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

Michael W. Green, the longtime critic of passive investing's impact on equity markets, is sounding fresh alarms about what he calls fundamental structural changes in how capital markets function, according to a new interview published this week on the Net Interest podcast.

Green, who has spent years warning about the consequences of the shift from active to passive investment strategies, sat down with Marc Rubinstein for a 58-minute conversation exploring his thesis that the growth of index funds and passive vehicles has created what he terms a "tragedy of the commons" in public markets. For CFOs navigating capital allocation decisions and investor relations strategies, Green's arguments—whether one agrees with them or not—represent an increasingly influential critique of the market infrastructure their companies depend on.

The interview, published January 20th as part of Rubinstein's Net Interest Extra series, marks Green's latest effort to draw attention to what he sees as dangerous distortions in price discovery and capital allocation caused by the dominance of passive strategies. While the specific mechanics of Green's concerns weren't detailed in the episode description, his broader thesis has centered on the idea that when large pools of capital mechanically buy securities based on index inclusion rather than fundamental analysis, it creates feedback loops that disconnect stock prices from underlying business performance.

This matters acutely for finance leaders because it touches on a question that keeps CFOs up at night: does your stock price actually reflect your company's performance anymore, or is it increasingly driven by whether you're in the right index and how much passive money is flowing into that index on any given day?

Green's warnings have grown more urgent as passive investing has continued its march toward market dominance. The shift has profound implications for how companies think about investor relations, capital structure decisions, and even strategic planning. If Green is right that passive flows create systematic mispricings, then traditional assumptions about efficient markets—the bedrock of corporate finance theory—need serious revision.

The interview format suggests Rubinstein, himself a respected financial analyst and writer, is treating Green's thesis as worthy of serious engagement rather than dismissal. That's notable because Green's views have historically been controversial in the investment management industry, where passive strategies have become both enormously profitable and, their proponents argue, demonstrably beneficial for retail investors through lower fees and broader diversification.

For corporate finance teams, the practical question isn't whether Green is entirely right or wrong—it's whether the trends he's identifying are material enough to change how you think about capital markets. If passive flows really do create the kind of structural distortions Green describes, it has implications for everything from the timing of equity raises to how you communicate with your investor base to whether traditional valuation metrics still mean what they used to mean.

The full conversation is available only to paid subscribers of Net Interest, suggesting there's enough demand for deep dives into market structure questions that finance professionals are willing to pay for access to these debates. That itself tells you something about how seriously the industry is taking these concerns, even if consensus hasn't formed around Green's specific predictions.

What's clear is that as passive strategies continue to grow, the questions Green raises about market structure aren't going away. CFOs would be wise to at least understand the critique, even if they ultimately conclude the system is working fine.