Contrary to popular belief, the primary edge in HFT comes from exploiting the physical and regulatory structure of markets, not from discovering complex financial patterns. Speed is the main tool used for this structural exploitation, prioritizing infrastructure over algorithmic genius.

With information now ubiquitous, the primary source of market inefficiency is no longer informational but behavioral. The most durable edge is "time arbitrage"—exploiting the market's obsession with short-term results by focusing on a business's normalized potential over a two-to-four-year horizon.

The explosive growth of prediction markets is driven by regulatory arbitrage. They capture immense value from the highly-regulated sports betting industry by operating under different, less restrictive rules for 'prediction markets,' despite significant product overlap.

Markets, technologies, and companies change constantly. The one constant is the human operating system—our biases, emotions, and irrationality. The ability to systematically trade against predictable human behavior is an enduring source of alpha.

A specific arbitrage opportunity exists with serial acquirers. When they announce a deal that will significantly increase future earnings per share, the market often under-reacts. An investor can buy shares at a compressed forward multiple before the full impact of the acquisition is priced in.

An estimated 80-90% of institutional trading is driven by quant funds and multi-manager platforms with one-to-three-month incentive cycles. This structure forces a short-term view, creating massive earnings volatility. This presents a structural advantage for long-term investors who can underwrite through the noise and exploit the resulting mispricings caused by career-risk-averse managers.

Today's markets are less efficient because the dominant players—passive funds, retail traders, and short-term quants—do not invest based on long-term fundamentals. This creates a significant arbitrage opportunity for investors who are willing to focus on a company's intrinsic value over a one- to three-year horizon, a timeframe now largely ignored.

David Kaiser of Methodical Investments posits a contrarian view on AI's market impact. Instead of creating perfect efficiency, he argues AI and the data it processes might actually create more mispricings and inefficiencies. This provides opportunities for disciplined, rules-based strategies that don't constantly adapt to short-term noise.

Contrary to classic theory, markets may be growing less efficient. This is driven not only by passive indexing but also by a structural shift in active management towards short-term, quantitative strategies that prioritize immediate price movements over long-term fundamental value.