SearkeI've always critiques of passive investing but never dove into them. But recently, going thru Kyla Scanlon's new book, she presented the dilemma clearly in like a paragraph. Indices are imitated and create a sort of Keynesian Beauty Contest. They're sort of a dangerous echo chamber.
So I'm curious now what an index created to avoid these problems might look like. I imagine we'd want an un-reproducible index. Something that cryptographically re-chooses its members constantly with our desired constraints. Sure someone does this already in some way. Even if it's just being a trusted authority instead of a cryptographic solution.
So, and this is just honestly some excessively complicated backtesting, if we had this new index and it was stable under different random seedings (proof that the index reflects the actual market), we could compare it with an index and see a divergence if the index was veering off because it became an echo-house.