Give Up & Gamble? Financial Nihilism is BS

The popular narrative that tries to explain financial recklessness.

Do you agree with this?

The economy sucks. The system is rigged against young people. And boomers are hoarding all of the wealth. So, the only way to get ahead financially is by making risky bets.

This increasingly popular narrative is being offered up as an explanation for a lot of the new or unusual financial phenomenon we’re seeing in the world today— everything from the rise of meme stocks to cryptocurrencies to online gambling.

It’s an idea that some people are calling financial nihilism.

If you’re not familiar with it, nihilism is essentially a philosophy that suggests that life is pointless or meaningless.

Financial nihilism is a play on that; it’s a term that began to be used a few years ago, and it describes a view that says that the cards are stacked against younger generations, so there’s no point in trying to become wealthy the traditional way— by saving and investing for the long term.

Instead, you’re better off either spending all your money or swinging for the fences in meme stocks and crypto.

Those who subscribe to this view point to things like unaffordable housing, the climate crisis, and an unstable political environment as reasons why people are giving up.

Now, while it’s certainly the case that young people today are facing unique financial circumstances, I think financial nihilism is nonsense.

The idea lumps together a bunch of disparate things and paints them with broad brushstrokes.  

Take the rise of meme stocks.

In 2021, the stocks of companies like GameStop, Bed Bath & Beyond, AMC, and others inexplicably surged as individual investors banded together to purchase those stocks.

More recently in May of 2024, meme stocks surged again as the leader of the GameStop movement, “RoaringKitty,” reemerged after a three-year hiatus.

Some people say that the rise of meme stocks is due to financial nihilism, that people pile into these stocks as a way to fight back against the Wall Street establishment and potentially get rich quickly in the process.

Yet, if you stop to think about it, that explanation is absurd. Sure, the original GameStop surge in 2021 may have been fueled in part by a “fighting the system” sentiment.

But the predominant motivation for buyers of the stock back then and those who purchased it this year was to make money.

I tend to think of meme stocks as a form of gambling and entertainment— you might get rich, but you’ll probably end up losing most of your money. And gambling isn’t new.

What is new is that it’s never been easier to gamble.

The whole meme stock phenomenon began back in 2020, when the pandemic was raging and people were stuck at home with a little extra stimulus money and nothing to do.

So, they congregated in online forums like Reddit’s Wall Street Bets to discuss stocks, while using new zero-fee trading apps like Robinhood to execute their trades.

The confluence of these factors— boredom, stimulus checks, social media and zero-commission trading platforms— came together to ignite the meme stock mania.

Meanwhile, the growing popularity of online sports gambling has completely different origins.

In 2018, the Supreme Court ruled that the Professional and Amateur Sports Protection Act of 1992 was unconstitutional.

That removed federal restrictions on sports betting in the U.S. and allowed states to decide whether to allow it. In the following six years, all but a dozen states legalized sports betting in some form or another.

Unsurprisingly, in that time, there’s been an explosion of sports betting on apps like DraftKings and FanDuel.

Then you have cryptocurrencies, which are a completely different animal. Some cryptocurrencies, like meme coins, have similar dynamics to those of meme stocks.

But the technology underpinning all of crypto—the blockchain—is revolutionary and has nothing to do with gambling in and of itself.

A Flawed Theory

To me, financial nihilism is flawed.

It assumes that there is a new strain of economic pessimism that’s causing people to give up and gamble their money away.

I don’t think that’s right. For one, economic pessimism has existed for ages. It ebbs and flows based on the health of the economy, but it’s always there. Even in the best of times, there are those who look at the glass as half empty.

And two, economic pessimism isn’t leading people to make risky bets. 

You don’t need to be a pessimist to get a thrill out of gambling. I’m sure if you go up to the average user on DraftKings, they’re not going to tell you they just placed a four-leg parlay on the NBA playoffs because housing prices are too high.

Instead, what’s really going on is it’s becoming easier to gamble, and when you make it easier for people to gamble, they’re going to gamble more.

Not So Pessimistic

So, unlike what the theory of financial nihilism would have you believe, economic pessimism isn’t causing young people to give up on traditional investing and to gamble their money away.

In fact, most people aren’t pessimistic, and they’re not gambling.

Across all age and income group, there are record sums of money invested in stocks—mostly in retirement accounts and boring index funds— as well as ultra-safe money market funds.

Don’t get me wrong, young people today do face unique challenges—housing prices are the most unaffordable they’ve been in decades, for example— but there’s no evidence that that’s causing them to give up and to be reckless with their money.