Gamestop stock went thermonuclear a week ago, which is at least a few months in internet time. Plenty of time for the initial themes to have set up already: the internet is good at attacking centralized gatekeeping; platform rules come apart at the seams when those attacks, you know, succeed; it turns out that bad platform rules actually just reflect underlying structures which assumed a level of centralized control that is increasingly incompatible with a free internet; etc.
But this is a newsletter about guns. So as much fun as it would be to analyze /u/DeepFuckingValue and the /r/wallstreetbets army 360 no-scoping a couple hedge funds, you’ve probably read enough about that already. (In case you haven’t: tldr the stock market is a fun MMORPG where you get money for being clever or lucky, but sometimes we all get very surprised by who turns out to be the most clever or lucky, and that’s quite entertaining for all involved, especially for the people who make a lot of money on the surprise, but actually not always very entertaining for the people who lose money on it.) Instead of all that, let’s apply some of the lessons to our niche.
There are only two publicly traded gun companies: Smith & Wesson and Ruger. Both are pretty small in the grand scheme of things, with market caps right around $1 billion. (For a sense of scale, that’s 7x smaller than Under Armour, 99x smaller than Caterpillar, and 1250x smaller than Google.)
What’s it like to be a publicly traded gun company? Let’s look at Ruger as an example. BlackRock owns 15.9% of the company. Vanguard owns 10.2%. Renaissance Technologies owns 8%. (Stats here.) So just three major institutional holders own a third of the company. Two of those holders — BlackRock and Vanguard — manage meaningful fractions of the world’s total wealth, with just over $8.5 trillion under management each. Centralization.
Giant investment management companies like that own shares in thousands of companies. Those shares entitle them to vote on board membership and shareholder proposals. But it’s too much work to figure out how to vote your shares in thousands of companies. So there are firms — Institutional Shareholder Services is the biggest one — who advise institutional shareholders on how to vote. If you’re BlackRock, you don’t need to track the minutiae of each shareholder proposal for each rinky-dink $1B company you own 15% of. You just call ISS and say, “Hey, this company’s annual shareholder meeting is coming up, how should we vote?”; ISS says, “There are three board directors and seven shareholder proposals to vote on. Here’s how you should vote on each one”; and you mostly go, “Cool, will do, thanks.” Centralization.
And that is indeed how it works. Back in 2018, ISS recommended that Ruger’s shareholders vote in favor of forcing the company (via a shareholder proposal written by gun control orgs that had bought up a small stake in the company) “to prepare a report about the financial and reputational risks associated with their business.” So the shareholders voted in favor of it. Centralization.
The company wrote a perfunctory report and promptly stuck it in file 13, so the next year, ISS punished the three board members most responsible for the report by recommending that shareholders vote to remove them from the board. Shareholders somewhat voted that way, with those directors only getting reappointed with 72% of the votes, as opposed to ≥97% for the other directors.
This all ties into a favorite theme around this neck of the woods: centralization favors gun control, and decentralization favors gun rights. Careful not to misread that as being about people: people who favor centralization or decentralization have every permutation of opinions on the topic. The point is that decentralized structures naturally push towards gun rights, irrespective of what the people involved want or don’t want.
This stems from a related thing we’ve written about, which is that when people learn about guns, they tend to be fine with them. Not true in every individual case, of course, but that’s the way things gravitate; a person learning about guns is more likely to see their belief in gun rights go up rather than down.
So there’s a corollary to that: gun control requires an environment where people can be prevented from learning about guns. And that requires centralization.
Think about the tech-accelerated decentralization of each of the following: media, content creation, manufacturing methods, commerce, payments, and even government. In every case, decentralization of those channels has been a boon to gun rights, and has been (quite rationally, if you think about their incentives) fought against tooth-and-nail by gun control orgs. Last week served notice that we’ll soon need to add finance to the list of channels.
Gun stuff has always operated under the friction of centralized decision-making in the world of finance. But we just got a taste of what markets can do when they start to route around centralized chokepoints. That trend isn’t slowing down anytime soon. We know it benefits gun rights in a general sense, but the exact shape that’ll take is anyone’s guess. We just know we’re hodl’ing. 🚀
This week’s links
Very cool event scheduled for June 19: “The first official shooting competition exclusively for individuals who make their own guns!” Tickets available at the link.
Ivan the Troll analyzes a request for comment he received about an upcoming article on 3D-printed guns
Interesting to hear the perspective of someone who’s been through the wringer a couple times with press coverage.
This means the OCC is delaying (and almost certainly altogether shelving) its rule that would have prohibited banks from denying service to disfavored industries.
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