The Pattern Repeats
Scandal erupts. Villains are identified and punished. Everyone celebrates the system working as intended.
But that's only half the story.
The other half is what the system was doing before the collapse. What architectural conditions made the outcome nearly unavoidable. Why the same structures keep appearing in different industries, different eras, and different organizations while we keep reaching for the same human explanations.
The Pattern Repeats doesn't exonerate the actors. The damage was real and the accountability was earned. It asks the harder question. What made this rational when it should have been unthinkable. And what does that tell us about where it's happening right now.
This edition: when holding the line matters more than survival.
Wall Street is full of greedy bankers focused on building their own fortunes while keeping the retail investors from having a fair shot. At least, that's what you believe. And today you have an opportunity to stand up to them in what feels like a meaningful way.
They took short positions. You have a chance to make sure those positions cost them dearly. The market climbs, they lose millions, you see more commas in your portfolio balance than you ever imagined you would.
And every time someone posts about selling, the community reminds them what that means. Paper hands. Betrayal. You're the reason we can't have nice things.
How long do you hold?
In January 2021, GameStop was a struggling brick and mortar video game retailer that most analysts had already written off. Hedge funds agreed. Several had taken significant short positions betting the stock would continue its decline.
What happened next became one of the most celebrated moments in modern financial history.
A community of retail investors on Reddit's WallStreetBets forum identified the short positions and recognized an opportunity. If enough people bought GameStop stock simultaneously, the price would rise and the hedge funds holding short positions would be forced to buy shares to cover their losses, driving the price even higher. A short squeeze.
It worked. GameStop's stock climbed from around $20 in early January to a peak of $483 on January 28th. Short sellers absorbed an estimated $12.5 billion in losses. The story dominated every news cycle. Retail investors were celebrated as the underdogs who finally found a way to fight back.
But something else happened alongside the financial mechanics. The trade stopped being a trade. The language shifted from position sizing and exit targets to holding the line and diamond hands. A new vocabulary emerged that had nothing to do with finance and everything to do with belonging. You were either in the movement or you weren't. You either believed or you were part of the problem. The enemy was Wall Street and every dollar you held was a vote against them.
The financial objective hadn't disappeared. But it had been joined by something more powerful. An identity.
But the architecture underneath the celebration was more complicated than the narrative suggested.
The people with the loudest voices inside WallStreetBets, the ones posting the most visible buy and hold content, the ones whose enthusiasm was driving the movement forward, were not all operating from the same position. Some had entered the trade weeks or months before it became a cultural phenomenon. Their cost basis was measured in single digits. Their exposure to downside risk was fundamentally different from someone who bought at $300 because the community told them the squeeze hadn't squoze yet.
As the price climbed toward its peak, large position holders began exiting. Quietly. In quantities that would eventually become visible in the disclosed filings. While the public facing message inside the community remained hold the line, the architecture of the situation was giving the earliest and loudest participants a completely rational reason to do the opposite.
This wasn't necessarily coordination or malice. It was architecture.
The rational actor with a $4 cost basis and a position worth 100 times its entry value faces a completely different optimization problem than the rational actor who bought at $400 because they believed the movement had momentum. The first actor's rational play was to exit while the price held. The second actor's rational play, given the social architecture of the community, was to hold because selling meant giving ground to the enemy they had come to defeat.
Two actors. Same trade. Completely different architectures instructing completely different optimal behaviors.
The community that had been built to apply collective pressure on the short sellers had inadvertently created an architecture that concentrated the upside in the hands of the earliest participants and distributed the downside across the people who arrived latest and believed most completely in the movement.
The hedge funds didn't win. But neither did most of the retail investors who showed up to beat them.
Eighteen months later, the pattern repeated.
Bed Bath and Beyond had become another struggling retailer with significant short interest. Those who had beaten Wall Street once had another shot at Goliath. And those who had watched from the sidelines during Gamestop had a chance to finally claim membership in the movement that had made history.
Ryan Cohen, the founder of Chewy and a celebrated figure in the retail investor community, had taken a significant position in Bed Bath and Beyond. His involvement was treated as a signal. If someone with his track record was bought in, they felt they had a real chance to stick it to Wall Street again.
The community mobilized. The stock climbed. The narrative was familiar. Hold the line. Diamond hands. This is the one.
In August 2022, Ryan Cohen filed to sell his entire position. All of it. In a single disclosure. The stock dropped nearly 40% in a single day.
The retail investors who had bought in on the strength of his involvement, who had held through the volatility because the community architecture made selling feel like admitting defeat, absorbed the collapse.
Cohen had entered at lower prices. His rational actor calculation had always been different from theirs. The architecture of his position and the architecture of theirs were never the same even when the public facing message suggested they were aligned. His exit filing was precise in its timing and complete in its scope. Whether that precision reflected awareness of the community's belief architecture or simply optimal position management is a question the architecture itself can't answer. What it can answer is what the rational actor in his position was instructed to do.
The story we told about both trades was about retail investors finally having a weapon against the institutional money that had always had the advantage. And in a narrow sense that was true. Short sellers absorbed an estimated $12.5 billion in losses during the Gamestop squeeze.
But the architecture of both movements concentrated the gains in the hands of the people who were earliest, loudest, and most able to exit quietly while the community they helped build held the pressure.
The heroes of the Gamestop story made fortunes. The believers who followed them into Bed Bath and Beyond lost them.
Not because anyone was necessarily lying. Not because the movement was a deliberate fraud. But because the architecture of the situation created two completely different rational actor calculations that looked identical from the outside. The community couldn't see the difference between someone holding because they believed and someone holding because they hadn't finished selling yet.
The people celebrated as the faces of retail investor empowerment were operating inside a completely different incentive structure than the people following them. The social architecture they helped create made doubt more expensive than belief for everyone except the people with the most reason to doubt.
Beating Wall Street by betting against them became who they were. Which ultimately meant that no bet was too risky to take.
And when the value started falling the belief didn't waver. It deepened. Because they weren't holding a stock anymore. They were holding a cause. And causes don't have stop losses.
Belief, it turns out, is a remarkably effective substitute for information right up until it isn't.
When a system makes doubt more expensive than belief, even rational actors choose to act against their own calculations.
The Gamestop trade is over. The Bed Bath collapse is in the rearview. The architecture that produced both outcomes is not.
What cause have you converted from a position into an identity?
What data are you ignoring because the movement is larger than the math?
What community are you holding for that has already started selling?
The pattern repeats not because we haven't learned the lesson. But because the next cause always feels different from the inside.