I think the largest fallacy is that HFT is about making money solely via high-frequency.

However, HFT is rather a group of market making strategies that operate at high speeds. They'd still work at lower speeds (above a certain threshold). But they 'make it worth it' for businesses, so to speak, because of the volume that can be generated, because high speeds means more trades.

Most people doing HFT are taking very small spreads. Fractions of pennies. But because they can do HFT a lot, this grows a lot. In fact, many HFT equity traders make money via rebates. Which means if anything they are only providing a service to the market (it's someone else coming across and crossing them for a trade).

So HFT is a mixed bag, as others have said. There are predatory strategies that probably do more harm than good -- accelerate crashes, etc.

But all HFT is -- is some slow strategy in the background + an ability to make markets a lot. By making markets a lot -- liquidity is provided. Whether the slow strategy in the background is good or bad -- again, is a totally different thing.

So insider trading + HFT (as Hirshleifer maybe is getting at), which we would include in the HFT category because of the latter component, is bad. But providing a certain risk assessment that other people think is overvalued or undervalued + HFT is not necessarily bad.

Where it gets tricky is that HFT infrastructure usually requires the same foresight that 'knowing more than other people' requires. And so it seems like people are being taken advantage of. But judged purely objectively, HFT is just a measure of speed. I.e., it's just magnitude. The direction is totally up to the market participant (many of whom, it's true -- are ruthless and even amoral).

But people may not appreciate the importance of liquidity (which is what HFT mostly provides). Liquidity -- which of course gets its name from this 'smoothing out' of markets -- i.e., making things more readily accesible based on a wide variety of demands, etc. -- that is the basis for any type of economy or convenience. It's a deep problem that we always probably want to improve.

Should some farmer in Africa who has some idea for taking some plant and using it to treat some ailment be given funding from a bank? In a highly liquid world -- yeah, there's an ATM machine in the middle of nowhere and he enters his information and gets a loan. I.e., this is an extreme example, but this 'convenience' is huge for innovation and making all of life, for lack of a better word, more elegant.

On the other hand, the risks of people who provide liquidity with much higher insights into the market than other people -- is like with any misaligned information relationship. Any type of manipulation is very bad -- and very tempting when you're one of the large market participants. So that should always be safeguarded against.

But yeah, I suppose it's like anything. You want things fast but safe.

ETA. I read the question (parent comment) a little more thoroughly. So I should probably answer -- why does 1/30th of a second make a difference? It rarely does. But nobody makes money solely with speed, right? What we mean by someone makes money by being faster by a couple of milliseconds -- is that there is some well-known strategy out there, and some market participants, with really fast connections, can get into that strategy faster than everyone else. But clearly, in regards to sub-second market entry, these strategies are fairly rare (e.g., trading announcements or IPOs or pairs trading, etc.).

High frequency trading means entering AND exiting quickly (i.e., you have to have some other strategy -- usually a hedge -- that you're doing to get rid of the risk of entering one side of the trade). Being sure about the direction somehow, that's of course the trick. But what HFT traders are counting on is -- for lack of a better way to put it -- dumb commercial paper. On average, they want to have a strategy that eeks out a little bit of a profit. Then, add in all the individual investors and mutual funds, etc., that have a mixed bag of clarity into the market, and extract some of the inefficiency out of it without assuming much risk.

But just because they've figured a way to extract rewards out of the misalignment of interests in the markets -- doesn't mean what they're doing is wrong. It's just annoying to speculators. Because it seems like they are being constantly reminded that the markets are unforgiving unless you have a very clear idea about what type of risk/reward profile you're willing to present.

The best way to fix the financial markets is education and other efficiencies. Anyway, that's just my two cents. I could go into the problems with GS and bailed out bulge-bracket firms -- but suffice it to say, the systemic problems are mostly based on conflations (e.g., conflating a commercial bank and proprietary trading).