'Squid' is a contraction of "Squirrelly Kid", and comes from So Cal racers who were also involved in the Surfer culture.
Though the term is now widely used to describe street riders of questionable cornering skill, questionable judgement in demonstrations of horsepower and braking, questionable judgement in the protective clothing worn, and very questionable judgement in his/her friends, the meaning was actually developed at the racetrack.
Back in the day before trackdays (an organized event to allow anyone with a motorcycle and the price of admission to gain familiarity with a racetrack and learn to ride faster, more safely than on the street) were common and new racers frequently had no track experience - hence their unpredictable behavior and unsteady lines led to them being labelled "squirrelly", as unpredictable surfers (or surfing conditions or surfing equipment) were also called.
From there, the term made it to the canyons of Southern California (a popular means to risk one's hide while demonstrating riding skill at speeds well over the posted limit), then out to the rest of the world that reads about So Cal in magazines and apparently strives to be just like So Cal.
"I really hate dealing with the street squids riding over their heads in the 'A' group at Buttonwillow."
"That trackday org is all about getting money from the squids who don't know better."
"Yeah, there was another squid taken off Palomar in an ambulance this morning."
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