Passive investment free-rides upon and dilutes the returns to passive investment. All differences in relative price are set by active investors, but those who are correct enjoy much lower excess return than they would in a world where billions of dollars of flow didn’t match their moves. 1/

You start with an assumption American capitalism flatters itself that is simply wrong, that if a thing is valuable it must earn higher returns. Passive investment simultaneously shirks the information work of investment while dramatically lowering returns to those who actually engage in it. 2/

That’s not the worst of it. There are more actively destructive aspects of widespread indexing. I may be mistaken, but you are unlikely to surprise me with a counter argument, this is an argument I’ve been making for almost 20 years. Mistaken or not, it’s a considered view. /fin

my son dug up a lego set, unopened, that was a gift several years ago. he hasn’t been very interested in legos in some time, video games have become his world, but suddenly he was eager to put it together. 1/

but before we did, my wife suggested we look up the kit, because they retire lego sets and sometimes they become collectible. sure enough, it’s no longer produced and goes for $200-$300 now. 2/

lucky us, i guess? we couldn’t open and build it anymore, it felt extravagant. it’s not like we’ve put it on ebay, though. back into the cabinet depths from which it came. 3/

i promised the kid i’d get him something else we could build together. we went to the lego store and blew $35 on a much less fancy, cool set. 4/

so, in practice the net effect of making legos into limited edition collectibles has meant we can’t enjoy (or afford) the better sets, and the hypothetical resale value has left us cash-poorer than we had been. 5/

i don’t think it has made the world a better place. /fin

Two essays (the second via the first) on America's somewhat entrenched trajectory towards marginalization, culturally and industrially. (But how about financially?) (See following posts.) 0/

"Left Behind" by Paul Musgrave musgrave.substack.com/p/left-behind 1/

"Labubu and the Decline of American Cultural Hegemony" by Miranda Wilson uscnpm.substack.com/p/labubu-and... /fin