Reddit's populist stock movement was 15 years in the making

Reddit long cultivated a reputation as a place where anything goes. PHOTO: REUTERS

NEW YORK (BLOOMBERG) - The Redditor revolt that made stock markets go haywire in recent weeks owes its origins, in part, to a humpback whale named Mister Splashy Pants.

In 2007, Greenpeace asked the public to decide the name of a whale in the South Pacific Ocean for a campaign raising awareness of hunting by Japanese fisheries. A group of pranksters organized on the still-nascent message board Reddit to hijack Greenpeace's online poll and push their chosen name. The organiSation and the netizens grappled for weeks until Greenpeace finally relented, and Mister Splashy Pants was crowned.

Two years later, Reddit co-founder Alexis Ohanian recounted the gag in a TED Talk. "In the last four years, we've seen all kinds of memes, all kinds of trends get born right on our front page," he said. "This is how the internet works. This is the great big secret. The internet provides a level playing field."

The Greenpeace caper was such a meaningful event for the company that Reddit temporarily changed its logo to a whale flexing its bicep fins. Mister Splashy Pants would offer a model for Reddit, shaped over more than a decade, that gave birth to cultural touchstones and charitable causes, as well as organized harassment and dangerous conspiracy theories. It also provided an early roadmap for WallStreetBets, a forum of amateur day traders who used Reddit to incite the stock market frenzy.

"No longer is the message coming from just the top down," Mr Ohanian said in the 2009 speech. "You've got to be OK to lose control."

Reddit long cultivated a reputation as a place where anything goes. The best and worst of the internet was on full display. Reddit took small steps last year to reduce the ugliest behavior by introducing its first-ever hate speech policy. But it remains a venue where controversy is permitted, hijinks are encouraged and a joke can quickly spin out of control.

The trading crusade of the last couple of weeks, which drove up the price of nostalgia stocks like GameStop and AMC Entertainment Holdings, was partly a joke and partly a way to chasten hedge funds shorting those stocks. It worked. Mr Ohanian, who stepped down from Reddit's board last year, and his co-founder Steve Huffman latched on to the populist argument. The founders, both 37, have said WallStreetBets demonstrates that people can band together to influence entrenched institutions.

"This is something, I think, for a lot of people, that was a statement as much as an investment," Mr Ohanian said in an interview on Bloomberg TV. Mr Huffman, the chief executive officer, described it as a "culture war of Wall Street versus everybody else."

But the victims extend beyond hedge funds and stock-trading apps like Robinhood Markets, which scurried for emergency capital to cover volatility risks. US regulators are examining social media posts for clues of possible fraudulent activity behind the trades. Now, as trendy stocks come crashing down, those who bought high aren't laughing as hard as before. "I've been looking at my phone nonstop for the past week, and it has worn me down," said Scott Smith, a Reddit user who lost about US$1,300 trading GameStop shares. "I'm going to take a long break and focus on my student loans before I think about stocks again."

Mr Ohanian and Mr Huffman met as students at the University of Virginia, where they started Reddit with another classmate in 2005 as a place to share and discover web pages and news articles. They were drafted into the inaugural class of a new business incubator in Silicon Valley called Y Combinator. With US$100,000 in venture capital, they cultivated a small population of users who filled the site with their own posts and placed votes on their favorite content.

Condé Nast, publisher of the New Yorker and Wired, acquired Reddit in 2006. In the ensuing years, the founders left; Condé Nast spun off the business; and a pair of outside CEOs tried unsuccessfully to tame the Reddit mob. One was Ellen Pao, a former venture capitalist at Kleiner Perkins. MS Pao is critical of the way Mr Huffman, her successor, handles hate speech, harassment and other troubling activity on the site. And with WallStreetBets, she said Reddit failed to provide adequate safeguards for people caught up in the craze.

"Reddit should be adding a disclaimer because I don't believe all 6 million people in the r/wallstreetbets, and the people who followed them, know exactly what they are getting into," MS Pao wrote in an email. (The forum now lists more than 8.6 million readers.) "Being transparent about risk is the ethical thing to do."

Mr Huffman's response to controversy on the site has been inconsistent and often late. He has dealt with critics using similar tactics as Reddit's trolls. On at least one occasion, he secretly edited a bunch of comments that were critical of him, something for which he later apologized. Pizzagate, an internet-native conspiracy theory falsely linking Hillary Clinton to a pedophilia ring, prospered on Reddit before Mr Huffman intervened to ban the community in 2016.

He allowed another group, The_Donald, to spread racist messages for years. In an interview with the New Yorker in 2018, Mr Huffman said some people on the forum were simply expressing political beliefs, "and that's something we want to encourage." Reddit banned the group last summer and then expelled a similar group last month after members stoked and celebrated violence at the US Capitol. Reddit declined to make Mr Huffman available for an interview.

The building blocks of Reddit have been around since the early days of the web. People shared stock-trading tips on Yahoo! message boards and conducted polls on GeoCities. But there's a certain aspect to Reddit's system, where anyone can vote practically anything on the site up or down, that draws out the inner shock jockey in users. Some treat it like a game, Mr Huffman told the New Yorker: "'If I post this ridiculous or offensive thing, can I get people to upvote it?' And then some people, to quote The Dark Knight, just want to watch the world burn."

Reddit monitors "bad stuff" on the site, Mr Huffman said in a conversation last month on the social media app Clubhouse, using an internal metric called "daily active shitheads." WallStreetBets has not met the threshold for punishment on Reddit, despite getting slapped with a hate-speech ban by Discord, another app that typically takes a soft approach toward moderation. WallStreetBets is "by no means perfect, but they've been well in the bounds of our content policy," Mr Huffman said.

Mark Luckie, Reddit's former head of media, has been critical of the company for its lack of intervention on racist and hateful content, but he doesn't consider WallStreetBets problematic. "These are people who are talking amongst themselves in order to better their financial futures. I don't think there's anything wrong with that," Luckie said.

In recent days, the tone of WallStreetBets, once gleeful about sticking it to finance types and making a fortune in the process, has turned somewhat dour. The board is peppered with comments about how much money members have seen disappear from their Robinhood accounts.

Mr Huffman expressed concern for his users' financial wellbeing but also an underlying hesitation to do anything about it. "I am worried for them. But I wouldn't let that extend to paternal action like protecting them," he said in a New York Times podcast interview published last week. "Hey, look, I would be worried if people were jumping off a cliff into a river as well. It is a fundamentally dangerous activity. But I also think people are free to make decisions."

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