The biggest news item of last week was the GameStop mania that left WallStreet hedge funds squeezed. It’s a captivating story because it feels like David beat Goliath at its own game. Wall Street hasn’t suffered like most American workers have this year. Only a small percentage of Americans hold individual stocks, so while the news is interesting, there are greater lessons for freelancers and small business owners to learn.
The stock market isn’t the economy. Unemployment, wages, and inflation are better indicators of the state of the US economy. Despite the pandemic, the stock market is booming while the unemployment rate is 6.7%. 10.7 million Americans are jobless. These numbers are nearly twice their pre-pandemic levels in February.
Never underestimate brand loyalty and nostalgia. How does a freelancer compete against bigger businesses? Loyalty. GameStop wasn’t the only nostalgic stock that soared this week. AMC, Blockbuster, and Blackberry experienced similar gains. Your customers will stick with you if you maintain their loyalty. Now, just like a freelancer, these businesses will need to modernize to take advantage of this new attention and capital.
The house always wins. This story isn’t over. The reason why so few Americans hold individual stocks is because it’s incredibly risky. We know these stock prices aren’t sustainable. We don’t know yet who is going to be left holding the bag, but it’s rarely Wall Street. As a business owner, you need make calculated risks to succeed. You should never risk more than you’re willing to lose.
We all need a safety net. I bring this up a lot, but that’s because without a safety net freelancers and small business owners are vulnerable. In some ways, what happened this week was inevitable. Interest rates have stayed close to zero. That means that there is no advantage in keeping money in our savings accounts. We’re taking risks like buying GameStop or Bitcoin stock because it looks like it’s the only way we can build a nest egg. Like I said, the house always wins, but a handful of everyday people made a lot of money this week.