Passive Investing Critic Michael Green Warns of Market Structure Risks in New Interview
Michael W. Green, a long-time critic of passive investing's impact on equity markets, renewed his warnings about fundamental changes in market structure during an interview published January 20, 2026 on the Net Interest podcast.
Green, who maintains active presences on X and Substack, has spent years raising concerns about what he characterizes as structural shifts in how equity markets function—shifts he attributes to the growth of passive investment strategies. The interview, hosted by Marc Rubinstein as part of the Net Interest Extra series, marks Green's latest effort to draw attention to these issues.
The conversation's framing—"The Tragedy of the Commons in Passive"—suggests Green is positioning the rise of index funds and ETFs as a collective action problem, where individual rational decisions may lead to broader market dysfunction. The "tragedy of the commons" typically refers to situations where shared resources become depleted because individual users, acting in their own self-interest, collectively harm the system.
For finance executives, Green's thesis has implications beyond portfolio theory. If passive investing fundamentally alters price discovery mechanisms or capital allocation efficiency, CFOs could face questions about whether their stock prices accurately reflect company fundamentals or instead move primarily with index flows. Companies added to or removed from major indices have long experienced price swings unrelated to their operating performance—a phenomenon that could intensify as passive strategies capture larger market share.
The interview comes as passive strategies continue to dominate asset flows. Green's warnings have historically met skepticism from mainstream finance, where the efficiency and cost benefits of indexing remain gospel. Yet his persistence in challenging this consensus has earned him a following among investors concerned about market fragility.
Rubinstein's Net Interest platform has become a venue for heterodox financial thinking, previously hosting conversations on topics ranging from private equity return measurement to blockchain technology's impact on traditional finance. The podcast format allows for deeper exploration of complex market structure questions than typical financial media permits.
Green's argument—that passive investing creates systemic risks analogous to overgrazing a common pasture—faces the challenge that markets have continued functioning even as passive strategies grew. Critics of his view note that active managers still set prices at the margin, and that passive funds simply free-ride on that price discovery rather than destroying it.
The interview's publication in late January positions it within ongoing debates about market structure as 2026 begins. For CFOs navigating investor relations and capital allocation decisions, understanding these structural arguments matters regardless of whether Green's warnings prove prescient. The mechanics of how their shares trade—and whether those mechanics are changing—affects everything from equity compensation design to M&A valuations.
The full 58-minute conversation is available only to paid subscribers of Net Interest, limiting immediate access to Green's complete argument. Whether his warnings gain traction among finance executives may depend on whether market dislocations emerge that appear to validate his structural concerns.
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