All funds that go into the business will either be debt or equity. Debt gets a guaranteed rate of return, and needs to be paid back. It gets first claim if you go under, but gets no "bonus" if you do well. Equity is an ownership stake; last in line if you go under, but with a claim on all future profits if you do well. The most obvious type of equity stake is your own, but you might say to a friend hey, go halves with me on buying a new lathe, and I'll split the profits from the furniture I make 50/50. That's another example of an equity stake, as old as the hills.
All a stock market is, is your friend saying "look, I've got the note saying I have a right to 50% of the profits of Zac's furniture business, but I'm broke right now; anyone wanna give me $50 for it?". And because in practice this sort of thing is fraught with risk, this is incredibly regulated, but that's all a stock market is; people trading the right to some uncertain future profits. (Well...kinda. There's also the question of control. Some shares give you a say in how a company is run; some don't. That's rarely a factor though.)
Notionally, incidentally, the value of a company's stock is the discounted sum of all future cash flows. If you owe 100% of Amazon, obviously you have the right to 100% of all future profit they make. If you owe 0.0001% of Amazon, you have the right to 0.0001% of all future profit they make. That's the core driver of stock prices; the market's ever-changing estimation of a companies future.
As for HFT...no, you won't make huge profits. The entire HFT industry, globally, makes chicken feed, but they make for VERY entertaining news stories, so you read about them a ton.
Anyhow, as to "why HFT is good", the answer is basically that we all benefit when markets work better, and one way markets can work better is if they are deep and liquid. In simple terms, that means that if you want to buy or sell something, there's always someone there offering to take the other side of the trade for more-or-less the market rate. Conversely, housing is a very shallow, very illiquid market. If you want to sell your $400k house, it might takes weeks or months, and you may find yourself happily paying significant fees to the broker, and maybe even selling it at a discount, just to get the damn thing to sell. If you want to sell your share of Apple stock, it will take microseconds, and you'll get very close to the market rate (ie, low commission/low spread). And while HFT doesn't have a huge impact, to the extent it has an impact, it is to make the market deeper, more liquid, and more efficient. HFT benefits the HFT traders, but it also, and this is really, really, important to grasp benefits every person who trades with the HFT traders. The losers are the "low frequency traders" who would have bought your Apple share from you a little slower and for a little less money, but lost out.
But again, this effect is minimal. The drive for HFT is the race for pennies in an increasingly efficient and competitive market. Small time investors, honestly, aren't the victims here. (Unless they're doing the day-trading, "I can pick stocks because I read a book on trend analysis" thing, in which case...they're absolutely screwed, but no more so now than before HFT. The stock market is not a game.)
And no, I wouldn't say the market is becoming "more one-sided"; that presupposes there being two sides. There aren't; there are seven billion sides. HFT does not profit at the expense of pension funds or entrepreneurs; it profits at the expense of everyone else who wanted to profit from them.
And I think the sports analogy is especially inapt. We want markets to work as efficiently as possible. We want sports to provide a spectacle. These things are not similar.
Approach A: If I own 100% I would clearly get 100% of all future profits. If I owned 50% (ie, if this was a joint venture between me and my friend Joe), then...I'd have a claim to 50% of all future profits. By extension, X% of ownership gives a claim to X% of the future profits. Your share of Amazon may be tiny, but if someone wanted to buy Amazon outright, they'd need to buy your share; the value of that share to the potential buyer is proportional to the value of Amazon as a whole.
Approach B: Every dollar of profit that Amazon makes is either paid out in dividends, or is retained and re-invested in order to garner future profits. The same is true for future profits. However, all things are finite, so at some point the company will be wound up and liquidated; any profits that have not been disbursed to shareholders via dividends will be disbursed at this time. Ergo, every dollar of profit is eventually disbursed to shareholders.
(Ah, you say, but it might be a decade or more before Amazon pays dividends or is wound up. But when you go to sell your shares, the same analysis holds, recursively. Your share of Amazon has value because you can sell it to someone who will buy it because they can sell it to someone who will buy it because [...] they want a share of Amazon's future dividends.)
Or to put it another way: A company has assets and liabilities; if you net these out (ie, sell off all the assets and pay off all the liabilities) you get a "book value". But a company almost always is valued at well above its book value: Amazon at 17 times book value. In other words, it would cost you 17 times more to buy Amazon than it would to just build an exact replica of all their warehouses and infrastructure (and patents, and brand awareness, and goodwill, etc.). Why? What do you buy when you launch a hostile takeover of Amazon other than all those assets? Answer: Their future profits. That's the only thing left to have value.
When they decide to forgo paying dividends, that money is usually put to other uses by investing it (case Amazon) or stockpiled in cash (case Apple).
In both cases the value of your 0.0001% slice has increased, and even though you won't get an instant transfer of that value, you will see it in the appreciation in the market price of your slice.
All funds that go into the business will either be debt or equity. Debt gets a guaranteed rate of return, and needs to be paid back. It gets first claim if you go under, but gets no "bonus" if you do well. Equity is an ownership stake; last in line if you go under, but with a claim on all future profits if you do well. The most obvious type of equity stake is your own, but you might say to a friend hey, go halves with me on buying a new lathe, and I'll split the profits from the furniture I make 50/50. That's another example of an equity stake, as old as the hills.
All a stock market is, is your friend saying "look, I've got the note saying I have a right to 50% of the profits of Zac's furniture business, but I'm broke right now; anyone wanna give me $50 for it?". And because in practice this sort of thing is fraught with risk, this is incredibly regulated, but that's all a stock market is; people trading the right to some uncertain future profits. (Well...kinda. There's also the question of control. Some shares give you a say in how a company is run; some don't. That's rarely a factor though.)
Notionally, incidentally, the value of a company's stock is the discounted sum of all future cash flows. If you owe 100% of Amazon, obviously you have the right to 100% of all future profit they make. If you owe 0.0001% of Amazon, you have the right to 0.0001% of all future profit they make. That's the core driver of stock prices; the market's ever-changing estimation of a companies future.
As for HFT...no, you won't make huge profits. The entire HFT industry, globally, makes chicken feed, but they make for VERY entertaining news stories, so you read about them a ton.
Anyhow, as to "why HFT is good", the answer is basically that we all benefit when markets work better, and one way markets can work better is if they are deep and liquid. In simple terms, that means that if you want to buy or sell something, there's always someone there offering to take the other side of the trade for more-or-less the market rate. Conversely, housing is a very shallow, very illiquid market. If you want to sell your $400k house, it might takes weeks or months, and you may find yourself happily paying significant fees to the broker, and maybe even selling it at a discount, just to get the damn thing to sell. If you want to sell your share of Apple stock, it will take microseconds, and you'll get very close to the market rate (ie, low commission/low spread). And while HFT doesn't have a huge impact, to the extent it has an impact, it is to make the market deeper, more liquid, and more efficient. HFT benefits the HFT traders, but it also, and this is really, really, important to grasp benefits every person who trades with the HFT traders. The losers are the "low frequency traders" who would have bought your Apple share from you a little slower and for a little less money, but lost out.
But again, this effect is minimal. The drive for HFT is the race for pennies in an increasingly efficient and competitive market. Small time investors, honestly, aren't the victims here. (Unless they're doing the day-trading, "I can pick stocks because I read a book on trend analysis" thing, in which case...they're absolutely screwed, but no more so now than before HFT. The stock market is not a game.)
And no, I wouldn't say the market is becoming "more one-sided"; that presupposes there being two sides. There aren't; there are seven billion sides. HFT does not profit at the expense of pension funds or entrepreneurs; it profits at the expense of everyone else who wanted to profit from them.
And I think the sports analogy is especially inapt. We want markets to work as efficiently as possible. We want sports to provide a spectacle. These things are not similar.