How do you explain all of the HFT firms that have gone out of business over the years? They're competing with each other, it's a very competitive space that doesn't even capture that much value compared to the people they replaced.

To win at HFT you have to have lower latency than your competitors. The NYSE rents server space in their building for this very purpose and makes alot of money doing so. If you don't have hardware there you will go out of business trying to compete with those who do. From a broad perspective it kind of looks like companies being allowed to skim freely from the market so long as the right people get their cut.

Getting early views of an order book and trades does not allow you to skim. No matter how close you are to the servers, you’re still seeing the data after the order has gone in and has either been matched or entered into the order book. There is no way for them to beat the order.

This is 100% not true. As mentioned below, HFT competes against itself, and there are measures to protect against latency manipulation.

I go from the account of Flash Boys where an HFT firm manager claimed they lose only once in four years - due to a human error.