Analyst: How Chamath Palihapitiya, Elon Musk Mastered The 'Narrative Of The Underdog'

With more and more young investors getting their information from social media rather than mainstream media outlets, controlling the online narrative is growing increasingly important for modern brands.

During the face-off between the WallStreetBets-driven retail traders and trading platform Robinhood last week, investors got a master class in spinning the underdog narrative, according to Empire Financial Research editor and research analyst Berna Barshay.

Perception Is Reality: On Monday, Barshay highlighted how effectively billionaire venture capitalist Chamath Palihapitiya utilized social media and outrage over trading restrictions on GameStop Corp. GME to his personal advantage.

“When you're building a consumer brand, the perception of truth is more important than actual truth, if no one believes the actual truth,” Barshay said.

When Palihapitiya saw just how upset Robinhood users were, he tweeted about broker alternatives to Robinhood. Among the three brokers he recommended was SoFi, along with a disclaimer that one of his SPACs is merging with SoFi.

When Palihapitiya tweeted that Robinhood users should “stop being tricked” into thinking they are the customers when Robinhood is selling their data and order flows, Twitter users pointed out that SoFi does the exact same thing.

The truth is virtually irrelevant if you can market the "narrative of the underdog," Barshay said.

“In this movie, Robinhood is the corrupt villain, and Palihapitiya has been cast as the benevolent billionaire, champion of the people ... which is convenient when you have a handful of SPACs trading in the market," she wrote.

Related Link: 3 Life Lessons From Chamath Palihapitiya's Hugely Successful Golden State Warriors Investment

Brand Cultivation: In recent years, Palihapitiya, Tesla Inc TSLA CEO Elon Musk and other influential business leaders have shown just how important cultivating a good narrative can be to a market that is obsessed with story stocks.

Without the proper narrative and branding in place, the idea of the world’s wealthiest person and CEO of the world’s most valuable auto company as an underdog would be laughable to investors.

"Like Musk — who has seen his popularity with the masses soar at the same time his net worth has spiked from $25 billion to $180 billion during a pandemic that has left countless American families indigent and desperate — Palihapitiya is embraced as a champion of the little guy ... as he laughs his way to the bank," Barshay said.

Barshay said both Musk and Palihapitiya are “brilliant, successful, and savvy marketers,” and both of them identified and took advantage of a tremendous marketing opportunity amid the GameStop social media outrage.

Palihapitiya actually stood by Tesla and Musk during a recent appearance on CNBC.

"Who was right on Tesla? I'll tell you who was right: every single retail investor. I was right. Elon Musk was right," Palihapitiya said. "Let me tell you who was wrong: every single hedge fund. Name after name, when it comes to innovation ... if it doesn't fit into the mold that Wall Street wants, they try to organize against it."

Photo courtesy of Tesla.