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Comment by anoncoward111 | Hacker News Reader

There is a much larger global prediction market that comes with its own set of nuances and quirks, and that of course is the stock market. You can even get involved with no fee at all through Robinhood, but you will have to fill out some annoying and potentially costly IRS forms.

If I could paraphrase Charlie Munger, in the stock market, the only people who are successful long term are those who bet massive sums, very rarely, when they are sure that the price of a security is severely and unproperly valued.

If Tesla is currently trading at $355, and you have evidence for yourself that it should be worth something like $0 or $3,000, then this would be an example of the current market prediction being extremely wrong.

A stock's price is really just a prediction of the company's future cash flow in the event of profits, losses, sale of assets, so on.

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Actually, there are also people [0, 1, 2, 3, 4, 5] who are very successful betting small sums (relative to their total investable capital), very frequently, on securities they believe are slightly over or under valued.

[0] - https://www.rentec.com/

[1] - https://www.twosigma.com/

[2] - https://www.citadel.com/

[3] - https://www.mlp.com/

[4] - https://www.deshaw.com/

[5] - https://www.worldquant.com/

Depends deeply on the time period and this list is most likely due to survivor bias. See Warren Buffet's hedge fund bet as a good semi recent example.

He was daring a human-managed fund to outperform S&P500. I don't think Warren is an authority on market's microstructure and quant trading, which these companies exploit.

Basically on very quick trades machines outperform humans. For long term investment a prediction market (stock market index) outperforms humans and machines.

It's called survivorship bias. With hundreds of millions of people making investments in the stock market, almost any strategy has many examples of people who "won" with it.

I understand survivorship bias.

These firms make many thousands of trades per day, year after year. They have multi-year track records of exceptional returns.

If their edge was truly no better than random then they would have been bankrupted years ago. You can do some back of the envelope math to easily convince yourself of this.

nobody said it's totally innefective (or random), just that it is vastly less effective (and you're exposed to terminal risk more often) than throwing lots of money on an index.

But never forget: Market Can Remain Irrational Longer Than You Can Remain Solvent

You have to fill pay taxes for earnings in something like Augur as well

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