7 ms·

Which we called the "stock market"

xoa 19d ago
No, the stock market is not gambling (or at least hasn't been, need not, and should not be). The stock market is a positive sum game, linked to the growth of the economy as a whole. Humanity is very, very far from the maximum possible utilization (and maximum efficiency) of matter and energy in this solar system or even this world. What decisions we make matters a lot in how well/how fast/whether we continue to get richer, so we've tried however ineptly and haltingly to make systems that reward short and long term gains balanced against current use priorities. And have failed plenty, and may yet fail completely. But it's perfectly possible for everyone to win, for the whole world to get "richer" (defined as being better able to meet human goals & desires within a given mass/energy budget or have more or both). Investments can yield >1x total returns. And that has indeed been the case, that's the story of modern civilization. Gambling in contrast is strictly zero sum at best and always negative sum in reality. A group of people puts in 1x capital, the house takes a cut of that, and then the <1x gets unevenly redistributed and that's it. Nothing is generated, the collective set of people is strictly worse off after the gamble, with a few making gains off the backs of loss distributed amongst everyone else. All while hacking dopamine reward centers that didn't evolve for that. It appears to be the case that we can't perfectly stop 100% of all IRL gambling without a cost that exceeds the benefit. That's life. But that doesn't mean we shouldn't be picking as much low hanging fruit as possible, same as with other negative sum brain hacks.
- consensus1 19d ago
  I was joking (mostly). The stock market absolutely is positive sum, but at the same time things like 2x levered short VIX ETF's exist...
  - xoa 19d ago
    I mean sure, people can find ways to use all sorts of events and activities for gambling, but that doesn't mean the events/activities themselves are. And the sentiment you expressed joking has gotten repeated with (afaict) total seriousness in these threads with some regularity (insurance is another one that people incorrectly bring up trying to defend gambling). So I think it's pretty important to differentiate between everything, and to help pass on some of the history as humans have grappled with this in the past. Insurance for example has the concept of requiring an "insurable interest" to help avoid negative incentives and gambling. You can insure your own house against burning down, but you can't take out a policy against some random stranger's house.
    - consensus1 18d ago
      Yeah, I hear you. The "stock market is rigged, insurance is a scam" vibe is strong here. HN has really turned into a sounding board for bitter people who think the whole world is out to get them.
- ryandrake 19d ago
  By a strict definition of gambling, the stock market is gambling: It's a monetary wager placed on an unknown future event. Just because it (often) is positive sum doesn't mean it isn't an unknown that people are betting money on.
  - gruez 19d ago
    Pointing that out makes as much sense as "so you're against drugs? Did you know Tylenol is a drug? Ha checkmate!"
    - inigyou 19d ago
      Great example, because Tylenol is more dangerous than nearly every illegal drug.
      - mlrtime 19d ago
        Now do H20, very harmful at high amounts.
        hoppyhoppy2 19d ago
        I'm not chemistry-minded enough to know what H20 would be, but I suspect you meant H2O. ("O" as in oxygen, not "0" as in zero.) (and of course the "2" would normally be subscript, but this is HN)
      - inigyou 19d ago
        For those who downvote: it's true. Look it up.
        gruez 19d ago
        Again, that's missing the point of drug regulation. There's plenty of substances even more dangerous than Tylenol, but aren't banned. "Drugs" are banned due to a combination of (perceived) harm to user/society, potential for abuse, as well as toxicity. That's why there's plenty of substances more toxic than Tylenol, but aren't banned.
- mullingitover 19d ago
  > or at least hasn't been The stock market was so gambling that we had 'bucket shops' where people would just buy and sell fake stocks that tracked real stock prices. Now we have public companies directly selling shares with no voting rights and no plans to ever pay dividends, which is the same thing.
deleted 19d ago
[deleted]
usefulcat 19d ago
The problem with this comparison is that it only really serves to water down the very real harms of actual gambling. Unlike sports gambling or casinos, the stock market actually does have some legitimate utility, as compared to being (at best) pure entertainment.
- inigyou 19d ago
  At what ratio does it become a problem? 0.01% actual utility and 99.99% gambling, or?
  - everforward 19d ago
    The utility is always the same. The stock market provides price discovery, which drives efficient resource allocation (in theory). Theoretically, more gamblers should mean better price discovery because the payouts for correctly taking the opposing side of the trade are higher. The market solution would be that the gambling will eventually solve itself. They’ll either learn enough to be trading on knowledge rather than vibes, fueling price discovery, or they’ll exit the market when they’ve lost too much or everything. My sticking point is that a lot of brokers offer leverage to people they really shouldn’t. I could have sworn you had to be a qualified investor to get leverage, but if that isn’t law it should be. Show the brokerage your certification, or a pile of cash large enough to convince them you can afford to lose the whole thing.
    - inigyou 19d ago
      I don't know if "theoretically" is good enough here. The theory hasn't really been tested or proven. It's more of a hypothesis, and an ideologically driven one at that.
      - everforward 17d ago
        I'm not positing that as a moral good or bad. It's possible for stock market gambling to be bad for society but have better price discovery, in the same way that dictatorships are bad but tend to have faster response times to events. My theory is mostly that "gambling" seems like it inherently means "buying stocks based on something other than their concrete value". More gambling means stocks drift further from their "true value", which means a higher payout for correcting them back to what their price should actually be. The whole thing does get very fuzzy because of the "market can stay irrational longer than you can stay solvent" aspect. It's not enough to know what the correct price is, you have to know when other people will realize that as well, or else convince people that your price is "correct".

xoa 19d ago

No, the stock market is not gambling (or at least hasn't been, need not, and should not be). The stock market is a positive sum game, linked to the growth of the economy as a whole. Humanity is very, very far from the maximum possible utilization (and maximum efficiency) of matter and energy in this solar system or even this world. What decisions we make matters a lot in how well/how fast/whether we continue to get richer, so we've tried however ineptly and haltingly to make systems that reward short and long term gains balanced against current use priorities. And have failed plenty, and may yet fail completely. But it's perfectly possible for everyone to win, for the whole world to get "richer" (defined as being better able to meet human goals & desires within a given mass/energy budget or have more or both). Investments can yield >1x total returns. And that has indeed been the case, that's the story of modern civilization. Gambling in contrast is strictly zero sum at best and always negative sum in reality. A group of people puts in 1x capital, the house takes a cut of that, and then the <1x gets unevenly redistributed and that's it. Nothing is generated, the collective set of people is strictly worse off after the gamble, with a few making gains off the backs of loss distributed amongst everyone else. All while hacking dopamine reward centers that didn't evolve for that. It appears to be the case that we can't perfectly stop 100% of all IRL gambling without a cost that exceeds the benefit. That's life. But that doesn't mean we shouldn't be picking as much low hanging fruit as possible, same as with other negative sum brain hacks.

consensus1 19d ago
I was joking (mostly). The stock market absolutely is positive sum, but at the same time things like 2x levered short VIX ETF's exist...
- xoa 19d ago
  I mean sure, people can find ways to use all sorts of events and activities for gambling, but that doesn't mean the events/activities themselves are. And the sentiment you expressed joking has gotten repeated with (afaict) total seriousness in these threads with some regularity (insurance is another one that people incorrectly bring up trying to defend gambling). So I think it's pretty important to differentiate between everything, and to help pass on some of the history as humans have grappled with this in the past. Insurance for example has the concept of requiring an "insurable interest" to help avoid negative incentives and gambling. You can insure your own house against burning down, but you can't take out a policy against some random stranger's house.
  - consensus1 18d ago
    Yeah, I hear you. The "stock market is rigged, insurance is a scam" vibe is strong here. HN has really turned into a sounding board for bitter people who think the whole world is out to get them.
ryandrake 19d ago
By a strict definition of gambling, the stock market is gambling: It's a monetary wager placed on an unknown future event. Just because it (often) is positive sum doesn't mean it isn't an unknown that people are betting money on.
- gruez 19d ago
  Pointing that out makes as much sense as "so you're against drugs? Did you know Tylenol is a drug? Ha checkmate!"
  - inigyou 19d ago
    Great example, because Tylenol is more dangerous than nearly every illegal drug.
    - mlrtime 19d ago
      Now do H20, very harmful at high amounts.
      - hoppyhoppy2 19d ago
        I'm not chemistry-minded enough to know what H20 would be, but I suspect you meant H2O. ("O" as in oxygen, not "0" as in zero.) (and of course the "2" would normally be subscript, but this is HN)
    - inigyou 19d ago
      For those who downvote: it's true. Look it up.
      - gruez 19d ago
        Again, that's missing the point of drug regulation. There's plenty of substances even more dangerous than Tylenol, but aren't banned. "Drugs" are banned due to a combination of (perceived) harm to user/society, potential for abuse, as well as toxicity. That's why there's plenty of substances more toxic than Tylenol, but aren't banned.
mullingitover 19d ago
> or at least hasn't been The stock market was so gambling that we had 'bucket shops' where people would just buy and sell fake stocks that tracked real stock prices. Now we have public companies directly selling shares with no voting rights and no plans to ever pay dividends, which is the same thing.

deleted 19d ago

[deleted]

usefulcat 19d ago

The problem with this comparison is that it only really serves to water down the very real harms of actual gambling. Unlike sports gambling or casinos, the stock market actually does have some legitimate utility, as compared to being (at best) pure entertainment.

inigyou 19d ago
At what ratio does it become a problem? 0.01% actual utility and 99.99% gambling, or?
- everforward 19d ago
  The utility is always the same. The stock market provides price discovery, which drives efficient resource allocation (in theory). Theoretically, more gamblers should mean better price discovery because the payouts for correctly taking the opposing side of the trade are higher. The market solution would be that the gambling will eventually solve itself. They’ll either learn enough to be trading on knowledge rather than vibes, fueling price discovery, or they’ll exit the market when they’ve lost too much or everything. My sticking point is that a lot of brokers offer leverage to people they really shouldn’t. I could have sworn you had to be a qualified investor to get leverage, but if that isn’t law it should be. Show the brokerage your certification, or a pile of cash large enough to convince them you can afford to lose the whole thing.
  - inigyou 19d ago
    I don't know if "theoretically" is good enough here. The theory hasn't really been tested or proven. It's more of a hypothesis, and an ideologically driven one at that.
    - everforward 17d ago
      I'm not positing that as a moral good or bad. It's possible for stock market gambling to be bad for society but have better price discovery, in the same way that dictatorships are bad but tend to have faster response times to events. My theory is mostly that "gambling" seems like it inherently means "buying stocks based on something other than their concrete value". More gambling means stocks drift further from their "true value", which means a higher payout for correcting them back to what their price should actually be. The whole thing does get very fuzzy because of the "market can stay irrational longer than you can stay solvent" aspect. It's not enough to know what the correct price is, you have to know when other people will realize that as well, or else convince people that your price is "correct".