cutty the point is that passive index investing as a % of total money invested is constantly on the rise exactly because of your 30 year statistic. But eventually that % of total money will become a noose over passive index investing.
Lets take your hypothesis to its ultimate conclusion, lets say everyone follows your thought process and passive index investing goes to 80% of total investing money. That leaves just 20% of funds not in the passive index group.
Now to me this creates two very big problems: a) Firstly capital is not directed towards the most efficient generator of returns, its allocated to those companies with the biggest market cap and b) Companies themselves will be incentivized to just empire build and grow their company size (size they will be rewarded through bigger market cap and by definition their stock will be accumulated by the index fund).
The remaining 20% of investing money will be the remaining pool of capital allocation, whether that's private capital, active funds, PE what ever. My hypothesis is because at this point the 80% weight of investment will act as dead wood, the remaining 20% should be able to generate fantastic above 'index' returns.
That's why I say everything in moderation including moderation itself.
MFG Price at posting:
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