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Comment by curuinor | Hacker News Reader

The business-building is not zero sum, but the trading is zero-sum, and the societal purpose of the thing is to provide liquidity

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Derivatives (options, futures, swaps, etc) are a zero sum market, there is always a winner and a loser necessarily because the contracts have an expiration date.

The same is not true for trading equities, they are not zero sum. There are dividends, buybacks, companies will sometimes spin off a part or parts as separate companies that you get newly issued shares of stock from (GE splitting into parts is a recent example), public companies get taken private at a premium to the market price, etc.

The market has been heavily engineered and gamed to be positive sum. But sometimes I wonder could it turn out to be negative sum on certain timescales. That is that overall money would be lost on markets.

This is more or less what Ray Dalio was getting at with The Changing World Order, IMO.

It can certainly be negative sum for a generation at a time, say 20 years. The US stock market has the good fortune of not doing that in a long time but if you look around the world for example Japan these periods are not hard to find.

Futures are zero sum, but can also be a win for both sides, because what they gain is stability.

"I will buy y tons of corn from you in April for £x" - now I don't have to worry about how much my corn will cost and you don't have to worry about what your income will be.

Presence of many options directly affect equity prices.

theoretically equity trading is about distributing stonks most optimally so that productive companies get more and less productive ones get less, improving productivity of society as a whole

We all know it hasn’t actually been about that for a long time.

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