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Technologos comments on Money pumping: the axiomatic approach - Less Wrong
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A good point to remember, and I'd say the most useful way to think of it.
The problematic word seems to be "bet," and while I agree that most bets do increase variation, I feel like Chris/Stuart take bet to mean "an amount of money that pays returns when one outcome happens and not when another does." This adequately captures both traditional bets (bets that some thing will happen because one believes the probability of it happening is higher than one's betting partner believes it is) and insurance or hedging bets.
Agreed.
I work on prediction markets, so I see it all as bets, and am used to thinking that both participants in a purely financial trade can gain from it, even though many people on the outside of the deal see it as zero sum. Sometimes you increase your variance because you think it's worth increasing your expected return, other times you reduce your variation.