E19: Breaking down Robinhood's GameStop decision: Why did it happen and how can it be prevented in the future?

**Jason Calacanis** (0:26)
Hey everybody, welcome to the All In Podcast. It was a slow news week, so we decided we'd give you a special episode. We're going to go around the horn with our special picks. We're each going to pick three picks, everybody. We're going to pick our favorite recipe, our favorite new hobby, and our favorite streaming guilty pleasure, because there was no news.
With us today, the dictator Chamath Palihapitiya, Rain Man, David Sacks, with his new track from Young Spielberg, just ripping across the charts, Young Spielberg at it again, this time with a track focused on the Rain Man himself, and the Queen of Quinoa, who everybody says we should upgrade to the King of Quinoa, David Friedberg.

**Chamath Palihapitiya** (1:09)
Why is that an upgrade? The Queen of Quinoa is better.

**Jason Calacanis** (1:11)
I don't know. People just felt I was being... I don't know how people could say that anointing him as Queen would be derogatory. I think these people are not woke and they need to be canceled.

**David Sacks** (1:26)
Jason, here you go again making a lot of assumptions about people's pronouns.

**Jason Calacanis** (1:32)
They Queen of Quinoa.

**David Friedberg** (1:34)
I take no offense. I take no offense your insults to me. And today I'm having the emotion of excitement and I am ready for the conversation.

**Chamath Palihapitiya** (1:42)
Good.

**Jason Calacanis** (1:43)
We got the firmware upgraded.

**Chamath Palihapitiya** (1:44)
All right.

**Jason Calacanis** (1:45)
So I think we might as well start with... I don't know if you guys caught this, but there's a subreddit called WallStreetBets and what they do on WallStreetBets is they find angles and a thesis and then they bet on a stock. The stock they picked for the past couple of months has been GameStop and boy did they...

**Chamath Palihapitiya** (2:06)
Actually, Jason, hold on a second.

**Jason Calacanis** (2:08)
Ram and Gems.

**Chamath Palihapitiya** (2:09)
That's not true. So I had actually a guy on my team put together two really important documents and I'm just going to read them because it's full of so much interesting shit and then we can talk about...

**Jason Calacanis** (2:26)
Where are these documents from? You're saying from the Wall Street Bets?

**Chamath Palihapitiya** (2:29)
No, no, no, no. I had a guy go in, one of my team members, one of my colleagues and go and summarize the entire saga from the beginning and then we can talk about the corporatist scumbags of Robinhood and other fucking people over. So let's do that in that order.

**David Friedberg** (2:44)
This is why they call him the dictator.

**Chamath Palihapitiya** (2:47)
Let's start with the...

**Jason Calacanis** (2:48)
Read your biased and boring document. Go.

**Chamath Palihapitiya** (2:53)
You're an idiot because you just want to defend people because you blindly stumbled into a fucking trade that actually made a little money. Low and behold, you actually invested in a company that literally they got on television yesterday and they fucking lied to Americans right to their face. This is a company that was insolvent because now let's just put a pin in the following data point which I believe to be true. I know more about this than you do because I live in these markets.
Okay, so I understand what it means to be putting on trades, to being short, to being gamma squeezed, to have longs, to do all of this risk management. You're an early stage investor. So I know the intricacies of this stuff and what's happening in here. This company was insolvent. They did not have the capital requirements to post the margin that was being asked of them by their partners. And so this was a platform level decision to ban and block people from trading securities. It cost individuals hundreds of millions, probably billions, maybe even tens of billions, and these motherfuckers should go to jail.
Now, let me give you the timeline before we get into that.
June 2019, in June of 2019, a Wall Street bets user named Deep Fucking Value began buying long dated January 21 calls. What that means is in June of 2019, this person was betting that the stock would go up by January of 2021 He spent $50,000, which by the way today is worth about $25 million.

**David Friedberg** (4:23)
By the way, Chamath, we should just highlight that there are forums where individuals that are trading stocks talk to each other and share tips and promote things to one another. That's where this was taking place.

**Chamath Palihapitiya** (4:33)
Yeah, and by the way, those forums exist in the professional organized world, too, amongst hedge funds. I've been invited to idea dinners where we all get together and we talk about the ideas that we have and we're all expected to do fundamental analysis. But some of those ideas are actually momentum-driven ideas. A lot of the biggest dislocations in the market, just as a setup here, have been because of momentum-driven trading by organized capital. We've been stuck with this for a while.