Mkay, so you disagree with my definition? Here is a quote from Wikipedia: i.e. 0 = sum<i=1 to N> { w_i * delta_i } where sum of w_i is 1 and delta is the utility or gains/losses of the participants. In other words (and now I quote from myself): You can not deduce a zero sum nature game (or, for that matter, competitive or non-competitive nature) from a single transaction, rather than from the total value in the system. Let's take the following example: Alice sells her share of his company at IPO for 100. Bob buys the share for 100 at IPO Cathy buys the share for 150 1 year later As you can see, Bob made 50 and yet Alice has not lost 50 because she her gains or losses are external to the system (she did not buy her share but rather she opened a company, got clients and has future cashflow that she's pricing at IPO). Since value is added from the outside, it's not a constant sum game, and thus not a zero sum game (since zero-sum is a a subset of constant sum games). As a side note, non-constant sum game can still be competitive like the stock market. Also, you can see how that is different from a simple bet which is distributive by nature, right? A disconnected derivative market is such a market, so there your loss is my gain unless, as I said, you are integrating value from other sources (you know, the usual "you buy an option, I sell an option and both of us win because we hedged delta differently") PS. Not trying to insult your knowledge or intelligence, really, but application of game theory to the markets is very tricky. There are several good papers on it that come to a conclusion
Ok dude I know what you are saying and I know what zero sum means. Literally speaking. But doesn’t hurt to expand the concept a little. A zero can be an absolute zero. Or a floating zero pegged to the index.
Everyone expects to lose in Vegas, they go for the rush of gambling not to make money. The few that have up days, will merely give it back the next day or next holiday.
Dude, he is right. Asset-weighted performance of all investors, both positive and negative, will equal the overall performance of the market. So once you subtract the total market performance (i.e. external value coming into the system), you do get a true zero sum game.
Yes it does because risk must also taken into the equation. You do understand that the guy who do make a annual 10% for a annual risk of 15% is winning over the guy who makes 15% for 30% of annual risk. The other guy can leverage up his trading and make 20% for the equal risk.
It is zero sum, below zero if you count other costs of trading, but I'd say there part of the game. It's zero sum because money is never created, merely redistributed, generally from retail to pro. Doesn't mean retail cant make big money, but overall we'll never be pros and will always be feeding the pro's.
Hitting on the head. That’s why I’ve always advocate this path to wealth - get job. Advance career. Supercharge earning potential. Maximize this positive sum game - save and invest. Stocks drift upwards. This is the second positive sum - maybe a side hustle like flipping houses cars. This is a third positive sum game. As you do create value in the fix up. - and if you have to play zero sum. Find a table with suckers. Sports betting. Horse racing. Poker cash. Etc. Auguably much higher dumb smart money ratio. You trade the stock market you are almost guaranteed to be a sucker. - I know this is a trading forum. What I am advocating is not against trading. But for mental flexibility to find the path of least resistance to the lowest hanging fruit. This is key if you want to succeed in anything.
I hear you. But in terms of zero sum, risk is not in the equation. Yes I may have a risky method to make 15 with 30 risk. That just means when I lose 30 someone else is making 30. The sum is still zero regardless I lose 15 or 30.