First, you can't just dismiss the economic impact of all the business expenses I listed. Those are real. Nor can you dismiss the impact of all the taxes hedge funds and their employees pay. Those are real too. So is the service they provide. Since when is a good return not a service? Tell that to their investors. Do you also think that mutual funds don't provide a service? Stocks are NOT a zero sum gain either. Not at all.
The same could be said of a company that makes mud pies, an enterprise for the digging up and then re-filling of holes in the ground, a buggy whip manufacturer, or a seller of ice to eskimos. Economic value is not equivalent to the overheads of a business, but the value of what it produces in excess of those overheads. If I spend $1 million on employing people to fart in unison, are you saying that is just as valuable as if I spend $1 million for them to build a bunch of houses or grow crops? Simply employing people for X dollars is irrelevant - it's what they *produce* that determines the value. If you are going to go socialist, at least understand the economics behind capitalism first, so you are migrating for genuine reasons rather than out of ignorance.
And who provides the seed capital for the machine inventor to make and market his product? Investors. Who allocates investor capital? Fund managers. Who are the best fund managers? Hedge fund managers. Capital allocators, such as hedge funds, are thus crucial to your example. Without them, the great inventor gets less or zero funding. With them, he gets ample funding and thus has a far higher chance of success and more years to build his business before running out of money. By accurately forecasting the future, and being willing to take a high risk in exchange for even higher return, the profitable hedge fund manager thus allows new products and services to come to market that would otherwise not have been backed at all. Far from providing no value, the existence of skilled, well-funded investors and fund managers is a key difference between an innovative, value-creating economy, and a moribund, stagnant one. In addition, skilled hedge fund managers have an economic interest in keeping asset values from getting too expensive or too cheap. When done profitably, speculation thus ensures that values best reflect the future, based on presently available information. More accurate prices means that society allocates capital more efficiently - better projects get more funding, worse ones get less. Without skilled fund managers setting more accurate prices, we get ludicrous bubbles or depressed prices, which inhibits capital formation and good investment decisions at the business level. No one who has ever actually tried to start or run a small, growing business, could ever possibly say that investment capital is unimportant. No one who has floated a company could ever say that fund managers are unimportant. No one who has seen the consequences of an asset price bubble or prolonged depression should think that making good investment decisions is useless. A quality fund manager who can assess the future reasonably well is immensely valuable not just to his fund holdings but to society at large. "It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a 'dismal science.' But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance." - Murray Rothbard
Even short-selling hedge funds provide value by doing what regulators are too incompetent to do -- identifying companies with excessive debt and flawed business models. And that's on top of providing a return for their investors.
The thing I always find funny is how these big time traders can't just open an online account and make money. I mean he could have funded it with half a million, he can't make more tha 7 bucks an hour trading half a million dollars from home?