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Gamification is not democratisation…whether it’s investing or politics

Asia Analytica
Asia Analytica5/7/2021 06:31 AM GMT+08  • 9 min read
Gamification is not democratisation…whether it’s investing or politics
This gamification is not necessarily bad.
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Investing in stocks has always carried an element of speculation. We can make projections and assumptions, but we can never be certain about what would transpire in the future. In fact, sometimes we think the less the market understands of a company’s business, the more attractive its stock becomes! Perhaps it is the gambling mentality that, over the course of history, has proved to be very much a part of human nature.

Positively, it is this risk-taking culture that drives innovation and entrepreneurship in the world. But excessive speculation often leads to asset bubbles that eventually end in tears when reality sets in. Yet, through every boom and bust cycle, there is never any shortage of investors who would embrace risk-taking.

Most prevailing narratives espouse a positive spin on how technological advancements have resulted in the democratisation of investing for millions of people, especially first-timers. How the ease of use and accessibility — all you need is a smartphone app — convenience, zero-commission fee trading platforms and fractional share trading have championed inclusiveness. How the free flow of information has levelled the playing field (more or less) for the everyday investor, the man in the street.

This democratisation of investing has played a key role in encouraging the younger generation — millennials and Gen Zers, who are also the most tech-savvy — to start investing early. Thanks to the remarkable power of compounding, even a few years’ difference in when you start investing can make a huge difference to your wealth over long periods of time.

What is less widely acknowledged is when the human inclination to gamble overlaps with these technological advancements — and what we are really witnessing today is not so much the democratisation but the gamification of investing. That is, turning investing into a game.

Instead of exchanging stock tips at the corner coffee shop or office water cooler, millions of budding investors from all over the world can now participate in the equivalent activity — the sharing of information and views — via social media platforms. The most famous of which, of course, is the Reddit Inc investing forum, WallStreetBets — where last year, a group of strangers banded together to outplay professional hedge fund managers at their own game. It was like watching David battle Goliath — with the little guy winning.

This gamification is not necessarily bad. It is an effective way to gain and engage the attention of the young and to help them overcome their fear of the complexity of investing. As we mentioned, investing early in life is a good thing.

The problem arises when most of these “investors” (whether they are dedicated players or neophytes looking for quick gains) do not even bother to pretend that fundamentals matter. It becomes all about the feeling of camaraderie, community and collaboration — humans, after all, are social animals. And sometimes, there is a sense of morality, coupled with our inherent competitive streak, to demonstrate the power of individuals against big-time Wall Street analysts and asset managers.

From GameStop to AMC Entertainment to whichever stock is the latest buzz, participants are not only touting stocks but also putting real money behind these trades. They do not care that GameStop is a video game retailer whose business has been in decline for years, as consumers turn to digital downloads, online gaming and streaming services. AMC owns a movie theatre chain that was hard hit in the pandemic and was heading into bankruptcy before it was saved by fresh capital injection at the eleventh hour.

The stock market has turned into a virtual multiplayer game! The euphoria of winning or achievement — of beating the system — releases dopamine (a chemical that mediates pleasure) in the brain, creating an adrenaline high. We think, like gambling, gaming can also be dangerously addictive. Because that is what it is.

The frenzied trading in the so-called “meme stocks” — stocks whose prices are driven by pure hype on social media and online forums, momentum and emotion — is gambling, not investing. And the scary thing is that young people are doing it for fun. As Thomas Goetz describes it in an article in Wired, “gamification is exciting because it promises to make the hard stuff in life fun — just sprinkle a little videogame magic and suddenly a burden turns into bliss”. It may seem like all fun and games, but make no mistake, it has real-life consequences.

The stock prices of the meme stocks are extremely volatile. Prices can rally sharply, with gains of up to thousands of percentage. Media attention often focuses on how easy and quick it is to make a lot of money with so little effort. It feeds our competitive nature — to boast of our wins and achievements — and, at the same time, our fear of missing out (FOMO). Less publicised is how fortunes can also be lost in a matter of days — or much worse, if one buys on margin financing. In a casino, the odds get worse the longer you play.

This gamification of investing phenomenon is not limited to the stock market. The jaw-dropping gains of cryptocurrencies are, similarly, driven by pure speculation. Ardent supporters of Bitcoin would at least try to justify its US$1 trillion market cap — as a legitimate asset class, digital gold and a hedge against fiat money devaluation and a future global currency — but the insane US$77 billion valuation for Dogecoin is quite simply pure gamification. For some perspective, that is more than the market caps of far more established companies, including Colgate-Palmolive, Baidu, BYD Co, BMW, ANZ, Bayer, Adidas, Marriott International, Ericsson and the largest listed company on the Singapore Exchange, DBS Group Holdings.

Dogecoin was created as a joke, to poke fun at the cryptocurrency mania in 2013. Its name and logo were derived from the “Doge” meme of a Shiba Inu dog that was popular at the time. It has little, if any, real-world utility. Ten thousand new dogecoins are created every minute to infinity. It has no meaningful value. In other words, there is absolutely no reason for anyone to pay real money for dogecoins — well, except for the fun of it.

Over the past year, dogecoin’s price has risen from a low of 0.23 US cents to a record high of 60 US cents on May 4. Dogecoin traders even declared April 20 as “DogeDay”, with the mission to pump up its price to US$1 (an arbitrary target). The craze was fuelled by celebrity tweets, including from one of its biggest supporters, Elon Musk. Billionaire Mark Cuban said it is “better than a lottery ticket”.

Where does it end? An asset without intrinsic value is worth as much as what people are willing to pay for it, until they aren’t. If anything, Dogecoin’s remarkable run should be a warning to all, of how easy it is to create and popularise a cryptocurrency. And how equally easy it would be to replace it with the next flavour of the month.

Zero-fee trading apps such as Robinhood as well as social media forums like Reddit and Twitter may be to blame for enabling and fuelling our gambling instinct, which is embedded in the gaming culture so prevalent among the young — people with more money than sense. But the concept — of gamification under the guise of democratisation — is hardly alien. The same can be said of a nation’s politics and, more so, geopolitics.

When does democracy or democratisation become a game or gamification? When do the conflicts created by the citizens of Lebanon or Syria move from having greater democracy to serving the gamification or political games of its geopolitical masters? Or, for that matter, how do the people of Hong Kong suddenly lose their “freedom and democracy” when it was handed back to the rightful owner, considering that the country was colonised for years by the British? Was Hong Kong truly more democratic under British rule than under China?

The younger generation so enamoured with, to the extent of glorifying, the years under colonialism would do well to study Hong Kong’s history — the social hierarchy, racial inequality, self-serving interests and, at times, brutal clampdown on dissent by the British. There was no election and the people had no say in governance. Indeed, there was never any plan to democratise the political system in Hong Kong in all the years, since 1841 right up to the eve of its handover in 1997. Are recent-day events a geopolitical gamification for the Western powers and their condescending views of Asians or are they really about the freedom of the Hong Kong people?

The Global Portfolio was down 3.5% for the week ended May 5, on the back of more selling pressure on technology stocks. Okta (-14.1%) and ServiceNow (-13.9%) were two of our worst-performing stocks while shares in Singapore Airlines (-7.1%), Adobe (-5.6%), Alibaba Group Holding (-5.1%) and ViacomCBS (-5.6%) also fared worse than the broader market. Last week’s losses pared total portfolio returns to 56% since inception. Nevertheless, we are still outperforming the MSCI World Net Return index, which is up 48.1% over the same period.

Disclaimer: This is a personal portfolio for information purposes only and does not constitute a recommendation or solicitation or expression of views to influence readers to buy/sell stocks, including the particular stocks mentioned herein. It does not take into account an individual investor’s particular financial situation, investment objectives, investment horizon, risk profile and/or risk preference. Our shareholders, directors and employees may have positions in or may be materially interested in any of the stocks. We may also have or have had dealings with or may provide or have provided content services to the companies mentioned in the reports.

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