In a Twitter thread, commenting on the long-standing debate on Wall Street about the growing power of index funds, Elon Musk and Cathie Wood criticized passive investing.The discussion was initiated by venture capitalist Marc Andreessen. He said that firms like BlackRockInc. had the deciding vote in many corporations. Elon Musk, the CEO of Tesla, responded that passive investing had gone too far. Wood, who founded Ark Investment Management LLC, supported the conversation, noting that investors in the S&P 500 missed out on big returns to Tesla before it was included in the index. Wood is one of the most prominent active managers. However, her top-of-the-line ETF, ARK Innovation, has fallen by almost 45% in the past year.

However, the counterarguments are becoming more and more complex.First, active managers use liquid passive funds in their strategies, which are easy to trade. They are also issuing their own exchange-traded funds - traditionally index-linked instruments - to reduce costs and increase access, as well as creating strategies that blur the line between indexation and stock selection. Meanwhile, most passive strategies, from writing the rules of each index to deciding how each fund would operate, were handled by a specific person.A study conducted last year by academics from Cornell University and the University of Technology in Sydney concluded that overall investment activity in the US stock market has changed little over the past two decades.