a MEME, like biological genes, exhibits extremely strong vitality after undergoing natural/cultural selection, just like dinosaurs and humans. Moreover, the evolution of MEMEs has both Darwinian (evolutionary) and Lamarckian (mutational) significance, such as the mutations caused by the outbreak of the COVID-19 pandemic.

We have always struggled to understand why these retail investors have such consistent action. Don't look at the comments or news; if you directly check r/wallstreetbets, you will find they are not the mob that experts claim to be, misled by "leaders/charlatans" and losing their rationality due to greed, nor are they the cannon fodder of a revolution. They are a new species. On the last trading day, January 29, r/wallstreetbets released this video:

The retail investors on r/wallstreetbets maintained their formation through this video, viewing themselves as Scottish warriors defending their land in "Braveheart." In fact, on the internet, MEME has two main attributes: creative replication of materials and intertextuality. Creative replication refers to "imitation, remixing, or blending," while intertextuality can be proven by combining memes from different cultures. This is the reason I mentioned achieving consensus on multidimensional values, which is quite terrifying; this is why they are referred to as a new species.

We see that the stock they chose, GME, also carries MEME significance, as GAMESTOP embodies their memories. The diverse blending has led to a strong consensus that possesses both rigidity and flexibility, thus the retail investors on r/wallstreetbets erupted with tremendous combat power. I envision a scene where Homo sapiens hunt and slaughter the stronger Neanderthals.

As a result, KOL Chamath, regarding the #GME incident, believes:

If r/wallstreetbets were an investment bank, then this investment bank would be a "new species," looking nothing like a traditional investment bank. It's like a leopard versus a crocodile. Those cold-blooded crocodiles on Wall Street might be no match for a leopard, which has a graceful physique and tenacious hunting skills, and is, in some ways, much cuter than a crocodile. Chamath must have thought of overturning Wall Street.

Take a look at Chamath's questioning of Wall Street on MSNBC:

I wonder, what should finance for young people (our descendants) look like? Or what kind of finance do our descendants need to support economic development, thus providing humanity with a bright future? We see that the environment in which r/wallstreetbets actually survives is not beautiful. They need to step out of the savannah and build their own new empire.

First of all, the internet platforms currently controlled by BIGTECH have already fallen. Regardless of the purpose, Reddit temporarily closed the r/wallstreetbets forum and set it to private, and the Discord chat room for r/wallstreetbets was also closed. The brokerage that facilitated retail trading on r/wallstreetbets, Robinhood, even exhibited the atrocious behavior of "pulling the plug," which is a complete betrayal for a brokerage that claims to be for people trading. On r/wallstreetbets, netizens sarcastically commented:

Moreover, Google reportedly deleted many searches unfavorable to Wall Street. Remember not long ago when the big leader's Twitter and Facebook accounts were banned? The standards for these censures are vague and swayed by the platform's stance. In fact, internet platforms are controlled by these BIGTECH companies, which should be public goods. Therefore, the future of r/wallstreetbets in confronting Wall Street is extremely perilous. Fortunately, they are a new species, and they can break free.

On the day after Robinhood banned retail trading of GME, Dogecoin surged, followed by Musk changing his Twitter bio to #bitcoin, causing BTC to soar by 20% due to the influence of the richest man. This is because, only in the crypto world, trading is "free." In fact, this points to a direction: r/wallstreetbets needs new financial infrastructure.

But can the current crypto circle provide a good environment? The answer is no, because that very night, the situation changed:

In fact, the two conditions that Chamath mentioned for the new investment bank of r/wallstreetbets—complete decentralization and democratization—are not achieved in the crypto circle and are far from it. The cruelty of cutting leeks in the crypto circle and the oligopolistic control of the market far exceed that of Wall Street. However, this points us in a direction.

Decentralization and community autonomy have not been well executed in either the internet or blockchain. Tim Berners-Lee, the inventor of the www protocol, has pointed out the centralization problem of the internet multiple times. Now we see the evil of BIGTECH, and BTC is now almost treated as a speculative asset controlled by Wall Street. Last year, we witnessed the rise of DeFi, and finally, we saw that things beyond BTC and ETH were no longer just air but began to smell valuable, like perfume.

I believe the financial infrastructure that r/wallstreetbets will need in the future will focus on several directions:

One is the reconstruction of internet platforms and DAO

Just like in the early days of the internet, the vast majority of users were in traditional fields, but when the time was ripe, user demand surged, and development was rapid. Now user demand has actually emerged, but the products are still immature. An internet platform built on DAO autonomy and collaboration, including BBS and chat rooms like Reddit that are needed for this r/wallstreetbets movement, as well as platforms like Weibo. In the early days of the internet, BBS, IRC, and NewsGroup were indeed decentralized, but BIGTECH, with the support of Wall Street capital, commercialized and provided a better user experience. To disrupt the current platforms, new protocols are needed to provide the experiences that users require.

DAO is a good approach, but the current DAO protocols in the crypto circle have huge problems, overemphasizing governance, with voting as the only means of governance. Therefore, the integration of DAO and internet products is crucial. We have already seen some new DAO projects making efforts in this area. For example, a recently popular DAO project, Metis, proposed the concept of DAC—Decentralized Autonomous Companies. Each DApp is a decentralized company DAC composed of community members and stakeholders, collaborating across domains to achieve specific missions. DAC is a subset of DAO, which not only cares about governance but also focuses more on management, which is currently lacking in other DAO projects. DAC aims to achieve true decentralized autonomy for internet platforms.

This DAO is essentially a circle within a circle, an ecosystem composed of many DAOs, which will replace the platforms currently controlled by BIGTECH, and more fields can join in, unlike the internet's influence, which is limited to the realm of information. So why can this be achieved? It is because of the natural selection of MEME; we see the evolution of culture (the stories of people/the bonds of consensus). Thus, in the network age, driven by technology and supported by algorithms, a new ecosystem is formed. Even in modern capitalism, the organizational forms are still very classical. Under the pandemic, we also saw the weaknesses of capitalist society. Humanity can build consensus and organize more effectively to achieve development. More and more phenomena show us the direction, including this r/wallstreetbets movement, which hopes to change some fundamental aspects of capitalism. Regardless of success or failure, it shows us a direction.

Another is new financial infrastructure and Social Finance

From this r/wallstreetbets incident, we already know that Robinhood is not a good internet brokerage, and neither is IB. In fact, this model of attracting a large number of retail investors to participate in secondary market trading, while offering zero commissions and a good user experience, is indeed unfair to retail investors, as Robinhood sells retail investors' big data to large institutions on Wall Street and engages in dark pool operations. This may not be non-compliant and provides good liquidity for trading, but it is unfair. This is also where Chamath questions Wall Street institutions, asking why all the benefits go to the institutions. We also saw that under the pandemic, ordinary people became poorer, while those with assets gained significantly.

So what is the new financial infrastructure? There is now a concept called Social Finance, which has several important characteristics:

1. Social Trading and Following Trading
Traditional securities investment models mainly rely on information asymmetry to earn excess returns, as the secondary market is a zero-sum game, theoretically excluding information sharing. However, this has led to expensive and inefficient asset management and investment research. Internet brokerages or financial information platforms flourished with the rise of the internet, but this did not bring about qualitative changes and even produced many negative aspects. This is evident in both the traditional secondary market and the crypto circle, where the internet has made it easier for Trading Leaders to collude with institutions to exploit retail investors. Although Etoro has performed well, it has not disrupted traditional players like e-commerce did. In fact, this r/wallstreetbets movement is not what we consider to be internet finance in the traditional sense. It has emerged in a completely different way, such as consensus forming on comprehensive forums like Reddit, without utilizing any innovative internet financial tools.

2. Crowdsourcing Model
Utilizing the power of the masses to replace specialized operations has not been realized in mainstream areas of the internet. In fact, the AMM mechanism in DeFi, which stands for Automated Market Maker, has achieved financial innovation in the sense of crowdsourcing, and the token economic model of liquidity mining has proven to be correct. Therefore, in many areas of DeFi, such as DEX, lending, funds, insurance, and derivatives, this can be applied.

3. Democratization of Finance
This point has not been well achieved in either internet finance or blockchain, as oligopolization in finance has emerged. Even in the DeFi field, there is oligopolization, as seen in the governance issues of Uniswap and the plundering of TVL by large holders, which makes us acutely aware that there is still a long way to go in this area.

In summary, a single r/wallstreetbets movement cannot overturn the capitalist system design inherited for hundreds of years on Wall Street. A revolution cannot succeed merely by building barricades in the streets. The decline of the Roman Empire took hundreds of years, and the Gracchi brothers, who sought to reform debt issues, were killed by the mob in the square. I think the reflection left by this incident is how we can use algorithms and the evolution of culture to bring about change. The decentralization and democratization that Chamath mentioned can only be sought through new technological tools to create new infrastructures. We have already seen the direction of the future, and perhaps that is enough.