Thread by @patio11

Matt Levine on investing-as-gambling and how society should do something productive with it rather than experiencing a deadweight loss for random number generation.

bloomberg.com/opinion/articl…

I suppose one could make an argument that startup crowdfunding might be a potential option here; put a limit on how much folks can lose, give them a team they can root for, and keep the ecosystem *relatively* free of outright predation.

I have a generalized belief not widely shared among my friends that one is much more likely to create value with a large number of relatively small investments in firms than a small number of largest investments in Prestigious Projects (TM).

"Is it a deadweight loss?"

*shrug* It's probably a subsidy to options market makers, since substantially every retail options trade crosses the spread, which is higher for most options than for most equities, without being motivated by market-superior knowledge regarding price.

I guess if you were an options market maker you could say something to the effect of "Liquidity in the options markets is societally beneficial because cheap hedging is a nice thing to have. We can offer that, in part, because some participants send us free money daily."