Index funds transformed investing by making it cheaper, simpler, and more diversified. But as trillions of dollars flow automatically into market indexes, a deeper question emerges: if fewer investors are choosing individual companies, who is still deciding what those companies are worth?

In this episode, we explore how passive investing affects price discovery, capital allocation, corporate governance, market concentration, index providers, and the growing power of giant asset managers. We also examine the paradox at the heart of modern finance: passive investing works because active investors are still doing the research, challenging valuations, and correcting market mistakes.

Did index funds weaken the market’s ability to reward good companies and punish bad ones, or did they simply create a more efficient division of labor between ...