Most of us have money riding on the market, whether we follow it or not. It sits in a pension, a retirement account, a superannuation fund, quietly tied to the rise and fall of the world’s companies. So this is not a story about other people and their fortunes. In a real and personal sense, it is a story about your money.
And something about that market has been changing. It swings harder than it used to. Booms run further than sense allows and last longer than they should, and the falls, when they come, feel steeper. People argue endlessly about the cause, but almost everyone who watches closely agrees on the pattern. Hold on to that shared unease, because the explanation this series offers is not the one you would expect.
You may have felt it yourself, even without following the market closely. The retirement balance that lurches in a single week by more than you earn in a year. The crash that seems to arrive out of a clear sky, and then the recovery that feels just as untethered. The growing sense that the market’s moods have become larger and stranger than the world they are meant to reflect. The point for now is only that the instability is real, it is widely agreed upon, and it has crept up on us.
When a thing grows more dangerous, we look for a dangerous cause: a reckless gambler, a mania, a villain with a face. But imagine discovering that the safest driver on the road was quietly becoming the greatest danger on it. That the most careful, most recommended, most reassuringly dull choice in all of finance was the very thing tilting the system toward instability. That is the possibility at the heart of this series. The safest strategy in modern investing may be helping to build a less stable market.
I am going to take this slowly, and lean on pictures rather than jargon, because the argument only lands if you can see each step for yourself rather than take my word for it. By the end you should be able to explain the whole thing to a friend over dinner. So let us meet the calm, trusted thing at the centre of it.
A buyer with its eyes closed
Most people who own shares no longer own them in the old way. They own a slice of an index fund: a single product that holds a little of everything, spreading your money across hundreds or thousands of companies at once, in proportion to how big each one already is. It is cheap, it is simple, and for an ordinary saver it has been a genuinely good deal.
But watch how this kind of fund behaves, because it is stranger than it looks. It reads no news. It forms no view about whether a company is brilliant or doomed. It never thinks a price too high, or pounces when one looks too low. It follows a single rule. Money in, buy. Money out, sell. And it never asks the one question every other investor in history has asked: is this a fair price?
Picture two ways of selling fruit. A market trader knows his apples. Offer too little and he refuses; let them ripen too far and he drops the price to shift them. He is paying attention, weighing every deal. A vending machine is not. Feed it a coin at midnight or in the middle of a hurricane and it simply clicks and drops the product, at the price on the front, whether that price is sensible today or absurd. It does not look at you, or at the goods, or at whether it is the only seller left on the street. It has no opinion because it has no eyes.
The index fund is the vending machine. This is not an insult and it is not a flaw. The whole point of the thing, the reason it is cheap and dependable, is precisely that it does not think. It simply buys. That, in the end, is the whole of its wisdom.
Notice how strange that is. For as long as markets have existed, the craft of investing has been the asking of that one question, by millions of people in millions of ways, and the clash of their answers is what set the price. The blind buyer does not answer it badly. It does not answer it at all. It has quietly retired the question that markets were built to ask.
And there is a quiet sting in the rule. Because it buys in proportion to size, every new dollar flows most heavily to whatever is already biggest, feeding the largest winners and starving the rest, with perfect indifference, on the way up and, in reverse, on the way down. The blind buyer does not merely fail to look at prices. It directs the largest flows toward whatever has already grown largest, and never once notices it is doing so.
For most of its life, none of this changed anything. A vending machine on a street full of sharp-eyed traders is harmless: the traders do the looking, the haggling, the refusing, and the machine is carried along on the prices they set between them. The unsettling question, the one this series exists to ask, is what happens when the machines slowly stop being features of the street and start to become the street itself.
How the quiet giant grew
The idea behind it was sound, and fairness demands we say so before we are hard on its consequences. Decades of careful study kept reaching the same awkward conclusion: most professional investors, after their fees, fail to beat the simple average of the market. So a reasonable person asked the obvious question. If you cannot reliably beat the average, why pay a fortune trying? Just buy the average, as cheaply as possible, and get on with your life. As personal advice it is very hard to fault, and one by one, then in a flood, savers and pension schemes took it.
Nobody planned the scale. It arrived through a million quiet, prudent defaults: a worker enrolled in a pension, the money placed in a low-cost tracker, never thought about again. It may be the only revolution in financial history that triumphed precisely because almost no one noticed it was happening. No empire ever expanded so quietly. And the direction of travel is the whole point. Each year a larger share of the market belongs to a buyer that never looks at price, and a smaller share to buyers who do. Nobody can tell you the exact level at which that turns dangerous, and I would gently distrust anyone who names one. But we are walking toward the threshold, not away from it. The blind buyer is not the only force that pushes markets around, either. There are others who destabilise from the opposite direction, not by ignoring the price but by chasing it, piling into whatever is already rising simply because it is rising, swept along by mood and the momentum of the crowd. They watch the price as closely as anyone. They simply read it backwards. We will meet them properly later. For now, just notice that the blind buyer does not act alone, and that the company it keeps is growing.
A market is a crowd, not a machine
To see why a growing crowd of blind buyers should trouble us, we have to change the picture we carry in our heads of what a market even is.
Without realising it, most of us imagine a market as a machine. Money goes in, prices come out, and if it breaks, it breaks in a machine-like way: a part wears out, a warning light comes on, an engineer is called. Machines fail slowly, locally, and with notice. That picture is comforting, and it is wrong.
A market is not a machine. It is a crowd: a vast number of participants, human and now automated, each one reacting to what the others are doing. And crowds do not fail like machines. They fail like crowds, quietly and then all at once, and often with no single part having broken at all.
One real event captures this better than anything I could invent, and we will return to it again and again across this series, so meet it now. In June 2000, London opened a sleek new footbridge across the Thames. On its first day, crowds streamed onto it, and the bridge began to sway, gently at first, then alarmingly. You could feel it shift underfoot. People threw out their arms to keep their balance, and in the old footage you can still read the unease on their faces. Nothing was broken. The steel was sound. What happened was simpler and stranger than a fault. As the bridge made its first small wobble, each walker adjusted their step to stay upright, and because they all adjusted the same way at the same instant, their footfalls pushed the bridge harder, so it swayed more, so they adjusted again. Within minutes the whole span was rocking from side to side in one frightening rhythm, thousands of strangers locked into a single motion not one of them had chosen. They closed it within days, and it stayed shut for almost two years.
No fault. No villain. Just a calm, ordinary crowd that tipped, without warning, into something unstable. Markets are crowds, not machines, and crowds can tip without any single part breaking.
Hold that comparison, because it is the engine of everything that follows. The walkers did not coordinate on purpose. Each was simply responding, sensibly, to the motion beneath their feet, and their sensible individual responses combined into a dangerous collective one. A market full of buyers who all follow the same simple rule is a crowd that can fall into step in just that way: each acting reasonably alone, all leaning together, and the ground they are standing on is the price itself.
Keep that bridge in mind. We will stand on it many times before we are done.
Blind is not the same as neutral
Now we can name the quiet error at the heart of how passive investing is usually described, and it is the hinge on which this whole series turns.
We have been taught to think of the index fund as neutral. It plays no favourites, makes no bets, attempts no cleverness, so surely it just sits there, harmlessly holding the market as it is. But neutral and blind are not the same thing, and the difference is everything.
A referee is neutral. A referee watches both sides with total attention, judges every moment on its merits, and is neutral precisely because they are paying such close attention. A sleepwalker is not taking sides either, but only because their eyes are shut. Both, you might say, favour no one. Only one of them is watching the game. The index fund is not the referee. It is the sleepwalker, moving through the market with its eyes closed, and the comfort we draw from its neutrality is mostly a misreading of what kind of not-taking-sides it is doing.
You can watch this happen in slow motion. Fresh money pours into the funds and has to be put to work, so it buys, and it buys most of whatever is already largest. Those things rise, not because anyone judged them more valuable that morning, but simply because the money arrived and the rule demanded it. The price goes up because the price went up. In a market with enough open eyes, someone leans against that and asks whether the higher price is deserved. With fewer open eyes, there is less and less leaning, and the rise feeds quietly on itself. This is the machinery of a boom that has forgotten how to doubt itself.
While the sleepwalker was one figure among a crowd of alert people, it changed nothing; the watchful set the prices, and the blind money simply came along for the ride. But picture the crowd filling, year by year, with more sleepwalkers and fewer open eyes, and the question becomes unavoidable. Who is left looking? A market increasingly run by participants who never judge price will still produce prices. The question a regulator or a central banker should sit up at is whether those prices still carry any information, or whether they have quietly become an echo of nothing but the flow of money itself.
The question that runs through everything
So we are left with a puzzle, the one the rest of this series exists to answer. How can a choice so sensible for each of us, one by one, become dangerous for all of us together? How can millions of careful, reasonable decisions add up to a market that is quietly losing its ability to stay upright?
And it matters far beyond the people who own shares, because prices are not merely numbers on a screen. They steer where money flows, which companies grow and which wither, what your pension will be worth on the day you stop working, how much it costs a country to borrow and build. When the market half stops looking, the errors do not stay politely inside it. They arrive, in time, as factories built where none were needed and good ideas left to starve, and as the quiet shock of a saver who retires to find the balance worth far less than the screen had promised for years.
To answer that honestly, we cannot simply assert it. We have to go back to a question so basic it is almost never asked aloud: what is a price, really? Why does a market need disagreement in order to work at all, and what exactly drains away as the disagreement disappears? That is where we go next, and once we have it, the swaying bridge will start to make a different and far more uncomfortable kind of sense.
Sit, for now, with the strangeness of where we have arrived. One of the most important institutions in modern life, the machinery that sets the price of nearly everything we own, is slowly changing its character, and no one ever voted for the change. It is happening through the most ordinary and well-advised act imaginable: putting a little money aside, sensibly, and not thinking about it again. And at the centre of it sits the thing we trust most, doing the one thing we never suspected it of.
The thing you trust most to be neutral is not neutral. It is merely blind.
"The largest buyer of shares on earth has never once asked whether the price is fair."
Richard Brennan writes on systematic trading, complex adaptive markets, and the philosophical foundations of trend following at atstradingsolutions.com. His books include The Fractals of Finance and Complex Adaptive Markets. The forthcoming Carved by Impossibility completes the trilogy.
Want the theoretical foundation for why trend following works?
The Fractals of Finance: Determinism, Adaptation and the Geometry of Markets
The book explores the full architecture of feedback, fat tails, and fractal structure in financial markets, and what it means for how we trade, invest, and understand risk.
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Want a practical field manual for trading trends and capturing outliers?
The Aussie Turtles Trend Following Guide: A Field Manual for Hunting Outliers adapts the timeless principles of the original Turtle traders into a systematic, rules-based approach for modern markets. Co-authored with Adam Havryliv.
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