[locallost]

I don't think that's surprising because the alternative would be that some people are able to predict the future. Whatever strategy one might figure out that works is long term destined to fail, as other people start using them. The only real way to make money there is by providing liquidity since it's a zero sum game. For the stock market this is not true because it's not zero sum, it grows over time.

[cortesoft]

There is alternative to being “able to predict the future”, which is “I already know the future” or “I can change the future”

[mathgradthrow]

Someone flips a coin and looks at it, what orders are you willing to put in?

The potential for insiders should be represented by a complete loss of liquidity.

[tsimionescu]

And yet, many people bet on things like the duration or contents of press conferences, of pre-taped shows, etc.

[mathgradthrow]

well, I wrote should as a hedge.

[Retr0id]

"predicting the future" and "correct analysis of all available information" often aren't all that different.

[AnimalMuppet]

From Schlock Mercenary (quoted from memory, may be inexact):

"You cannot see the future. All we are given is the present."

"Of course. But if you look closely at the present, you can find loose bits of the future just laying around."

[glitchc]

A sufficiently large market is indistinguishable from Brownian motion.

[11101010010001]

That's a model.

[dheera]

Not really. Not all players in prediction markets are rational players. A good chunk of it are there for entertainment, and analyze things incorrectly; you can take the other side of those trades, and you won't need to predict the future.

[Retr0id]

Deciding that someone else's prediction is wrong is a prediction in and of itself.

[tsimionescu]

There are some bets on prediction markets where the future is either already known or in the control of people who may be participating in the market. For example, when people bet on how long the next presidential briefing will be, it doesn't take a prophet to predict this, anyone who organizes said briefing can control it (at least with a very high probability).

So, the question becomes "what is the preponderence of such bets" and "how many people with control or knowledge of bet outcomes actually participate in the market" - not "can some people see the future of any bet better than others".

[locallost]

This still doesn't mean they are good at it. For them it's like flipping a coin with two identical sides. It's just cheating.

[tsimionescu]

My point was that the alternative to "liquidity providers make the most money" is not "prophets exist", the truth could have been "insiders make the most money".

Note that there is nothing in the rules of Polymarket or the other prediction markets that says it's not perfectly OK for insiders to bet, so I don't think it makes sense to call this cheating. Of course, this is a major absurdity of these "markets", but insiders are part of the game you chose to play by participating.

[locallost]

There could be many alternatives, but not valid. Polymarket and Kalshi have banned insider betting.

[vcf]

Yes, but the alternative (that some people are very good at forecasting) is also plausible. It's also useful to have a good prediction model and timely data sources when providing liquidity. We also find that some of the "biggest losers" also provide liquidity; they just aren't as good at it.

[locallost]

I don't know. Buffett had a good example of, if you organized a national coin flipping contest in the US, you would have people that won 25+ coin tosses in a row. Are these people good at calling coin tosses or is it just chance? You cannot reliably and long term predict if Bitcoin will go up or down within 5 minutes, or something similar. You can cheat maybe somehow, but that's not within the rules of the game.

[vcf]

That's true, but you can invest in your infrastructure and data sources to be faster than most traders, which allows you to provide liquidity with a smaller spread (and snipe the slower traders that try to provide liquidity)

[dheera]

The stock market is arguably zero sum as well, just that directionally betting on the US has generally worked during the golden years of the US economy.

The stock markets of the world aren't a money printer.

[FabHK]

The stock market is not in the least zero sum. That's just a fundamental misunderstanding. There's dividends, capital allocation, etc.

[dheera]

There is only so much real money in the world, and that is determined by the Treasuries and Feds of the world. There are only so many dollars that were ever created, so many Japanese yen that were ever created, and so many Turkish lira that were ever created.

The stock market is a wealth redistribution mechanism, not a money printer. Market caps going up are not equal to money being created. It's not like the shareholders could collectively cash out all of that market cap and spend it. If everyone sold all of their stocks and pulled fully out of the stock market until everything crashed to $0, everyone's cash would still sum to whatever the government printed.

[neffy]

Although the stock market isn´t in itself, it benefits from the second order effects of continuous money supply expansion, and long term processes progressively concentrating money into the financial system.

[FabHK]

Sorry, but that is wrong or confused on multiple levels. You claim that a) "real money" (whatever that is) is determined by how much money central banks supply, and b) the stock market is a redistribution mechanism, not a wealth creation mechanism. In reality, the stock market creates wealth, and central banks control the nominal quantity of money (not "real money"), thus influencing inflation and shifting around real wealth (between creditors and debtors).

The entire point of the stock market is to support an economy that creates value: take inputs that are worth X (basically, cost of goods sold) and combine them into something that is worth more than X (revenue), with the difference being a profit that (after interest, taxes, depreciations) is paid out to stockholders as dividends. That is positive sum.

The market cap of a firm is the best estimate of the discounted value of future earnings. When it goes up, that does represent (estimated) value creation.

Stocks have a fundamental value. Everyone would not "collectively cash out" - stock prices would fall well below their fundamental value, others would see a bargain, and buy the stock. (Unlike crypto, say, which has no fundamental value but is purely sentiment; well that plus supporting the underground economy.)

Of course, it is conceivable that something happens (nuclear war, say) that would reduce company earnings for the foreseeable future, and then the stock market would collapse. But that is because it correctly anticipates reduced future earnings, not because "everyone collectively cashed out". If everyone is wrong about the stockmarket, but you are right, you can realise your gain over time. Just hold on to the stock and wait for the dividends to roll in.

So, the economy is positive sum, the stock market is a wealth creation machine (refuting your b).

Next, on money. My entire discussion above was purely in real terms. Yes, central banks determine the money supply (commercial banks create most money, but central banks control it). But they don't determine how much real wealth is produced every year; rather, they try to control the money supply so as to achieve moderate inflation.

By creating more or less inflation the central banks achieve some redistribution of wealth from debtors to creditors or vice versa, but again, they do not influence real wealth creation (unless inflation becomes so extreme (either deflation or hyperinflation) that it affects consumer behaviour, degrades planning, etc.).

[cluckindan]

They can be in cases where investment lenders don’t have 100% capital requirements, but that’s generally no different from other banks.