I don't think "knowing how business works" (in a microeconomic sense) has anything to do with this. This is a macroeconomic transaction, these people (or the trading algorithms they've written) rely on ripple effects that spread through the economy as a result of isolated incidents, either for real market reasons, or because of the psychological effects on markets. An oil field catastrophe may cause economic fluctuations which make people or companies buy less chips. Or at least someone thinks they'll buy less chips, whether they do or not.

Also, as youy point out, these market fluctuations don't reflect real economic realities, but short-term variations that can be exploited on the margin. You and I may not invest in the short term, but software, with instant knowledge of the market and the ability to respond instantaneously to it, attempts to capitalize on short term, miniscule variations. It's like the games currency traders play, or commodities speculators, buying low and selling high, but never actually producing anything of value.

No doubt a smart trader can get rich this way, but when everyone is doing it, at the speed of light, with automated methods essentially outside human control, I get a very uneasy feeling about it. In a real business transaction, buyer and seller both win, by definition, or neither would have participated in the first place (well, at least it works out this way on the average!). In this case, with mindless algorithms written by hired guns and financed by leveraged loans of other people's money to take advantage of hair thin fluctuations, and you get a system which, in my opinion, is inherently unstable. It's a zero sum game since nothing is produced, so the "wealth" must come from someone's loss, as opposed to being the fruit of someone's labor.

I believe this is how depressions happen. Think about it, the day after the Great Depression, what had really changed? The mines and factories were still there, the skilled workers were still there, everything was in place in terms of real wealth before and after the Crash. But the world had changed.