A War of Biblical Proportions: How the GameStop Short Squeeze Used a Dangerous Political Trope

On a scorching June day in 1954, Senator Joseph McCarthy sat slumped in his chair at the center of a congested Senate chamber. The flash of press cameras reflected off his reading glasses in a moment mirrored on millions of televisions in American homes. Feeling pressured to provide evidence of a Communist infiltration, McCarthy — out of turn — delivered his sermon, one that was nearly identical to the ones Americans had grown accustomed to hearing.

McCarthy attacked a young lawyer who he suspected of having Communist sympathies — his proof of widespread Communist influence. As McCarthy continued his relentless crusade, the lawyer’s mentor, Joe Welch, interjected with his famous line: “Let us not assassinate this young lad further… you’ve done enough. Have you no decency, sir?”

This exchange represented the climactic moment of a four-year campaign by McCarthy. In 1950, McCarthy — a then-unknown legislator from Wisconsin — had risen to prominence with a speech in Wheeling, West Virginia, in which he claimed to own a list of 205 government officials with Communist agendas (he never produced this list). He warned of an impending Communist takeover that would funnel the same chaos from the Soviet Union into American homes, businesses, and government. This message struck a particular chord with the American psyche, which, because of World War II six years prior,  was just as battered as the Western Front. This new wave of Communist paranoia simultaneously launched McCarthy into political stardom and his movement, known colloquially as the ‘Red Scare,’ into widespread support.

Just one year before the infamous McCarthy-Welch Exchange, influential Black author Langston Hughes, nicknamed the “poet laureate of Harlem,” sat in that same Senate chamber. This time, however, McCarthy was peering down upon Hughes from his seat as the Chairman of the Subcommittee on Investigations. This hearing was the latest in a line of private inquiries ordered by McCarthy that were completely shut off to journalistic oversight. Just after his Wheeling speech had subjected every government employee — over 4 million of them — to “loyalty tests.” Anyone who gave an unsatisfactory answer was immediately investigated as a “subversive.” Public paranoia and media complicity largely gave McCarthy carte blanche to purge hundreds of public officials from their positions, although none were ever formally charged. But McCarthy quickly turned his attention to private citizens, particularly those who possessed the ability to shape American culture. McCarthy called over 500 witnesses, mostly artists and activists, before the Subcommittee on Investigations; many of their careers never recovered, and some were even imprisoned for invoking their 5th amendment rights.

Hughes sat in that Senate chamber in a similar position to those other artists — many of whom were also Black: he had to find a way to defend a lifetime worth of poems, stories, and ideas — all with his legacy firmly in jeopardy. 

“Have you ever been a believer of communism?” prodded one senator.

Hughes spoke about his early perceptions of America. He spoke about getting stoned on the way home from school. He spoke about watching white friends file into a movie theater, walking under a sign that read, “Colored not admitted.” “My interest in anything that may be considered political,” Hughes said, “has been born out of this whole problem of myself… and how I can adjust to this whole problem of helping to build America when sometimes I cannot even get into school… or check out a book.” Hughes spoke so calmly, so defiantly, so convincingly, that he would not be called for a public testimony. Hughes’ eloquence, the senators decided, was too much of a threat to place in front of national television cameras. Instead, McCarthy showed the public low-level government servants and artists who were not equipped with the same talents as Hughes. McCarthy could antagonize these witnesses until he found some inconsistency or they reduced into incoherence. The hearings were nothing more than glorified Condemnation to the Beasts, and unsurprisingly, the press covered McCarthy’s antics exhaustively.

McCarthyism, as it is known, survived on a uniquely eternal, powerful and blinding narrative which has recently reappeared in the American political landscape.

During his infamous speech at Wheeling, McCarthy delivered a line that served as an unofficial thesis for the Red Scare: “Today we are engaged in a final, all-out battle between communistic atheism and Christianity. The modern champions of communism have selected this as the time, and ladies and gentlemen, the chips are down — they are truly down.” With this quote McCarthy established a narrative that positioned himself (and his supporters) at an inflection point in a much larger conflict against a far superior foe. Perhaps unintentionally (McCarthy was known for having a particularly dull foresight), he tapped into a theme that is central to Judeo-Christian religion, ubiquitous in American culture, and wrapped in the mysticism of the country’s birth. McCarthyism, like many of today’s political philosophies, invoked the same thematic device used in the biblical story of David versus Goliath.

It is hard to measure the exact effectiveness of a David and Goliath narrative. Perhaps the closest approximation is looking at a graph of GameStop’s stock price, as McCarthy’s witch hunt and GameStop’s recent value explosion were fueled by this same narrative. 

The original version places us in a long war between the Israelites and an opposing tribe called the Philistines. The story takes place at the climax of the war, where a supposedly undefeatable Philistine warrior named Goliath challenges the Israelites to one-vs-one combat. The winner’s tribe would acquire the loser’s side as slaves. Wearing inferior armor, David — an Israelite — slays Goliath with just a single stone, securing freedom for the Israelites. Put simply, the story of David and Goliath is an example of an underdog triumph (even if this is not necessarily its thematic significance in the larger Book of Samuel).

The underdog story has been and continues to be supremely relevant in America. Its inherent hope and agency is why David versus Goliath is one of the most recognizable biblical stories. It is also the reason why millions always tune into March Madness hoping to witness the fabled upset. Put a tricorne on David, and voilà: you have the basic elements of the American Revolution. For Christians, a narrative that uses this theme subconsciously implies that its conflict is as righteous and holy as the Bible itself. For atheists, that same narrative is a reflection of values and behaviors ingrained into American culture. And for all Americans, its theme is central to the nation’s history, at least how most people retell it. This universality of the underdog theme, and the understandable glorification of the underdog story, is what makes narratives like McCarthy’s so potent.

During his speech, McCarthy identified his Philistines: “communistic atheism.” Because McCarthy’s party — the Republicans — was mostly composed of Christians, he chose “Christianity” as his Isrealites. That famous quote from the Wheeling speech locked both sides in an ideological war with an overtly religious subtext. Later in the speech, McCarthy selected the State Department, with its superior resources and supposed Communist infiltration, as his Goliath. The particular power of the underdog narrative gave McCarthy his cover to play the role of David for the next four years, securing American “freedom” one hearing at a time.

Some 70 years after McCarthy’s address, on the morning of January 27th, 2021, the world awoke to stunning news. It was actually many months in the making: GameStop’s stock price had more than doubled overnight, reaching a level on par with Apple, Microsoft, and other blue chip companies. This latest jump drove the struggling video game vendor to a 1700% increase in value since the start of the fiscal year. For the previous weeks, Wall Street hedge funds, led by Melvin Capital, had begun to borrow and sell GameStock as part of a tactic called “short selling.” 

Short selling occurs when someone borrows an amount of stock and sells it, only to buy it back at a lower price (to return to the original lender). The short seller is effectively betting against that stock, because their profits are inversely proportional to that company’s success. And betting against GameStock was a good bet for Wall Street in theory: the company’s brick and mortar business plan is all but obsolete in our current digital age. But what Melvin Capital and the other hedge funds did not factor into their calculations was a decentralized group of amateur investors who were determined to counteract Wall Street’s short selling.

 Connected through the subreddit r/wallstreetbets, the investors progressively bought more of GameStop (GME) stock throughout January in a move called a “short squeeze.” Among other things, a stock’s price is calculated using the Economics 101 principle of supply and demand. By increasingly purchasing stock, the r/wallstreetbets investors effectively created more demand for GME, pushing the price slightly higher and higher — bad news for the hedge funds who bet on GME’s price decreasing. The short squeeze trundled along in a similar way through the first three weeks of January: an unfortunate bet for Melvin Capital and a moral win for the Redditors. Then, starting on January 26th, something happened that proved not just unfortunate but devastating for Melvin Capital and life-changing for the original r/wallstreetbets investors.

Even in the early days of this adventure, the short squeeze was always positioned as a sort of narrow retribution against Wall Street. Hedge funds, objects of much public ire since the Great Recession, are representations of the staggering wealth divide of this country in the minds of many Americans. The short squeeze was a way for ordinary people to chisel off some of Melvin Capital’s profits and perhaps even slip some into their own pockets. In many ways, the early portion of the r/wallstreetbets short squeeze embodied everything that makes David’s fight against Goliath so empowering. And that is precisely why it was so tantalizing for national media, politicians, and other public figures.

Starting around January 26th, the success of the short squeeze began to receive national media attention, and the price of GME stock increased exponentially. Much of this early media coverage emphasized the ongoing, one-sided conflict between regular Americans and Wall Street — working class versus elite, rather than the story itself. And much of it described the GME short squeeze as a climactic battle in this war between a superiorly resourced Melvin Capital and regular people. The New York Times ran the headline “‘Dumb Money’ Is on GameStop and It’s Beating Wall Street at Its Own Game.” NBC even invoked the biblical version, inexplicably saying that “the battle over GameStop has a David vs. Goliath feel,” in an article that was supposed to be purely informative. CBS This Morning aired a segment that was irresponsibly titled, “Small Investors Turn GameStop into Wall Street David and Goliath Story.” YouTube continues to be littered with videos of political pundits praising the “little guys” standing up to corporate power. This is not meant to villainize the journalists who covered this story (heck, I even framed the GME short squeeze this way on my podcast); every writer is trained to connect each story to a larger theme or importance. It is crucial to recognize how this first wave of media analysis served a similar purpose to McCarthy’s Wheeling speech.

As the narrative exploded, so too did the price of GME stock. The number of Google searches for terms like “GameStop,” “Wall Street,” or “how to buy stock” follow the exponential curve of GameStop’s price almost exactly.

At some level, everyone dreams about being David. Maybe it is a middle-aged man pulling the lever of a Vegas slot machine, hoping that he will finally beat the house. Or maybe it is a middle schooler trying to find the courage to confront their more ‘popular’ bullies. For people who lost houses and life savings because of Wall Street, or people barely surviving on each paycheck while Wall Street brokers make millions, investing in GameStock was their chance to have a piece of David’s glory. And this blinded them from realizing that their story could not end like David’s did.

Quickly, the Redditors who made the original investment began marshaling the revolutionary fervor for their own benefit. As it jolted into the mainstream consciousness, r/wallstreetbets became increasingly more of an echo-chamber for GameStop zeitgeist. The discourse was largely not about the investments themselves, but rather about a rejection of corporate tyranny or a rebellion against oligarchical rule. The more GameStop investments represented miniature political protests, the more Americans bought stock. And simply getting people to buy more is exactly what r/wallstreetbets was designed to accomplish.

Hedge fund managers make profit by using the huge swaths of money at their disposal, and the people who led the GME short squeeze used a similar tactic. The initial GME investors did not have access to a bottomless bucket of cash, so they simply mined the only vein they could own; they engaged millions of smaller buckets of money though r/wallstreetbets, and compelled their owners to invest in GameStop as a political statement — all using the David vs. Goliath narrative.

Everyday people putting their savings into GameStop artificially inflated its value, and those early investors became fabulously rich. The initial investors seemed to recognize this: anecdotally, r/wallstreetbets moderators deleted posts warning users about the risks of investing and clarifying misconceptions about the nature of the short squeeze. As long as people believed this narrative was destined to conclude like the original, the less likely that they would realize their investments were truly benefitting a select few at the top of the r/wallstreetbets community. When those early retail investors decided that they had ridden the narrative to its peak, they sold their stock in unison. And GME’s value plummeted as quickly as it had risen. And all those people who were entranced by the David and Goliath story suddenly were staring down a crippling loss.

That is the tragedy that tends to happen whenever someone bastardizes the David and Goliath story: “David” usually does not win in the end. These narratives’ primary function is to benefit the bastardizers. Ironically, the GameStop frenzy epitomized the same thing that it was supposed to be a protest against: the few making money at the expense of many. 

Despite millions of dollars in losses for everyday Americans, the GME short squeeze was one of the more benign examples of the David vs. Goliath narrative. Donald Trump’s election lie, which ultimately led to the January 6th insurrection, and the QAnon conspiracy are obvious recent examples. Adolf Hitler’s Jewish question that begot the Holocaust was also a variation, albeit with a particularly nasty twist. The blinding effect of the David vs. Goliath narrative is becoming increasingly popular amongst right-wing reactionaries whose ideas would be considered distasteful without it. It is certainly a cause for concern that these types of narratives are again prevalent in Washington. As each new narrative appears, we must all make a conscious effort to identify its true aims.

Although McCarthy never produced concrete evidence of a Communist infiltration, let alone jailed anyone on “subversion charges,” he rode his fanatical fib to national prominence and ushered in a new era of Republican reactionaries. When retelling the notorious saga of McCarthyism, it can be easy to look towards Charlie Chaplin, Lena Horne, Dalton Trumbo, and the dozens of other public figures who were tangibly affected by the Red Scare (some even serving in prison for contempt of court). But it may be Hughes, who escaped his brief encounter with McCarthyism largely with his legacy and public relevancy intact, that serves as the most useful lens through which to remember the Red Scare. Hughes’ story reminds us that the Red Scare was nothing outside of its narrative, and McCarthy’s public relevance was nothing outside of the Red Scare. McCarthy hid Hughes from the public, not for a lack of evidence (Hughes actually wrote many poems that linked him to communism), but because he was a risk to McCarthy’s narrative.

In times of crisis, people often look for sources of control, and the David vs. Goliath theme provides them with a convenient supply of it. McCarthy’s Red Scare fed off of life’s dystopian undertone stemming from the Cold War and increased nuclear capabilities. Similarly, the GameStop narrative undoubtedly took power from the uneasy minds exhausted from 10 months in quarantine. Because the underdog theme is so evocative and so empowering, it can be hard to question the validity and purpose of narratives that employ it. Hughes tried to ask those questions, and McCarthy never let the public hear them. But one year later, sitting in that packed Senate chamber in June of 1954, McCarthy made his final mistake. By mercilessly assassinating the character of that young lawyer, McCarthy gave Welch the opportunity to do what Hughes was never able to. “Have you no decency?” — his question to McCarthy — is generally remembered as the fatal blow to the Red Scare. As public support declined after that confrontation, McCarthy turned towards alcohol. In 1957, with his public influence in tatters, McCarthy died of hepatitis.

Every narrative lives in fear of a Langston Hughes or a Joe Welch — a person who can enlighten the public to its true nature. And perhaps every narrative will eventually meet a person who questions it. The only uncertainty, then, is how many people that narrative will hurt before the truth is exposed.