Getting Down to the Nitty "Griddy"

The Importance of Understanding Risks

Friday, August 1, 2025

I’m sure there isn’t a single person reading this that doesn’t vividly remember the Great Freeze of 2021. Power outages, more than 200 deaths, and between $80-$130 billion in damages from infrastructure, supply chain disruptions, etc. What some of you might not remember is the debacle over an electrical company called “Griddy”. I think the situation with Griddy and the fallout after the freeze provides a useful example of how important it is to understand risk, particularly when investing.

Griddy was an electrical company founded in 2016 that serviced the state of Texas. What made Griddy unique was that customers paid the spot price for electricity, plus a small monthly membership fee ($9.99), instead of a fixed rate. This resulted in electrical bills that could be as little as half of what other companies were charging. That is, until the Great Freeze of 2021, where the price of electricity spiked from .12 cents per kilowatt hour to $9.00 per kilowatt hour. That’s roughly a 7,400% increase. Many customers were caught flat-footed and were charged thousands of dollars for a single day of electricity. Griddy was built on a risk vs. reward concept. Most of the time, customers were paying as little as .03 cents per KWH while their neighbors might be paying .06  to .10 cents per KWH. But when things turned sideways, these same customers paid the price, literally! In the end, ERCOT revoked Griddys license to operate in the state of TX. The company filed Chapter 11 bankruptcy by March of 2021, and the state gave financial relief to many affected customers.

There is a corner of the financial market where I fear many, particularly younger investors, might not fully grasp the risk of their investments.

As the example above illustrates, understanding risk is important in general. But let’s look at the investing space. When investing, it is vitally important to understand your risk tolerance, and ensure that your investments are allocated accordingly. There is a corner of the financial market where I fear many (particularly younger) investors might not fully grasp the risk of their investments. This is the mobile trading space. Just to be clear, I have nothing against reducing friction for the investor and democratizing access to the market. There are a lot of people who consider themselves “do-it-yourselfers” and enjoy the process of market research, rebalancing their account, etc. And that’s great! But there are many young Americans who are putting a lot of money into some very risky investments, I fear, without fully comprehending the elevated risk factors.

Some of these risky products include things like “meme stocks” and crypto-currencies.

Now, I’m not referring to all crypto currency, I’m particularly looking at the currencies you probably won’t hear about on Fox Business or Bloomberg, but nonetheless, are bought and sold rapidly due to online fervor. When something called “Fartcoin” reaches a market cap of $1.6 billion, its apparent that someone has to be investing in it. Lord knows I wish I was kidding about that last sentence.  If you paid attention to the Gamestop short squeeze of 2021, you’ll be familiar with meme stocks. The meme stock phenomenon refers to situations where lots of online retail investors decide to, en mass, purchase the stock of a company, usually with poor financials. The idea is to squeeze the hedge funds that have shorted the stock. This is volatile because it essentially divorces the stocks price from the estimated price based on traditional fundamental analysis.

It’s my worry that millions of young Americans who want to start investing, might enter into investing via these speculative and volatile avenues. It would break my heart to see these young Americans turn to investing, in an attempt to help secure their future, only to be surprised and dismayed when they lose money on an investment they didn’t realize was high risk. It could dissuade them from future investing and thwart their financial freedom down the road.

When you have an economy built on consumption of goods, having fewer consumers presents a bit of a problem.

In the current environment, young Americans are faced with a multitude of financial challenges. The price of living has increased significantly over the last 5 years, interest rates remain near their 22 year highs, and a shortage of housing has increased prices beyond what many can afford. According to the National Association of Realtors, the average age of a homebuyer in America is 56 years old. That’s a record high, and up significantly from 1981 when the average age was 31. Rising prices of essentials and housing have shown to delay marriage, and dissuade starting a family. A significant decline in the birthrate would be a far reaching problem we all have to deal with. When you have an economy built on consumption of goods, having fewer consumers presents a bit of a problem.

I think investing is going to be essential for the upcoming generations of Americans to secure a stable future for themselves. If you have a young person in your life who is showing interest in investing, talk to them about risk - or send them to us! We would be happy to help financially educate the next generation of investors. We want to prevent situations like the one with Griddy, especially with the ones we love!

I hope you have a great weekend!

M. Grant Pannell, Financial Advisor/Director of Operations

(The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.)