GameStop’s saga: What the stock surge proves about financial (il)literacy

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When first-time and inexperienced traders entered the market by plunging into the GameStop Corp. trading frenzy earlier this year, they may have gotten the wrong idea about investing. 

GameStop’s stock soared to $483 per share in late January — up from less than $3 last April — then came crashing down to earth and then rose again to $183 in late March. The catalyst of the gyrations, in large part, was the Reddit stock-trading discussion group r/WallStreetBets.  

Fintech and social media apps like Robinhood and Twitter added fuel to the fire, enticing more retail investors to band together on social platforms and push stocks.  

So the pandemonium over GameStop sent the message that investing in the stock market is a lot like betting, right? Get in at the right time and ride the wave up.  

That takeaway creates a concern for Charlie Fitzgerald and other financial literacy advocates. 

“GameStop has become the lesson for why stock market speculating is a very bad idea,” said Fitzgerald, principal at the advisory firm Moisand Fitzgerald Tamayo. “GameStop speculating doesn’t make one an investor any more than betting on a football game makes one a football player.” 

Fitzgerald was one of the members of the Financial Planning Association of Florida who helped lead a six-year effort to enact a state law that requires Florida high schools to offer an elective course in financial literacy.  

 The trading in GameStop ignored the bedrocks of patience, diversification and investing with goals in mind, said Mitchell Freedman, owner of MFAC Financial Advisors. 

“The biggest lesson is that there is a difference between investing and gambling,” said Freedman, a founder of California JumpStart Coalition, an organization that promotes financial literacy.

He equated GameStop trading with throwing a dart while blindfolded. 

“It may land in the bull’s-eye, but it may miss the board altogether,” Freedman said. 

Annamaria Lusardi, a professor of economics and accounting at George Washington University, is worried that her students look at the GameStop situation and think that they can get rich in the stock market by placing a bet on an individual stock and trading it frequently. 

“It’s very easy to learn the wrong lesson,” said Lusardi, founder and director of GWU’s Global Financial Literacy Excellence Center. “The stock market is not a game. You don’t want to play the market. The stock price should reflect the underlying value of the firm.” 

The GameStop phenomenon has spurred a renewed interest in investing, but there’s a safer way to get an introduction to the market, said Suzanne Costanza, executive director of the Florida Council on Economic Education.  

Florida offers a 10-week market simulation for high school students and adults called the Florida Stock Market Challenge. Participants get to manage an imaginary $100,000 portfolio and buy and sell stocks in real time. 

So Costanza is using the same tool that Robinhood Financial Markets and other online trading platforms employ — gamification.   

“It’s a fun, interactive way for them to get their toes wet,” Costanza said. “We’re looking for ways to expand education, and gamification is one of those new methodologies for doing that. I don’t think gamification is going away.” 


Critics warn that the dark side of gamification tactics comes into play when fintechs employ them to get users addicted to trading.  

Gamification strategies in the Robinhood app — like sending daily push notifications or displaying confetti raining down after each trade — are used to “lure customers” into consistent participation and long-term engagement with the platform, which, in turn, generates more revenue for the app, according to William Galvin, secretary of the Commonwealth of Massachusetts.  

In December, Galvin filed a suit against Robinhood over its gamification strategies, in a bracing rebuke to the praise the fintech has received for democratizing the market. 

The lawsuit is just one example of the increasing pressure Robinhood has faced since the tragic death last year of Alex Kearns, a Robinhood user who took his life after mistakenly believing he lost some $730,000 in an options trade.  

The tragedy combined with the GameStop frenzy generated harsh criticism from lawmakers like Rep. Alexandria Ocasio-Cortez, D-N.Y., and House Financial Services Committee Chairwoman Maxine Waters, D-Calif. 

In March, Robinhood announced that it scrapped its confetti design and replaced it with images of floating geometric shapes when a Robinhood user trades for the first time. The app also frequently posts blogs on financial concepts and offers educational resources for users to read at will. Robinhood even claimed that it would hire an options education specialist following Kearns’ death, but no new hire has been announced. Robinhood did not respond to requests for comment. 

Robinhood’s tactics could be addictive and manipulative, said Daniel Simon, CEO of Vested and co-chair for the Museum of American Finance communications advisory board.  

“Hacking human psychology to improve how we interface with products and services can be used for good and ill,” Simon said. “With any good user experience, companies can improve their products, making them simpler and easier to use, but can also manipulate their customers.” 


Financial technology applications, or fintech apps, are the critical tool in the pockets of retail investors that enable market manipulations, like the GameStop stock surge. If not for easy-to-use free trading apps like Robinhood, millions of retail investors wouldn’t have the access to move markets.  

While digitization has done a tremendous job of flattening the landscape of accessing financial services, it is the responsibility of the fintech apps, in turn, to create a user design that places education and financial literacy at its core, Simon said.   

“Financial literacy is just a matter of user design,” he said. “Finance is the only industry where users pay to not understand how to use the product.”  

Financial literacy is a more nuanced topic than it appears to be on the surface, said Dan Egan, Betterment’s vice president of behavioral finance and investing. Betterment is the largest independent robo-adviser, managing about $18.1 billion in assets.  

Think of it this way: Financial education is just a map, whereas financial advice is the GPS that helps users arrive at their destination, giving them direction along their journey, Egan said.  

“Instead of trying to teach investors the ‘why or why not,’ financial firms should instead focus on providing only the best choices through smart design,” he said.  

For decades, investment managers have been trying to provide education to investors — white papers, books, webinars, lectures, articles, charts and so on. Today, most fintech apps tout blog posts or newsletters they send to users that offer up financial education.  

While much information has been put out there for the public to consume, it still doesn’t appear to be helping much, Egan said. “That’s why the latest development toward automation and web-based robo-advising can do for investors what education cannot.” 

Of course, investor education does have its place online. For individual investors, knowing the principles of investing and finance are invaluable, but each person must be open to making the effort to learn them. 

“Financial education works if the person has the time, educational background and, critically, motivation to benefit from the education,” Egan said. “Research shows that when an investor is motivated to learn the nuts and bolts of investing, he or she will be better at it for a short period of time.” 


Outside of apps, financial literacy also can be taught in a traditional classroom setting, which gives financial advisers an opportunity to participate in imparting good money management principles to the next generation.  

Lawrence Pon, vice chair for financial literacy for the California Society of CPAs, taught a class on the subject at a high school in Cupertino, California, just days after GameStop hit its high-water mark. One of the areas he covered was “investing vs. gambling,” and nine of his 42 PowerPoint slides focused on GameStop. 

“It’s like being at the casino,” Pon said in characterizing the GameStop frenzy. “They keep rolling the dice over and over and over. If you’re willing to lose, that’s okay, but don’t bet the farm.” 

Pon, who is also a certified financial planner, exudes enthusiasm for financial literacy.  

“It’s a personal passion of mine,” he said. “America needs a lot of help.” 

Fitzgerald encourages financial advisers to take the initiative and contact local school districts to volunteer to teach a financial literacy class. Not only would they contribute to educating the next generation on personal finance, they might get some students interested in a financial advice career. 

“You can be a resource to the teacher, and you can introduce a profession,” he said.