Pluralistic: A perfect distillation of the social uselessness of finance (18 Dec 2025)

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Originally published at: Pluralistic: A perfect distillation of the social uselessness of finance (18 Dec 2025) – Pluralistic: Daily links from Cory Doctorow



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A perfect distillation of the social uselessness of finance (permalink)

I'm about to sign off for the year – actually, I was ready to do it yesterday, but then I happened upon a brief piece of writing that was so perfect that I decided I'd do one more edition of Pluralistic for 2025.

The piece in question is John Lanchester's "For Every Winner A Loser," in the London Review of Books, in which Lanchester reviews two books about the finance sector: Gary Stevenson's The Trading Game and Rob Copeland's The Fund:

https://www.lrb.co.uk/the-paper/v46/n17/john-lanchester/for-every-winner-a-loser

It's a long and fascinating piece and it's certainly left me wanting to read both books, but that's not what convinced me to do one more newsletter before going on break – rather, it was a brief passage in the essay's preamble, a passage that perfectly captures the total social uselessness of the finance sector as a whole.

Lanchester starts by stating that while we think of the role of the finance sector as "capital allocation" – that is, using investors' money to fund new businesses and expansions for existing business – that hasn't been important to finance for quite some time. Today, only 3% of bank activity consists of "lending to firms and individuals engaged in the production of goods and services."

The other 97% of finance is gambling. Here's how Stevenson breaks it down: say your farm grows mangoes. You need money before the mangoes are harvested, so you sell the future ownership of the harvest to a broker at $1/crate.

The broker immediately flips that interest in your harvest to a dealer who believes (on the basis of a rumor about bad weather) that mangoes will be scarce this year and is willing to pay $1.10/crate. Next, an international speculator (trading on the same rumor) buys the rights from the broker at $1.20/crate.

Now come the side bets: a "momentum trader" (who specializing in bets on market trends continuing) buys the rights to your crop for $1.30/crate. A contrarian trader (who bets against momentum traders) short-sells the momentum trader's bet at $1.20. More short sellers pile in and drive the price down to $1/crate.

Now, a new rumor circulates, about conditions being ripe for a bounteous mango harvest, so more short-sellers appear, and push the price to $0.90/crate. This tempts the original broker back in, and he buys your crop back at $1/crate.

That's when the harvest comes. You bring in the mangoes. They go to market, and fetch $1.10/crate.

This is finance – a welter of transactions, only one of which (selling your mangoes to people who eat them) involves the real economy. Everything else is "speculation on the movement of prices." The nine transactions that took place between your planting the crop and someone eating the mangoes are all zero sum – every trade has an evenly matched winner and loser, and when you sum them all up, they come out to zero. In other words, no value was created.

This is the finance sector. In a world where the real economy generates $105 trillion/year, the financial derivatives market adds up to $667 trillion/year. This is "the biggest business in the world" – and it's useless. It produces nothing. It adds no value.

If you work a job where you do something useful, you are on the losing side of this economy. All the real money is in this socially useless, no-value-creating, hypertrophied, metastasized finance sector. Every gain in finance is matched by a loss. It all amounts to – literally – nothing.

So that's what tempted me into one more blog post for the year – an absolutely perfect distillation of the uselessness of "the biggest business in the world," whose masters are the degenerate gamblers wh buy and sell our politicians, set our policy, and control our lives. They're the ones enshittifying the internet, burning down the planet, and pushing Elon Musk towards trillionairedom.

It's their world, and we just live on it.

For now.

(Image: Sam Valadi, CC BY 2.0, modified)

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Upcoming books (permalink)

  • "Unauthorized Bread": a middle-grades graphic novel adapted from my novella about refugees, toasters and DRM, FirstSecond, 2026

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Colophon (permalink)

Today's top sources: John Naughton (https://memex.naughtons.org/).

Currently writing:

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«John Lanchester’s “For Every Winner A Loser,” […] The other 97% of finance is gambling. Here’s how Stevenson breaks it down: say your farm grows mangoes. […] This tempts the original broker back in, and he buys your crop back at $1/crate. That’s when the harvest comes. You bring in the mangoes. They go to market, and fetch $1.10/crate. […] This is finance – a welter of transactions, only one of which (selling your mangoes to people who eat them) involves the real economy. Everything else is “speculation on the movement of prices.”»

The argument is right but the example is wrong because in the example “finance” is performing a useful task which is via the prices of “futures” to estimate expected crop yields in order to effectively insure them and the person who makes the best estimate makes a profit. What is being traded in the example is materially relevant insurance risk because the farmer, wholesalers retailers, consumers, all have a material interest in estimating how big the crop will be for various planning purposes and the best estimate is of value to them.

«The nine transactions that took place between your planting the crop and someone eating the mangoes are all zero sum»

The difference between proper finance and finance as betting is very clear and it is not that one is not zero sum and the other is zero sum but it is whether the participants have a material interest in the risk being traded.

The much better example is buying and selling risk about whether the temperature in Omaha will be over 10C tomorrow for people who have no material interest in the temperature in Omaha:

  • Two traders Jane and Mary have an initial capital of $100m.
  • One day two traders Jane and Mary have a deal where one sells an option on the temperature and the other buys it.
  • Jane gets it right, makes $10m and gets a bonus of $1m for that; Mary’s trading capital shrinks $10m and makes no bonus.
  • The result is that Jane now has made $1m for herself, her trading capital is $109, and Mary’s trading capital is $90.
  • The next day the Jane and Mary repeat the trade, this time Mary gets it right, makes $10m and gets a bonus; Jane’s capital shrinks by $10m and makes no bonus.
  • The result that Jane now has $99m capital and $1m for herself, and Mary now has $99m capital and $1m for herself.
  • The next two rounds work the same and the result is that Jane has $98m in capital and $2m for herself, and so does Mary.

On average what happens is that neither side gets ahead and capital goes back and forth but every round some of the capital gets pocketed by a trader as “bonus”. When enough betting round have been done and all the capital has been turned into bonuses for the traders the Fed and the Treasury recapitalize Wall Street and refill the bonus pools.

That betting without any material interest in the outcome is what modern finance is doing in a large majority of cases and traders (and their executives) become very rich thanks to it.

Note: Thanks to Summers, Rubin and accomplices the law that disregulated derivatives trading specifically exempted derivatives trading from state gambling laws.

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That betting without any material interest in the outcome is what modern finance is doing in a large majority of cases and traders (and their executives) become very rich thanks to it.

And that profit in the immaterial is causing inflation to rise on all of the material interests as well? Do I have that right?

In that case, making all material interests from the past cost more and more to upkeep. All because the greed for immaterial profit is hoarding the finances that would have maintained the material interests of the past, for longer?

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Sorry if what I wrote was ambiguous: I used “material interest” in the legal/insurance sense, not in the sense of an interest in something physically tangible. In the sense I intended it means something like “an interest in which the subject has a direct monetary stake”.

For example as to fire insurance: an owner has a material interest in their owned house so if they insure against fire loss it that is not betting, if they insure against fire loss an house that they do not own they do not have a material interest in it so it is betting. The same applies to amount insured: if an owner insures the house they own for twice its value then they do not have a material interest in 50% of the insured value so the insurance is betting to that extent. Note: obviously betting on something over which there is no material interest creates incentives for crime (e.g. arson of the house they do not own but have insured).

I was trying to explain why it is not “zero sum” that makes most of financial speculation into betting but rather not being affected directly by a loss in the asset.

«that profit in the immaterial is causing inflation to rise on all of the material interests as well?»

Indeed, to the extent that central banks and treasuries refill with new “liquidity” the capital and bonus pools of financial corporations bankrupted by betting losses thus expanding their balance sheets as it happened in 2008 and in 2021.

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