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...is to ask Russ Allbery to define the word bet.
These financial instruments are accumulations of real sources of income. At the bottom are a bunch of mortgages getting (hopefully) regular interest payments. It makes perfect sense to aggregate them and sell them. It's entirely reasonable to have the higher-risk mortgages pay higher interest rates in exchange for the increased risk. This is how financial systems work. It's no more betting than buying stocks is betting. It's just more complicated.
In mathematics or statistics, taking a risk based on calculated odds, is known as a bet. The amount you gain by doing so is called a payoff. Investment, as it is used by Mr. Allbery, is betting. Buying stocks, which is done based on the expectation that the stock will increase in value, as opposed to the event that the stock decreases in value, is also a bet. Even the names of some of these "financial instruments" (a phrase invented when the quants and derivatives got a bad name) reflect jargon used originally in gambling: A Hedge fund gets its name from the expression to "hedge a bet".
The more people understand that investing is a form of betting, and therefore realize that means that there is a possibility of losing the bet, the better off they will be.
