GameStop and the Power of Story
Whether or not you are an avid investor in the stock market, you must have heard about the about the thrilling news of the ups and downs of the GameStop Corporation (GME) stock. And there’s a leadership lesson to be had here: the power of storytelling.
It all started as investment — attempting to take advantage of a severely overly shorted stock. But it suddenly became viral and set off a figurative bomb on Wall Street. Its popularity and the continuation of the saga has been completely driven by simple stories, the story of: normal people rise against the rich, the revenge of those who’ve been taken advantage by wall street for years and defending those pleasant childhood memories at GameStop.
Moreover, these are stories filled with emotions: the anger against hedge fund manipulation, the elation of victory when “small people” joining forces and the joy of the feeling of belonging (with other Reddit users).
Armed with these stories, the early starters rallied hundreds of thousands of Reddit users around the world to join the battle of GME stock, many young and with little knowledge on stock trades. They bought and they held, despite of the roller coaster-like price change. In less than a year, the price of GME stock went as high as $483 per share.
In Robert Shiller’s book Narrative Economics, the Nobel Prize-winning economist explained how good stories can go viral and affect economy worldwide.[i] Although some criticized the book’s overly generalizing the role of narratives and downplaying the role of money in Shiller’s claims[ii] (because money can indeed impair people’s rational thinking in many cases[iii]), the arguments in the book are well aligned with research findings in dual process thinking.
The dual process theory states that people make decisions or judgments via two distinct processes: the fast and unconscious process (aka system 1, peripheral system, heuristic process) and the slow and rational process (aka system 2, central system, systematic process).
A story is the perfect trigger of the use of the fast system by appealing to people’s core values and emotions. Stories are perfect for conveying values and emotions and human brains are tuned in for these types of stories. Instead of making rational investment decisions, many were driven by emotions invoked through the stories (sometimes under the disguise of rational thinking). If the story is simple to remember and can appeal to values and emotions held by most, it can quickly go viral and be powerful enough to push big changes.
One of the most appealing story I’ve heard during the GME frenzy is from one Reddit user who stated that his family lost their home and wealth during the 2008 financial crises caused by Wall Street’s greed — and now he/she will use the GME short squeeze as an opportunity to have Wall Street suffer from losing this battle for what they’ve done.
A story of revenge.
In the end, storytelling is a powerful tool to motivate people, influence people and have people follow your lead. A good and simple story that appeals to people’s deep values and their emotions can make them overcome fear and difficulties to achieve something truly amazing.
Check out this Lead Read Today article on how to use storytelling as a management tool.
[i] Shiller, R. J. (2020). Narrative economics: How stories go viral and drive major economic events. Princeton University Press.
[ii] Brown, B. (2020). Book Review: Narrative Economics: How Stories Go Viral and Drive Major Economic Events. Quarterly Journal of Austrian Economics, 22(4), 620-626.
[iii] Stanovich, K. E., West, R. F., & Toplak, M. E. (2016). The rationality quotient: Toward a test of rational thinking. MIT press.
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