Edge Decay

David McLean and Jeffrey Pontiff published a landmark study in the Journal of Finance in 2016: "Does Academic Research Destroy Stock Return Predictability?" They found that anomalies documented in academic papers declined by approximately 32% after publication. The mechanism is competition — once an edge is known, capital flows in to exploit it, and the exploitation narrows the inefficiency until it is no longer profitable after costs.

Edge decay applies beyond academia. A strategy shared on a forum, sold on a marketplace, or described in a YouTube video is a strategy being distributed. Each additional user running the same strategy on the same market reduces the available edge for all users. This is particularly acute on thin markets — a mean reversion strategy on an illiquid Polymarket contract may work when one bot runs it, and fail when ten bots run it, because the combined activity absorbs the inefficiency.

This is critical context for the botwir3 marketplace (when it launches). A strategy being sold is a strategy being shared. The buyer must evaluate not just whether the strategy had edge historically, but whether that edge will persist as more buyers deploy it. The seller has an incentive to sell strategies whose edge is already decaying — they extract value from the strategy through sales rather than through trading. This is not fraud. It is the natural economics of shared information. The informed buyer understands this.