I just ordered this book. I look forward to becomming very well acquainted with it over the next few weeks.
Isn't this the endgame for hft in general. The day when the best firms are colocated in the exact same distance and have the exact same budget who do they take money from? I know you will say that there will always be other dumb money in the market, I am just not so sure how long this lasts considering latest numbers suggest 70-80% of stock volume is hft.
Most of that volume is concentrated on the most liquid (highest volume) stocks like C. If you're looking for "dumb money" look at hype stocks like TSLA, and HFT isn't needed to trade these.
The Johnson book could be described as broad but shallow. The author knows a reasonable amount about many different topics, but doesn't explore any of them in depth. It can't hurt to read the book, but it isn't nearly sufficient.
Do you have one to recommend that is sufficient? Perhaps the book has references to the more in depth sources.
If you have no infrastructure and no strategy, there should be no time pressure. The time-pressure comes when you know your edge is evaporating in the market. The most difficult aspect of trading is to expand an edge and push the business forward. In the absence of any revenue stream, you should not have this pressure. If you have a backer, tell the backer you do not need his money until your research is complete. He should respect that decision, because 1) it's cheaper for him, and 2) you don't have something to work with yet anyway, and just throwing darts at the wall is riskier than putting money into even a savings account.
Who do they take money from? That's a good question. I don't think this will drop into a scenario where all the firms are just taking money from each other, because participants are generally smart enough to figure out when they aren't winning their poker game anymore. The HFT participants will continue to extract a premium for providing liquidity to long-term investors. The number of participants in a position to extract the premium will drop substantially -- getting into this position is essentially where the real battle is, and the big names are not necessarily the ones who are winning. (More curiously, I'm more intrigued by why these firms would seek private equity investors, if they were so unbeatable.) The reason I think the arms race will continue well into the next 15-20 years (in the absence of government intervention) is because investors have nowhere else to go. If you're talking about producing returns, there will always be a mad dashes of capital in and out of various assets. Just holding cash indefinitely has never been profitable and is a net loss over the long run, so anyone interested in preserving wealth absolutely has to participate in speculation or own assets that rise in value. Even if the government does enact a tax, I guarantee another nation would be more than willing to step up and offer a home for a place like the CME or NASDAQ. Capital will then be pushed around on foreign exchanges instead of the US exchanges, and HFT will continue. (... Well, unless we get one-world government. I leave that one to the conspiracy theorists. Global financial regulations would be a very bad thing.)