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 renewed his warnings about fundamental structural changes in capital markets during a January 20 interview on the Net Interest Extra podcast, hosted by finance writer Marc Rubinstein.

Green, who maintains active presences on X and Substack, has spent years arguing that the rise of index funds and passive investment strategies has created what he describes as systemic risks to market functioning—a thesis that remains controversial among finance professionals but has gained renewed attention as passive funds now dominate equity ownership.

The interview, published this week, comes as CFOs and corporate treasurers increasingly grapple with questions about how their companies' valuations are determined in markets where price discovery may be distorted by mechanical buying from index trackers. The conversation marks the 16th episode of Rubinstein's series exploring specialized finance topics through expert interviews.

Green's central argument—that passive investing creates a "tragedy of the commons" where individual rational decisions lead to collective market dysfunction—has implications for how finance leaders think about capital allocation, share buybacks, and investor relations strategies. When index funds buy stocks based solely on market capitalization rather than fundamental analysis, Green contends, the traditional feedback mechanisms between corporate performance and stock prices begin to break down.

For corporate finance teams, this raises uncomfortable questions. If a significant portion of your shareholder base buys and sells your stock based purely on index rebalancing rather than company fundamentals, does traditional investor relations still matter? How should CFOs think about the "real" value of their equity when price signals may be distorted?

The timing of the interview is notable. As of early 2026, finance leaders are navigating a market environment where passive strategies have reached unprecedented scale, yet the full implications for corporate governance, capital structure decisions, and market efficiency remain hotly debated. Green's warnings have historically been dismissed by many in the asset management industry, who argue that passive investing has democratized market access and reduced costs for investors.

The podcast format allows for a deeper exploration of Green's thesis than typical financial media coverage permits. Rubinstein, whose Net Interest publication focuses on detailed financial analysis, has built a reputation for technical conversations with industry experts—previous episodes have covered topics ranging from private equity return measurement to LIBOR conviction appeals.

What makes Green's argument particularly relevant for finance executives is the potential impact on corporate decision-making. If passive flows dominate price formation, the traditional calculus around timing equity issuances, structuring buyback programs, or evaluating acquisition currency becomes more complex. The "market's" reaction to corporate actions may reflect algorithmic rebalancing rather than informed investor judgment.

The interview is available only to paid subscribers of Net Interest, reflecting the specialized nature of the content. For CFOs looking to understand the evolving market structure in which their companies operate, Green's perspective—whether one agrees with his conclusions or not—represents an important counterpoint to the conventional wisdom that passive investing is an unalloyed positive for market efficiency.

As finance leaders prepare for strategic planning cycles and capital allocation decisions in 2026, understanding these structural market changes may prove as important as traditional financial analysis. The question is no longer whether passive investing has changed markets, but how corporate finance teams should adapt their strategies in response.