Yes! Completely agreed. The fact that it's a negative sum game is really hard to explain to people who've had some moderate success trading (and there are plenty of those anecdotal examples out there).

But that's a great point that any kind of active trading strategy needs to be compared against the right index. I think this holds true for pension/sovereign funds which invest in multiple hedge funds as well - comparing to the overall market performance may be less relevant than comparing to sector-weighted market performance, for example.