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, is escalating his warnings about fundamental changes in market structure that he argues pose systemic risks to corporate finance and capital allocation.
In an interview published January 20, 2026 on the Net Interest podcast hosted by Marc Rubinstein, Green—who maintains active commentary on both X and Substack—framed the rise of index funds and passive strategies as a "tragedy of the commons" problem. The conversation marks the latest salvo in Green's multi-year campaign to highlight what he sees as dangerous distortions created by the shift away from active stock selection.
For CFOs and finance leaders, Green's thesis cuts to the heart of how their companies are valued and how capital flows through public markets. The passive investing revolution, which has funneled trillions into index-tracking funds over the past decade, has fundamentally altered the relationship between corporate performance and stock prices, according to Green's analysis.
The "tragedy of the commons" framing suggests Green views passive investing as creating a collective action problem: individual investors benefit from low-cost index funds, but the aggregate effect undermines the price discovery mechanism that markets depend on. When fewer investors actively evaluate companies based on fundamentals, the theory goes, stock prices become less tethered to actual business performance—a nightmare scenario for CFOs trying to signal value through operational improvements or strategic pivots.
Green has spent years developing this argument, positioning himself as a contrarian voice against the conventional wisdom that passive investing represents an unalloyed good for retail investors. His warnings have gained traction among some institutional investors and market structure experts, even as the passive investing industry continues its relentless growth.
The timing of this interview is notable. As of early 2026, finance leaders are grappling with unprecedented questions about market efficiency, particularly as artificial intelligence tools begin to automate more investment decisions. If Green is correct that passive flows have already distorted price signals, the addition of AI-driven trading could compound those distortions—or potentially correct them, depending on how the technology evolves.
For corporate treasurers and investor relations teams, the practical implications are immediate. If a growing share of your shareholder base owns your stock only because it's in an index—not because of any view on your business—traditional methods of shareholder communication may be losing effectiveness. The quarterly earnings call, the investor day, the carefully crafted annual letter: all of these assume an audience that cares about your specific company rather than simply tracking an index.
Green's analysis also raises questions about capital allocation. If stock prices don't accurately reflect company fundamentals, then equity markets fail at one of their core functions: directing capital to its most productive uses. CFOs making decisions about share buybacks, equity issuance, or M&A transactions need functioning price signals. A market dominated by indiscriminate index buying may not provide them.
The interview appears as episode 16 of Net Interest Extra, Rubinstein's podcast series featuring conversations with finance experts. The full 58-minute discussion is available to paid subscribers of Rubinstein's newsletter.
Whether Green's warnings prove prescient or overstated, the questions he raises about market structure aren't going away. As passive strategies continue to gain market share, finance leaders will need to adapt their strategies for a world where fewer investors are actually paying attention to what they do.
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