Random question: Do the activities around GameStop Stock (GME) represent a potential shift for Small Business as well?
3 reasons why GME is a potential positive indicator for small business. Summary: The distribution of resources is shifting the leverage small business has in the marketplace. An argument for this is the impact the diversification of non-physical resources has had on the investor marketplace which is represented in the happenings of GME Stock.
If you don’t live under a rock you have probably heard something about the happenings around GameStop and it's stock. A quick history if you haven't: a group of individuals (retail investors) came together to challenge (and possibly beat - still to be determined) large institutional investors . To see a whole breakdown of what happened, you can find a more in depth summary here: (insert link) Up to this point in history, major institutions and investors paved the way for business trajectory. Their control of resources and opportunity to execute has been tightly held, but the tides keep changing and we are starting to see the impact this could have on smaller players on a large scale.
1. Access To Leverage
We know by now that the internet is a source of incredible leverage for small businesses and brands. Businesses and brands that would have had to spend hundreds or even thousands of dollars to get set up, running, and customers can now spend pennies compared to before.
How does this apply to GME?
The situation with GME would have been nearly impossible to pull off previously. Previously, only major players would be able to even trade the stock. Major institutions were the only ones with access to the platforms needed for trading. Furthermore, those institutions were the ones that had access to the information which could lead to educated trades. 25 years ago how would a retail investor have been able to discover key bits of information so easily, in order to make semi*-educated trades. With a quick search, it became incredibly easy to find that Game Stop Corp. Class A is shorted 120%, information like that would have been nearly impossible for an retail investor to find out previously. (For those who don't know what "shorted" means - it simply means that an individual is betting a stock will go down. Done by borrowing someone's share and selling it on the open market, promising to return to that share to the person you borrowed it from at a later date. A more in-depth definition can be found her. The next phenomenon in this scenario is occurring because of the large shorted amount on Game Stop, a short squeeze.
A short squeeze is a rapid increase in price owing primarily to technical factors in the market rather than underlying fundamentals. A short squeeze can occur when there is a lack of supply and an excess of demand for the stock due to short sellers covering (liquidating) their positions. Why this is relevant: retail investors are capitalizing on the information they know: the stock is incredible over shorted. If some individual retail investors had that information in the past, how would they be able to utilize this information to their advantage? You would need a lot of retail investors to bet a stock would go up in order to compete against major investors saying the stock is going down. Previously this would not be possible - how hard would it have been to have individuals to coordinate in such a way to actually pressure major investors? Reddit Wall Street Bets has "9.4 million degenerates" imagine if 5 million of those degenerates had 1,000 to take this bet. That's $5 Billion that could be used - not peanuts. $5 billion coming from the "small guy". $5 Billion thrown into an opportunity with the risk diversified amongst 5 million people (individual funds) means there is potentially a lot less at stake per investment. Which in theory give the group more power as a whole. When else in history could this be done in history as frictionless as it is today? Never. That's the power of the internet and understanding that power is what could lead Small Businesses into their new age.
2. The Distribution Of Resources
Resources are critical to any individual or business and while some resources are becoming concentrated, others are becoming more distributed. And it is that distribution of resources that are going to pose huge benefits. Human Resources - Talent & Compensation - Large corporations have the funds needed to attract top talent.
Financial resources: - Capital
Intellectual resources: Brands, patents, copyrights, partnerships, customer databases.
In terms of small business, this distribution of resources is moving the needle to their favor. Human resources - humans were once spread out across the U.S. but that shifted towards urban settings with the coming of the industrial revolution. Now, with the ongoing digital revolution we are beginning to see a reverse migration (insert link) from major cities and all they offer - jobs at large corps, compensation, etc. and towards smaller locals. We are headed in a direction where humans who once gained skills amongst peers in major locations are now returning back to their home or a new small local and bringing with them all their new skills. This can be compared to (insert time in history where the sharing of knowledge led to an increased productivity across cultures/tribes).
Financial Resources - remember when you could only get a loan from the bank or if you were fortunate enough - from your friends and family. That is no longer the case, there are thousands of ways to raise/make money online today. There are hundreds of platforms to raise money, make money, get money etc. Capital is no longer behind a few doors, it is behind many. Physical resources: Physical resources are difficult to distribute, so I'm going to simply make this, the ability to capitalize on physical resources can become easier. Physical resources are limited by their very definition, that said, the ability to capitalize on these resources might become easier. As an example, small towns tend to have some form of physical resources that are huge opportunities for humans to capitalize on. Take a trip through a small town, and you'll see buildings empty, you'll see open land, you could see that there is plenty of space. And it's space that has had little interest in a long time, so that space might be easier to work with.
Finally, intellectual Resources - these non-physical, intangible resources are having an incredible distribution. Customer databases can be created for pennies compared to before, partnerships can be created as easily as a quick message. These intellectual resources do take time to curate, but they can be made cheaper and faster than ever before! Recap how distributed resources allowed GME events to happen and what that could mean for small business. The distribution of funds, knowledge, and intellectual resources coupled with access is what allowed retail investors to compete against major institutions in the GME space. The continued distribution of resources will continue to play and maybe play an even greater role for impacting small business in the future. The final part - - the gasoline - the Hive Mind.
3. The Hive Mind
The concept of the Hive Mind is that it is the collective thoughts, ideas, and opinion of a group of people (such as Internet users) regarded as functioning together as a single mind.
Humans have always looked to other humans even when they don't need to - it's a survival instinct that is programmed into our neurology. If we see a group of other people running away from something, we feel inclined to run. If we see many running towards opportunity - we run towards it as well (think of the gold rush). Our lives are more digital than ever, that digital escalation has come on so quickly that our neurology has not had time to evolve to adjust to it. We are still practicing old survival techniques, now in a digital setting. In a fear setting, that could be news creating mass hysteria - in a greed setting that could look like a collection of people who see an unverified (or verified) opportunity running towards it even though it's digital. Example: the wildfire of NFT taken off in the past few months
Couple that concept with being in just the right time period where FOMO, YOLO, and other paradigms can spread like wildfire. You can no longer write off retail investors with "no money". Even if someone has $500 - $1000 that is enough to make an impact when a Hive Mind is in control. Because it is no longer 1 person making that $500 to $1000 decision, it's the hive (which could be millions of people) making a $500 to $1000 decision.
What does this mean for Small Business?
So GME became possible because of the leverage the internet offers, diversification of resources, access to the internet, and the sped up evolution of the human Hive Mind due to social media.
This translates to potentially huge positives for small businesses. Imagine a rapid increase of small businesses with monstrous growth overnight, they catch on like wild fire. And then after that, the small businesses refine their Hive Mind and that leads to even more incredible growth.
Resources are becoming more accessible for them and they will continue to become more easily accessible. Capital is becoming more distributed in terms of business, humans are exploring new locations are heading back to their hometowns with all of the new skills they have learned.
More small businesses and brands are going to be coming and that does mean more competition is on the way. But we also have to remember that the "pie" is growing. With more individuals coming online every year, that means that the channels are growing.
Small Business Saturday #shopsmall #smallbusiness are all growing and they have the potential to continue to grow. Consumers know what the downsides to large business, yet they continue to use them because of the convenient experience that comes with large business. That "ability to offer convenience" is becoming more affordable to offer and it is also becoming cheaper to get that product, service or SAAS in front of consumers.
Again, just a thought experiment, what do you think?