> Actives do expensive research and trade against each other to arrive at the consensus price. Passives trade at that price for "free." Since both get the same

> Actives do expensive research and trade against each other to arrive at the consensus price. Passives trade at that price for "free." Since both get the same price on average but passives incur no cost, they win on average No, actives can make money on average. If the actives do expensive research and learn things, they can buy good stocks at low (below-fair-value-given-new-knowledge) prices, drive up the price, and the passives follow later, buying at high (fair) prices. No one needs to lose, but actives accrue a disproportionate fraction of the gains. > This breaks down if passives outnumber actives Hypothetically there is a level of passive investing where the system breaks, but (1) this has nothing to do with 50% threshold (a small active minority can be fine) and (2) the are natural strong forces that prevent this from happening (as the fraction of passives increases, the reward for being active increases, drawing in more actives).