Dumb Money movie vs true story-Analysis/GameStop/Robinhood 2021 Review

written by Laura J.

The Antisocial Network: The GameStop Short Squeeze and the Ragtag Group of Amateur Traders That Brought Wall Street to Its Knees by Ben Mezrich (2021)

Dumb Money directed by Craig Gillespie (2023)

Book Review

This book was published in September of 2021, so while it seems too early to be writing about it, I did find the book engaging and informative. It is written in a creative non-fiction kind of way so it isn’t dry the way some non-fiction can be (looking at you House of Gucci). When Mezrich wrote about Ken Griffin of Citadel, he definitely let his personal bias show with talk of how me probably sits on a throne made of skulls. “Griffin…almost certainly wasn’t sitting on a massive ivory white throne made of the skulls and the bleached and polished skeletal remains of the many enemies he’d vanquished on his way to the top of the financial industry…Such a throne, if it had existed, which it most certainly did not, would have been just the sort of thing to set the mood…” I, like most people, love the story because it is a group of everyday people that are trying to stick it to the Wall Street big money guys so I am not rooting for Griffin or Melvin Capitol, but I also kind of want my nonfiction books to be a nonpartisan view of things.

The book was also repetitive at times, like how many times does he need to remind us that the Analysis users of Wallstreetbets call themselves “apes” and the R word? We get it!

I did learn a lot from the book though and it was a suspenseful read at times. It also did a decent job of conveying the hope and solidarity of this event, while also showing how in the end, big money wins because they are the ones that make the rules. A good mix of inspirational and depressing lol.

Movie review

This is a great cast and as a big Paul Dano fan I was so excited to see this! It didn’t quite live up to my expectations though. While I like the cast, no one here is giving a performance of a lifetime or anything. I wanted something along the lines of The Big Short, but it wasn’t as good as that movie is. First off, they don’t try to explain any of the stock terms. I guess they expect people who are interested in this movie to already be well versed in what short selling means, what a short squeeze is, and why hedge funds were losing so much money when the stock went up. They also have multiple people talk about buying stock on Robinhood using call options, but never tell us what that is. They do kind of explain payment for order flow but that was about it.

I also wanted a movie that would make me feel emotional, and there was a scene with the Dano character, Keith Gill, giving his testimony and during the House of Financial Services Committee hearing that was meant to be the emotional scene. Yet even then I just wasn’t really feeling much. There is also a scene between Gill and his brother (played by Pete Davidson) that was meant to be touching and funny, but again, I didn’t find it as impactful as it was meant to be. In general, the humor wasn’t the kind I found funny either. I chuckled a few times, but not as often as was intended. There were others in the audience laughing though so just because I didn’t find it as funny doesn’t mean you won’t.

Having said all of this, I think the movie is worth seeing if this is a topic that interests you. The movie certainly doesn’t overstay its welcome, at 1h44m, it flies by.

Investment/stock terms explained

I have invested in Robinhood in the past, and through my own experience, my spouse’s knowledge, and from having read the book, I wanted to share what these different terms mean before getting into the story.

(I am obviously not an expert or even am amateur when it comes to this, so if I make any mistakes in my explanations, please feel free to correct me in the comments.)

Short selling

Using GameStop in this example, MC (Melvin Capitol) wanted to short sell the stock because they believed it would be going down in price. MC borrows 10 shares of GameStop stock from a broker at $2 a share, then sells it back into the market. They wait till the price goes down, say to $1, then they buy back the 10 shares, then give it back to the original broker at the $1 price. There is a fee they pay to borrow the stock, so if that was $2, they then made an $8 profit. I am using tiny amounts, but obviously MC was buying in the millions. If you are greedy, you just keep waiting for the stock to go lower and lower, but that is risky because what if, like with GameStop, the stock instead goes up?

Short squeeze

When big money is shorting a stock, they wait to buy back the stock until it has hit a low enough number. However, if there is a short squeeze, the stock price is rising and that short seller has to decide if they want to buy back their stock now, before it goes higher, or wait it out in hopes it drops down again. It is risky to buy back that stock, because these big investors would by buying back so much stock, that buying it back would greatly contribute to its growing value. Yet, waiting is dangerous because it can keep going up and there is not telling how much debt you could be in because you have sold the borrowed stock at $2, but now it is worth $100 and you if you buy back now, you have to make up that $98 difference.

Call options

Call options are basically a contract where you pay a small fee in order to have the right to buy stock at a certain price. For example, when GameStop was selling at $10, you could get a call option that gives you the chance to buy the stock at $12 within the next month, and to get that option, you pay a $0.50 fee. If you don’t use the option, you just lost that 50-cent fee But if the stock goes up to $15, you then can use that call option to buy at $12 and make a $3 profit per share (minus the 50 cents).

It is almost like the opposite of short selling because you believe the stock will rise. Also, unlike short selling, if it doesn’t go up, you don’t lose an infinite amount but just the initial investment.

Pump and Dump

The movie just briefly mentions this, but a pump and dump is when a group buy up a ton of the same stock to pump up the price and their buying gets other unrelated people interested and they buy it up too, all of this pumping up the stock. Then the original group that started buying, then sells once it reaches a certain number-hence the pump and dump. This leaves all those others who had been following suit in the dust, because they didn’t have the inside scoop on when to dump and now, they have either lost money or made nothing.

Bull and bear

You can get the gist from context, but to be bullish for a stock means you thinks it will go up. A bull market is when the market is high, a bear market is when it is low.

Payment for order flow

People questioned how Robinhood makes money, if they don’t charge their users. But as we should know with any service, if you aren’t paying for it, it is because you are the product. That is why social media is free, these companies get your information and sell it to other companies that then market to you. You are the product they are then selling and making a profit it out of. It is a cliché to say not to trust anything that is free, but just because it’s a cliché doesn’t mean it’s not true!

Anyway, Robinhood makes money from Payment for order flow which means they give the stock orders to other companies to process.

“Robinhood bundled up and sold their users’ trades to market makers—giant financial firms …  primarily Citadel—who could near-instantly analyze the trading flow and profit by taking tiny slivers out of the spreads between bids and asks. Because Robinhood’s main users were amateurs who made risky trades—and  more and more, gravitated toward more leveraged and even riskier plays such as options—Robinhood could  command a premium from the market makers, whose profits went even higher the more volatile the trading flow.”

Robinhood gets stock prices that best suit Citadel, which means their users can loose more money since Robinhood and Citadel are looking out for themselves first, not the user.

Clearing

Buying and selling on Robinhood seems instant, but it actually takes two days for a buy or sell to clear. Robinhood has to front the cost of these buys, and every morning their clearinhouse guy gets a call based on the previous day’s activity and they are told how much money they need to front while they wait for the orders to clear.

From here on out I will be getting into the details of the book and movie which means I will be getting into spoilers!

Keith Gill aka Roaring Kitty

Keith Gill is just your average Joe who has an interest in stocks. He thinks GameStop is undervalued, and it is public knowledge that the hedge fund Melvin Capitol is shorting the stock. Gill invests $53,000 into it, and shares this on his investment YouTube channel, Roaring Kitty, as well as on the sub-Analysis Wallstreetbets. For the most part everyone thinks he is crazy.

In the movie and real life, he was married and had one daughter at the time and was renting the home they lived in. He was also a track star in his day and ran almost a sub 4 minute mile. No shade to Dano, but I personally don’t think he looks the part of someone who can run that fast. There is literally a part in the movie when he runs like a 4:08 minute mile and I’m sorry but he should be so much leaner if they are going to show him going that fast. Anyway, in the movie we see his parents and brother, and learn that he had a sister who died in 2020. The brother isn’t in the book, and I don’t remember there being talk of his sister. In real life his sister really did pass away and he did have a brother, but the book just didn’t mention it.

The movie also shows that Gill was fired from his day job at Mass Mutual because of his online persona. They also had to pay $4 million because they were sued for not being aware of his online activity, even though Gill never spoke of where he worked when on Youtube or Analysis. I don’t think companies need to be aware of what their employees do in their down time, and again, Gill didn’t talk about where he worked, so it shouldn’t have mattered. Granted, it wouldn’t have mattered had he not become famous.

Gill stopped posting in April of 2021, but as of then, he still liked the stock and had not sold. The movie shows him buying his brother a sports car in the end, but I don’t get how he has a ton of money, if he never sold? I guess maybe with call options he makes money if he sells right away, and some money he keeps but some he just puts back in. But at the height, he was at $53M.

GameStop rise

The movie makes it seem like Gill is the whole reason GameStop did so well. Or maybe not the whole reason, but they show him leading the popularity. In real life, in summer of 2019, Michael Burry, the same guy who saw the 2008 crash coming and was played by Christian Bale in The Big Short, bought 3% of GameStop’s available stock. The book reading, “Burry’s buy didn’t just bolster the stock price; it galvanized a portion of the community  on the WSB board—or at least warmed them to the idea that Keith might not be entirely crazy.”

Then another near billionaire named Ryan Cohen bought $76M of the stock. So in reality, it wasn’t just thanks to Gill that the Analysisors were buying stock. It was other big names that gave people the confidence to buy.

The book and movie show us a variety of people who have invested in GameStop and I liked how this showed how people from various walks of life were part of this. The movie even includes a guy who works at a GameStop store, which wasn’t in the book.

Melvin Capitol became the target for a lot of retail investors, seeing their short sell and wanting to cause a short squeeze. Classic David and Goliath story, the little guy trying to take down the big guy. As they hoped, Melvin Capitol does indeed lose billions as the stock rises in January 2021.

Robinhood and WSB shut down

With so much activity of people buying up GameStop, Robinhood gets a clearing call saying they need to front over $3 billion. The amount is usually in the hundreds of millions, not in the billions. They are able to find a way to make the total, but they then shut down the buy option on GameStop. They still allow you to sell, just not buy. The Wall Street brokers can still buy whatever they want, it is just the retails investors how have now been limited.

At the same time Robinhood buying was turned off, the Wallstreetbets sub-Analysis was also closed down for hateful and inappropriate content. As Gill’s wife says in the movie, “but that always been there.” So clearly that was just a phony excuse.

These events coinciding was a coincidence, but as Mezrich says, “Why did coincidences always seem to benefit the people in power?”

Eventually both are back up, but what kept so many retail investors holding, was being able to communicate and bolster each other up. The sense of community and being a part of something big was what kept people motivated to hold even when they were up hundreds of thousands. They weren’t in it for a pump and dump. By the time Robinhood was available, the price was beginning to drop.

David and Goliath

Something I thought was well written in the book was how the “little guys” can never really win. Melvin Capitol lost billions, sure. But then Citadel came in and made a multibillion dollar investment in MC, saving the day. Citadel also worked with Robinhood, so the fact that they shut down is also suspicious. Robinhood said it was because they couldn’t afford another multibillion clearing cost, but considering their work relationship with Citadel, it seems there were other things at play.

A line from the book I wanted to share reads, “…the rules weren’t there to protect the people; they were there to protect the system. The Analysis crowd took that to mean that the only way to win was to try to tear that system down. What they didn’t realize was that there was a simpler path to victory. You didn’t tear the system down—you became the system. And once you were the system, the rules were there to protect you.”

In the book we also get multiple characters talking to someone important in their life, and the GameStop holder is wanting to keep holding as a way to stick it to Wall Street, even though MC has been bailed out and the stock just keeps going down. Two characters in the book that weren’t in the movie are two college age brothers. The brother that didn’t invest, and thinks the investor should sell tells him, “…you’re going to lose every penny of it. Because—and I mean this in the nicest way—you guys on this board are a bunch of losers. And the guys you’re up against are sharks. They win—that’s what they do. You’re up right now, but you’ll hold all the way back down.” There is then another line that reads, “It was perhaps the most difficult part of investing—knowing when to accept that you’d won.”

The idea to keep holding is admirable in its way, and if you are Gill and you are in love with the stock that’s one thing. But to hold to make a statement, in the end you are just going to lose it all and what kind of statement is that? You need to realize when you have won, otherwise you will keep going and end up losing. As someone who has spent time in casinos (and lets be honest, the stock market is just gambling) I could really relate to that line. You think you are going to stick it to Wall Street, or to the casinos, but that is a loser’s mindset because let’s be real. The house always wins, and big money built the system to help them-not help you. So when you are up, realize you have won and be happy about it, and go home with your winnings.

The America Ferrera character in the movie is still holding by the end, whereas in the book her counterpart had sold. She didn’t sell at the height, but still made good money. When it has dropped a lot, she is talking to her friend saying she is an idiot for holding past the height. He says to her, “’I don’t think you’re an idiot. I think you wanted to believe. And I’m proud of you for that.’ His words had hit  her harder than she’d expected. They were talking about GameStop. A stupid video game company.” I like this part too because it shows how much this meant to the retail investors. The stock market is supposed to logical, but when people get emotionally attached, it no longer makes logical sense. The lack of logic is what made this whole thing so insane and wasn’t predicted by the big guys.

House Financial Services Committee

In early 2021, people involved in this were served to be present at for a  virtual hearing for the House Financial Services Committee, including Gabe Plotkin (Melvin Capital), Keith Gill (Roaring Kitty), Ken Griffin (Citadel), and Vlad Tenev (Robinhood).

Honestly, I do know what the point was because nothing even came of this hearing.

After all is said and done, Citadel closed in 2022, Gill has retreated from the public eye, and the Robinhood creators are no longer billionaires (by the way, I didn’t love that at the end of the movie they made it seem like we should be happy that the Robinhood founders “struggled”. Like, if you feel that way, how are you any better than short sellers who want to profit off of someone’s failed business?) And Ken Griffin is currently suing the movie Dumb Money because he doesn’t like his portrayal in the film.

Book vs Movie

To recap my thoughts, the book was very informative and while I wish he would have dumbed it down even more with certain stock terms, overall, I think he made the story accessible. It also had my interest early on and it was even tough to put down at times. It also does a decent job capturing this moment in time and why it felt so important to some, while also showing that in the end, the system is messed up and is there to serve the rich.

The movie was entertaining, but it could have done a better job at explaining things. The music choice was also odd at times. Like in the beginning, there is a song with very sexually explicit lyrics playing while the stock is going up. I found it distracting from what was happening. I also found the book more emotionally impactful.

While I would recommend the movie, I would say the book wins in the end.

I also want to say that in general, it does seem a bit early to make a movie about this. In the end, they act like this has changes the stock market, but I mean, it was only two years ago. You can’t claim this has changed Wall Street until a more significant amount of time has passed.

The movie tries to force the feeling of what a big movement this was and how it was impactful. But I wanted to see not how this impacted Wall Street (because as said, we really can’t claim that) I instead wanted to see the personal way this impacted those involved. And while it tries to do that, I just wanted something more intimate and human. It was also very heavy handed with wanting us to dislike Griffin, Tenev, and Plotkin. Which again, I am on the side of the retail traders, and I think most people feel the same. So, the filmmakers really didn’t need to hammer home that rich people suck because I am pretty sure people already feel that way. There is a good scene though when we see Gill and his wife talking about finances, following by a scene which mirrors that where Plotkin and his wife are talking about finances. Showing their similarities in a way, even though the numbers with Plotkin are so much higher. So while it is showing their similarities, it is also making a point to show that he is in a whole other playing field.