>The entire trading industry is a zero-sum game bro. For someone to win someone else has to lose.

Traders add liquidity. That liquidity allows me to easily buy and sell stocks without waiting long periods or worrying about getting ripped off by the spread. And since the economy isn't zero-sum, it's possible for everyone to end up better than before.

Does trading stocks somehow cause an increase production of actual stuff? If not, I don't see how everyone ends up better off.

> Does trading stocks somehow cause an increase production of actual stuff?

Sure it does. If the price of a stock changes, it becomes easier/harder for that company to raise money relative to other companies. If it's a good company then making their shares go up can increase production of actual stuff because they can afford to build more factories etc. If it's an inefficient company and its shares go down then the people who sold it can go invest that money in something else. There is a net increase in production if the company who gets the money is the one more efficient at using it to make stuff than the alternative, i.e. share price becomes "more accurate" as a measure of the company's market efficiency.

You have to buy stocks or you'll money will go to the government thanks to inflation.

Without the government the stock market would be less crowded.

People are saying that pump and dump schemes are unethical even if they're not always illegal. I would assert that investing for short-term gain is always unethical and the only way the stock market really benefits retail investors is when people invest and hold for long-term gains.

> The entire trading industry is a zero-sum game bro.

It isn’t in utility terms, which are the only terms that matter for whether something is actually zero sum.

Under certain assumptions, it is in (e.g.) dollar (or other specific commodity) terms, but the whole reason markets work at all is that the no specific commodity (including any fiat currency at any point in time) has a consistent relationship to utility across market participants.

How well does that utility argument play out when companies see fit to grant 0 dividend?

If you buy shares for $100 and they increase to $200 without paying you a dividend, you've still made $100. If you prefer to have $100 in shares and $100 in cash rather than $200 in shares, you can sell half of your shares.

Dividends or not are irrelevant, what matters is that the marginal utility of market value measured in monetary terms (or in market equivalent in any other commodity, but money is the most common one for people to mistake for a direct measure of utility) differs between market participants, and for the same participant (relative to others, not just by, e.g., inflation that applies in the same way to all market participants) at different points in time.

Incorrect. Capitalism allows economies to accelerate the birth of new companies that benefit people.

When it's policed and regulated poorly, yes, scammers can proliferate. So don't vote for politicians who lie without apology, and don't let people you don't trust manage your money or provide you with goods or services.

Predatory people will exist with or without capitalism, only Capitalism is fine-grained democracy where you vote literally every day with your dollar.

I should also add, don't do any scamming or predatory behavior yourself. Because the most important vote you make for how society is run is with your own actions.

> only Capitalism is fine-grained democracy where you vote literally every day with your dollar.

I'm not sure where you get that from. Every economic model has trading, wherein the participants make trades (goods for goods). Capitalism is not democratic. Communism isn't democratic for a similar reason. The pareto principle (and natural hierarchies) appears and equality goes out the window for the traders.

It certainly is more democratic than any alternatives I'm aware of. If you don't want someone to accumulate more economic influence, do not pay them. The government will not jail you for doing so.

If business is controlled by a democratically elected government, and 49% of the country voted against those officials, there is no way for them to start their own alternative business to articulate those preferences in the market.

> It certainly is more democratic than any alternatives I'm aware of

It's no different at all, to any other economic system.

> If business is controlled by a democratically elected government, and 49% of the country voted against those officials, there is no way for them to start their own alternative business to articulate those preferences in the market.

If you have 1 dollar and I have one hundred thousand, the same problem exists. This has nothing to do with capitalism or democracy, per se.

It is not the same. You can build your own business and the guy with one hundred thousand dollars does not have any ability to prevent you from doing that under the law. The hierarchy under capitalism is very different.

> The entire trading industry is a zero-sum game bro.

It's not, and even a cursory understanding of what zero-sum games are and how the stock market works would tell you that.

How does the market grow if all trades are zero-sum? How do recessions happen if all trades are zero-sum?

Some portion of trades are zero-sum, maybe even most of them. Stock markets don't function if every trade was zero-sum.

Pump and dump schemes are bad because they distort information in the marketplace. The tradeoff is supposed to be that these major firms perform price discovery, and in exchange for providing accurate prices to the market, they are allowed to arbitrage off the difference between the current price and the "true" price.

Pump and dump schemes don't do any price discovery, they do the opposite. They create a fake new price, arbitrage off that difference, and then leave the followers holding the bag.

The stock market grows because companies create value for real consumers. Companies serving the people.

But the stock market and its derivative markets are just people speculating on the price of the stock. So the vast majority of the value is a zero sum game.

Think of it like the "use value" of a house, vs a housing speculative bubble on top. They can pump, they can dump.

The trading industry is separate from the investing industry.

The investing industry is positive sum - but you must hold for the long-run, or only make decisions if new information is discovered to be an investor. Vanguard and other passive firms are a part of the investing industry.

As the GP says, the trading industry is zero-sum.

Not a fan of over-financialization, but... if trading is propagating market signals to people who otherwise wouldn't have them, it should have some positive externalities?

Outside money flows into the market, this allows it to be positive sum.

For the DnD analogy, it is as if you had a cleric.

Eg: IPO sells at $2, next seller buys at $4, next at $6, etc. Everyond makes money in that scenario. Eventually there can be losses, do all the losses counter balance these profits? No, because on net everything went up. If there were always trades that had losses to balance the gains, only then it would be zero sum.

What's more, people convert types of holdings all the time, and it is the big players that move things. When a mutual fund allocates 1% more to stocks, or 1% less and putd that to bonds, those are very big net new or net negative money flows. So, it's not just paychecks being added in, there are lots of sources of dynamism to make the stock market system anything but closed. There is net new money flowing into it all the time.

Money gets created when people take out loans which creates debt which is then traded in the markets. That's not money flowing into the markets, that's just the markets doing their own internal bookkeeping (much like D&D uses HP for internal bookkeeping about character health).

If you want to convincingly argue that markets are positive sum you have to demonstrate that markets produce more than they consume in terms of something besides money. E.g. when some of the factory workers quit to go be day traders, the factory ends up producing more while consuming the same or less due to the positive effects of the investments enabled by the increased trading activity.

This might be the case in some cases, and it won't be the case in others, and I don't know how to sum it in aggregate. Presumably somebody does.

Whether it comes out positive or negative, asset prices are an implementation detail, not the thing we're measuring.

In general there are two ways for companies to make money. 1) They make something that otherwise wouldn't have been made, or make it more efficiently than the competition and then capture volume with lower prices. 2) Rent seeking; they extract higher profits from the same activity, e.g. by buying their competitors and raising prices.

Traders do the work of finding the companies that can do one of these things and allocating resources to them so they can do them. When it's the first one, the societal gains are quite significant. When it's the second one, well, there are supposed to be laws against that and if it's happening then we need better laws or better enforcement.

I'd argue for a third category where the new thing addresses a problem that the company themselves is making more problematic (e.g. TurboTax) or where "more efficiently" involves cases where costs to the company are exchanged for costs to society (e.g. petroleum companies, cambridge analytica).

I think this category represents the majority of economic activity today, which is why I'm skeptical of markets being zero sum.

The result is the same though: find was to get more of (1) and less of (2) and (3).

The third thing is just the second thing. TurboTax lobbying to avoid free tax filing is obviously rent-seeking. It might even be more accurate to call this category rent seeking through regulatory capture. Fossil fuels would have been trounced by nuclear except that they lobbied to require nuclear to internalize all of its costs (and then some) but not their own, extracting undue rents by handicapping the competition.

The closest you get to a third category is Cambridge Analytica, in which case the third category would be criminal enterprises. But these rarely remain listed on the stock market; you won't find shares of the Guadalajara Cartel at your brokerage. It's the companies in the second category that do, because they're doing things that should be illegal but aren't.

I was going for extreme examples to make the point, but look at any modern advertiser: their products are used to target segments of society such that we can be encouraged to either turn against one another or to make some kind of decision which is bad for us and good for whoever is doing the advertising.

The perspective you're describing doesn't seem to have a way to classify this activity as unhelpful without going so far as making it illegal. Without that ability, I don't see how we can ever expect the market's notion of value to find itself in line with society's values. The best we can hope for is a random walk within the bounds of "illegal".

There are only a finite number of possibilities here.

If you're stuck with a machine you don't like that shows you harmful advertising because it has no viable competitors, the problem is with the law, because it's propping up that institution or otherwise failing to enforce anti-trust laws.

If that machine exists, even though there are plenty of viable competitors that don't do that, and then you freely choose that one on purpose, it's not obvious that the company is doing anything wrong. You apparently like that kind of advertising.

The exception would be for some kind of information asymmetry, like the advertiser is lying to you and you don't find out until it's too late. In which case we're back to needing a law, in that case against false advertising.

Now I can tell why you're choosing this one, because it's a sticky one: What happens when they're lying about politics? We can't have the government enforcing a law against "lying" about political issues, because the very thing that makes them political is that people disagree and don't find the other side's evidence to be credible. We can't have whoever is in power at any given time censoring the opposition.

The solution we use for this is to put the determination in the hands of the public. The marketplace of ideas. If someone is full of crap, you prove them wrong in front of everybody, and then they lose credibility. This isn't perfect but it works pretty well in the absence of the aforementioned anti-trust problem. Because then instead of a handful of megasites that people get siloed into and fed content like livestock, you'd have a million blogs that intersect like the web. There would be no walls between sites, no way to prevent someone you're trying to mislead from hearing from the other side just because you're in with the site's operators, because none of the sites would be big enough to exercise that kind of power when the average person is getting their information from hundreds of separate sources instead of only one or two.

Sometimes companies have bad incentives. Those either get curbed by laws, or by free market competition, or... what's your alternative?

I agree that a marketplace of ideas is indeed the solution to the information asymmetry problem. I think we need to change the web so that nobody but the user has authority over which data is displayed in context with which other data such that platforms cannot prevent critical annotations from appearing next to content (or annotations that simply remove that content)... supposing the user has opted into those annotations. I'm working on such a protocol.

As for the incentive problem... Imagine that I'm a grocer and I live in a place whose ground water is being poisoned by a nearby mining operation. The mining company employees are showing up in my grocery store and expecting that they can exchange their salaries for food. But it's not in my interests to give them that food because it's going to enable them to stick around and continue poisoning my tap water. Maybe their behavior is illegal, but I can't really wait the years that it would take for the legal system to get around to doing something about it. Or maybe I live in a place where I don't trust the legal system to actually do that, I dunno.

Pardon the contrived scenario, it's just easier to talk about hazards like this if you've got characters to reference.

So I'm this grocer and my tap water is now poisonous, and there's only so much bottled water in town and I need immediate recourse which ideally doesn't involve violence. So I get together with the other people in town and we track down the entity/loan which issued the money which these miners are trying to use to buy groceries with, and... here's the answer to...

> what's your alternative?

...we disable that money for all uses except getting the hell out of town. We just collectively refuse to accept it. It would be like how nations wield sanctions against each other, except anybody can do it. It would be like, a wallet setting or something.

It's sort of like how we currently ship operating systems with a pre-populated list of certificate authorities, but maybe we could instead leave it to the user to populate that list based on who they actually trust. Except instead of the validity of SSL certificates we're talking about the validity of money. Instead of certificate authorities it would be governments or banks or publicly traded companies, or cryptocurrencies or issuers of collectible playing cards, I don't know... assets.

Being sanctioned by the masses would be a disaster for such entities, so this would create incentives against issuing money-like abstractions to people who are going to use it for evil. It's a way to get the banks to take some responsibility for their actions which does not create incentives to find things that should be illegal but aren't yet and exploit them asap.

> I think we need to change the web so that nobody but the user has authority over which data is displayed in context with which other data such that platforms cannot prevent critical annotations from appearing next to content (or annotations that simply remove that content)... supposing the user has opted into those annotations. I'm working on such a protocol.

To some extent browsers (i.e. users agents) already do this -- it's how ad blockers work. Naturally large corporations are always looking for ways around this, like using native apps for specifically the things (like social media) that have no reason at all not to be a web page -- or better yet, a feed protocol like RSS with a client app which is independent of the service.

A modern protocol which is basically RSS for social media content would be welcome. Probably even among content creators. But not so much social media conglomerates.

> We just collectively refuse to accept it.

If there are 10 grocery stores in town and 8 of them go along with this, the miners just shop at the other two, or the mine starts selling groceries in the company store. In order to be effective it would have to be close to universal, at which point you're basically reinventing government. Notice how if 51% of people are in on it, you already have the votes to pass a law.

Trying to tag money with the evil bit is also a fool's errand because it's fungible. Suppose that AT&T isn't in on your boycott, so they accept the hundred bucks from the mine to pay their phone bill, and put it in their account with billions of other dollars. Now AT&T is tainted. They're going to pay that money to their employees who will use it to buy everything from everywhere and in two weeks there won't be an account in the country that hasn't been Six Degrees of Kevin Bacon'd into having tainted money in it, or the boycott becomes a self-DoS because there are fewer places you can patronize while respecting the boycott than the miners can.

Conversely, suppose you're not willing to taint money that some huge corporation accepts. Well, now the miners just go to Walmart, who isn't in on your boycott, and use it to buy a prepaid debit card which isn't tainted because Walmart doesn't publish that information, and then use the card to buy whatever they want.

> you're basically reinventing government

Well, yes. The ability to spin up a government when there's the kind of problem that needs one and dissolve it when that problem goes away is indeed what I'm after.

How else are you going to resist people with enough market power to corrupt your existing government? You've got to spin up a new one. (Consider all the US-installed dictators in South America in the 80's as an example. If only the citizens of those countries had something like this and were prepared to coordinate a resistance.)

> Money... Is fungible

Is it? I've worked at enough payment provides and been through enough trainings about KYC the OFAC lists and heard enough proposals regarding CBDC's to doubt that that's true anymore. It's just that only privileged parties are allowed to use the non-fungibility of money to their advantage.

As for the Kevin Bacon thing, that's kind of the point. When I accept some fiction in exchange for parting with something real, I want it to carry enough metadata to know who I'm helping and who I'm harming by doing so. That way I can make better decisions

It's not "the" evil bit, it's annotations by people who I may or may not share interests with. It's a restoration of information symmetry.

> How else are you going to resist people with enough market power to corrupt your existing government?

How are you going to resist people with enough market power to corrupt your new government?

What are you going to do when the incumbent corrupt government declares your alternate government to be unlawful?

> Is it?

Being fungible is the purpose of money. It's why a doctor doesn't have to find a farmer who needs medical care in order to have lunch.

> I've worked at enough payment provides and been through enough trainings about KYC the OFAC lists and heard enough proposals regarding CBDC's to doubt that that's true anymore.

Are you aware of the effectiveness of KYC? It's basically zero. Because money is fungible.

Suppose Bob is naughty and nobody is allowed to give him any money, but Bob wants to sell iron and buy wheat. Alice wants to buy Bob's iron. So Alice tells Bob she can't give him money and asks what he wants instead. Bob says wheat, Alice buys wheat from someone she's allowed to buy things from, then trades the wheat for Bob's iron, which is a process that involves Alice and Bob but not banks so nobody else knows it's happening. Trying to prevent this is futile but causes a lot of collateral damage and overhead and the people who continue to insist it be attempted should become unemployed.

> When I accept some fiction in exchange for parting with something real, I want it to carry enough metadata to know who I'm helping and who I'm harming by doing so.

And what I'm saying is that the metadata would just be a meshed graph containing everyone in the world.

Let's come back to AT&T. If someone you don't like pays them $100 and then they put the $100 in an account with a billion other dollars from ten million other people, what do you want metadata on money that comes out of that account to say? That the money is from everyone? Because it is. But how does that help you decide anything? All money would say that within a trivial number of transactions because it would quickly end up going through some large institution which mixes it with money from millions of other sources and then sends it back out into the general economy.

re: corruption, the impromptu government in my scenario only exists because a group of people decided to form it by collectively deciding the same way re: which money they'll accept and which they won't. It is legitimate so long as they continue to agree. If it stops being legitimate, then it stops being effective at the problem it was created to solve, people stop agreeing, and poof, it disappears.

The goal is only to make this kind of resistance possible. If it's the wrong tool for the job, stop using it and use something else.

re: incumbents, the assumption is that they're so sclerotic that they can't respond to novel scenarios. If this weren't the case, you could've just used them to deal with the driniking water problem in the first place.

re: fungibility and barter, the idea that "before we had money, we had barter" is often repeated in economics classes, but the anthropological evidence doesn't support it. Before the Roman empire violently asserted that caesar-face coin was more valuable than the metal it was made of, we did more or less what I'm describing. People with shared interests kept track of debts between each other, and people without shared interests refused to do so. It didn't scale super well, but now that we have computers, it can.

re: fungibility and kyc, there are plenty of people who are in jail for at one point having had the wrong kind of money, because it's not fungible.

re: a meshed graph containing everyone in the world

Well yes, that's how we treat money today, but I don't think it's sustainable. It concentrates too fast into the hands of too few. Why play a game in which you were born into a losing position? My generation decided to play, but I don't think that'll keep happening, because every generation has worse and worse reasons to. The French got fed up with their royalty, the children of the future will get fed up with their Quadrillionaires. The French chose violence, I'm proposing something else. A way to make old money into not money without taking anybody's head.

If you opt in to something like this, all that remains is new money--money issued with a purpose (we have this already, money enters the system when loans are granted, those loans were granted because somebody at a bank thought something was worth doing, a mining project perhaps). You don't have to track every single transaction, just the ones where money is created. I think people should have the ability to look at money and decide if its original purpose was a worthwhile one (nowadays the loan reasons are hidden from us). This would create better behavior among those so audacious as to create things and propose that they be treated like money.

For inflation reasons, money will also need to exit the system, so it's not going to hang around forever. As for whether you need metadata on every hand that is passes though from creation to destruction, or whether it's good enough to accept/reject anonymously handled money based solely on the conditions of issuance... that's up to the people. If they deem an abstraction legitimate by being willing to accept it as money, so be it. If not, well I guess we'll need bigger databases or more aggressive demurrage schemes such that the histories don't become unwieldy.

I realize that this all seems a bit outlandish, I must seem like a crazy person to you. But it's clear to me that our system has some very damaging design flaws, and I can't tolerate watching the subsequent harm without at least spinning my wheels now and again in search of an alternative.

> If you want to convincingly argue that markets are positive sum you have to demonstrate that markets produce more than they consume in terms of something besides money. E.g. when some of the factory workers quit to go be day traders, the factory ends up producing more while consuming the same or less due to the positive effects of the investments enabled by the increased trading activity.

Price discovery would be the function of the markets that allows this. If the markets find out that iron ore production is going to crash because of a flood or something, they create demand for futures of that iron production, raising the price of iron and encouraging stability in the supply of iron via more companies mining it.

These futures then provide stability of supply and price (somewhat) to the factory. Conversely, they provide stability of demand and price to the mine, who can sell their production ahead of time.

I would not be surprised if most factories do employ investors, even if indirectly via a third-party supplier. Knowing that the price of iron was going to go up would be tremendously useful, and they would be able to produce their goods cheaper than everyone else if they stocked up on materials at lower prices.

They're traded in dollars, but the same would be true in a barter system. Liquidity would be incredibly important in any non-monetary system; people would pay a pretty penny to be able to exchange payment in goods they don't want to something they did want.

> Money gets created when people take out loans which creates debt which is then traded in the markets. That's not money flowing into the markets, that's just the markets doing their own internal bookkeeping (much like D&D uses HP for internal bookkeeping about character health).

That is meant to reflect the new value being created by all of the entities in the market. If you don't add currency to account for growth, the currency increases in value equal to demand for it, making the currency itself a very attractive investment.

Those loans have interest rates, so the borrowers need to be doing something with the cash to generate value in excess of the interest rate, which in turn creates value on the market. Loans backed by actual currency are dramatically more expensive to service because of opportunity costs. The borrower's interest rate would be higher than what the loan offerer thought they could get in return for safer investments. Current loan rates for practically everything are far below that.

The factory benefits by having access to extra cash for cheap. They don't have to stockpile cash for a decade to open a new factory, they can borrow money and do it now at an interest rate that still allows them to keep most of the value.

I'm responding to only: "> How does the market grow if all trades are zero-sum?"

I'm not trying to say that markets are necessarily a net positive. But we should also not be myopic about it either. There is more to it.

Firstly, money being made solely by trading is rent seeking. It's maybe even the definition of rent seeking (?) Personally I'd be in favor of tax rates in the 40% to 50% region for rent seeking (long term and short term capital gains tax IMO should both be doubled). Perhaps we agree a bit there.

> Money gets created when people take out loans which creates debt which is then traded in the markets

This is still net new money into the market, ergo, the market is not at all zero sum. There is new money flowing into it. That _negates_ the statement that there must be one person losing for every person winning in the stock market, it is not zero sum. Everyone can actually be making money because there is new money being injected (and the opposite can be true when money is net leaving because interest rates are high and everyone is putting their money to cash or bonds instead).

Same thing happens in a Ponzi scheme, everyone can actually be making money while there is new money flowing into the system.

In the example you stated, if a person borrows money against their house, they are moving money away from real estate to the market. Their wealth is net-zero in that scenario, but relative to the market - the market saw a net increase. Thus, the market is not a closed system, it is therefore not by necessity zero-sum - it's possible to have more winners than losers when trading (and/or more losers than winners too)

> If you want to convincingly argue that markets are positive sum you have to demonstrate that markets produce more than they consume in terms of something besides money. E.g. when half of the factory quits to go be day traders, the factory ends up producing more while consuming the same or less.

Yeah, this is what happens with IPO. Oatly is an example, they had a supply crunch, they could not produce enough milk for store shelves. With their IPO money they funded the construction of additional factories to increase their production capacity. I think people forget this, the IPO of a stock is a huge injection of money to a company, as-is whenever the company issues more stock. Amazon is another example, instead of using cash to pay employees, they used stock; which freed up cash to go to other places. Though, post-IPO, shares being traded around is arguably all just rent seeking. A company can still issue more shares too though. This very thing saved both AMC and GME; both of those companies would have gone under if they were not able to raise money by issuing stock.

On the other side, this situation is not always fully pure. Plenty of companies are run by MBAs that give themselves too many shares & their sole goal is to go public so they can offload their holdings rather than grow their company. Still though, the primary reason for stocks to exist is that companies can acquire additional funding without taking out loans, they get that funding by trading ownership. That's still a thing even if there is a lot of other corruption & rent seeking relating to it. Thus, we should not be myopic it, there is more to it.

Cancer is an exploitation of the politics present in human cellular biology. The DNA of what makes us human mammals is molecular capitalism in this analogy. You can dismantle that, but then we would be floating amoebas in the primordial ooze.

What you can do is identify when cells aren't behaving in good faith and punish them appropriately (through chemo etc) and find ways to prevent that behavior from surfacing again (diet / avoiding carcinogens / unknown future solutions).

Agreed, I'm not for dismantling it wholesale, just for being a bit more targeted with our punishments.

That is, I don't think that "the markets are up" is not an adequate indicator of "behaving in good faith". You have to look more closely at the actual outcomes. Whatever is being invested in, does it make life better or worse for the rest of us, etc.

I agree we need more keen punishments, and am annoyed by market value being some coarse indicator for economic health. It's been more morally pleasing to me to see criminal companies and "currencies" collapse in the past few years than it has for me to have seen the general market go up, as long term health depends on excising fraud.

It's almost like a financial system that is so incredibly prone and vulnerable to manipulation shouldn't form the backbone of our entire economy.

Oh wait. This is by design so the elite can retain all money and power.

it's not, but only because someone keeps printing more money.

There are places in the world that is an apt description. The US is closer to that than previously (as judged by effective tax rates on millionaires comparing the 1950s to today), but nonetheless, the US us not "there" yet and still has a ways to go