Passive Investing Critic Michael Green Warns of Market Structure Crisis in New Interview

Michael W. Green, the portfolio strategist who has spent years warning about structural shifts in equity markets driven by passive investing, sat down with Net Interest's Marc Rubinstein this week to discuss what he calls a "tragedy of the commons" unfolding in public markets.

The 58-minute conversation, published January 20 as part of Rubinstein's Net Interest Extra podcast series, centers on Green's thesis that the rise of index funds and passive investment strategies has created fundamental distortions in how capital markets function—distortions that finance leaders may be underestimating as they manage corporate treasury operations and capital allocation decisions.

Green has built a following on social media and Substack by arguing that passive flows, which by definition don't discriminate based on company fundamentals, are reshaping price discovery mechanisms that CFOs have long relied on to gauge market sentiment about their strategic decisions. The "tragedy of the commons" framing suggests that while passive investing benefits individual investors through low fees, the collective effect may be degrading the market's ability to efficiently allocate capital.

For corporate finance executives, the implications cut across multiple domains. If Green's warnings prove prescient, the stock price signals that boards and management teams use to evaluate everything from M&A opportunities to executive compensation structures may be increasingly disconnected from underlying business performance. The concern isn't theoretical: finance leaders already grapple with explaining quarter-to-quarter volatility that seems untethered from operational results, particularly in sectors with heavy passive ownership.

The timing of the interview is notable. As of early 2026, passive strategies continue to capture market share from active management, a trend that has persisted for over a decade. What began as a cost-saving innovation for retail investors has evolved into a dominant force in capital markets, with implications that extend far beyond individual portfolio construction.

Rubinstein, whose Net Interest publication has become required reading for finance professionals seeking sophisticated market analysis, has made these structural market conversations a hallmark of his podcast series. Previous episodes have tackled private equity return measurement, LIBOR conviction controversies, and the migration of traditional finance onto blockchain infrastructure.

The conversation arrives as finance leaders confront a paradox: their companies' stock prices are increasingly set by algorithms and index rebalancing rather than fundamental analysis, yet they're still expected to "manage" those prices through investor relations, buyback programs, and strategic communications. Green's framework suggests this may be a losing game—that the very nature of price formation has changed in ways that render traditional IR playbooks obsolete.

What remains unclear from the podcast description is whether Green offers practical guidance for CFOs navigating this new reality, or simply sounds the alarm. For finance executives accustomed to operating in markets where price discovery reflected some version of collective intelligence about business prospects, the "tragedy of the commons" diagnosis raises an uncomfortable question: if passive flows have broken the feedback loop between corporate performance and market valuation, what signals should finance leaders trust when making capital allocation decisions?

The full interview is available to paid subscribers of Net Interest, reflecting the specialized nature of the content and its target audience of finance professionals willing to pay for sophisticated market analysis beyond headline news.