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

Michael W. Green, a longtime critic of passive investing's impact on equity markets, has issued fresh warnings about what he calls "fundamental changes in equity market structure" in a new interview published January 20, 2026, on the Net Interest podcast.

Green, who maintains an active presence on X and Substack, has spent years arguing that the rise of index funds and passive investment strategies has created systemic risks in public markets—a position that puts him at odds with much of the asset management industry but resonates with finance executives concerned about market fragility.

The interview, titled "The Tragedy of the Commons in Passive," suggests Green is framing the passive investing boom through the lens of collective action problems—where individual rational decisions (buying low-cost index funds) may produce collectively irrational outcomes (distorted price discovery and market structure).

For CFOs and finance leaders, Green's thesis carries particular weight as companies navigate capital allocation decisions in an era where roughly half of U.S. equity assets sit in passive vehicles. The concentration of ownership in the hands of a few large index providers—Vanguard, BlackRock, and State Street control the majority of passive assets—has implications for everything from shareholder engagement to M&A dynamics to the cost of capital.

Green's warnings center on how passive flows, which buy and sell based on index membership rather than fundamental analysis, may be creating feedback loops that amplify market movements and distort traditional valuation signals. This matters acutely for finance executives trying to interpret their own stock performance or make decisions about equity issuance and buybacks.

The interview was conducted by Marc Rubinstein, a finance analyst and Substack author, as part of his Net Interest Extra series exploring specialized topics in finance. The full 58-minute conversation is available only to paid subscribers of Rubinstein's publication.

While the specific details of Green's latest arguments weren't disclosed in the public preview, the "tragedy of the commons" framing suggests he's positioning passive investing as a problem where individual benefit (low fees, market returns) comes at the expense of collective market health (price discovery, capital allocation efficiency).

Green's perspective remains controversial. Proponents of passive investing argue it has democratized access to markets and reduced costs for retail investors, while critics like Green contend it has created dangerous concentrations of power and undermined the price discovery mechanism that makes public markets useful for capital allocation.

For corporate finance teams, the debate has practical implications: if Green is correct that passive flows are distorting valuations, traditional metrics for assessing whether a stock is fairly priced may be less reliable than they once were. That uncertainty complicates decisions about when to raise capital, repurchase shares, or pursue M&A.

The interview arrives as passive investing continues its march toward market dominance, with no signs of the trend reversing despite persistent criticism from active managers and market structure skeptics.