Winner Takes All

Given the existence of ‘super-smarts’ like Warren Buffett, Patrick Veitch and others, including George Soros (the man who broke the Bank of England), Zeljko Ranogajec (blackjack and racing expert and the world’s biggest gambler for 2010), Haralabos Voulgaris (NBA king and sportsbook owner) and Matthew Benham (owner of Smartodds, one of the world’s biggest betting syndicates), we should at least consider the possibility that some professionals are capable of making a living through beating the market. Despite the complexity and non-linearity of markets, it may be that some individuals are genuinely talented or hard working enough to uncover sufficient regularity to overcome the costs of playing and be consistently successful. If that is accepted, what are the consequences for the rest of us? Sadly, it makes our prospects even worse than if it was all just a game of chance. In zero-sum games like betting, investing and poker, someone has to pay for the ‘winners’. The market facilitators won’t do it; inevitably, that means the job falls to the rest of us, the ‘losers’. Furthermore because small differences in relative skill, over time, are compounded, the resulting distribution of profitability can be distinctly non-linear. That is to say, the winner takes all.

Next: A Market for Lemons