In the Stock Market by Default, Off the Table by Design

If you added up the value of all the goods and services the world generated in 2024, it will fall $39T short of the $149T of stocks traded that year. That means the total value of all stocks traded was 35% higher than the global GDP for the year, and this is even before accounting for the $5T of private equity whose assets under management have been compounding at 14% a year from 2015-2023. This goes further than just money, as it is also the reason why your timelines are filled with opinions about how to trade the latest SpaceX IPO or how private equity bled another beloved company dry.

While you can choose to close your TikTok feed with enough willpower, the same can't be said for choosing whether your money gets invested into the equity markets in the first place. Nothing in the modern financial system is genuinely insulated from equity and private markets. Banks can lend out the money in your savings account to public or PE-backed companies alike. Pension funds can put your retirement money directly into private equity. Whether exposure is through borrowing money or owning shares, equity markets are structurally baked into how returns on your money are generated.

Crucially, none of these allocation decisions are made by you, the owner of the money. Most people have never touched a stock, with the majority of equity trades made by money managers working for the financial institutions (banks, funds, etc.) that handle your money. Once you've handed money over to these institutions, you don't get a say in how your funds should be used nor are you eligible to vote even though your money was used to purchase the stock. This arrangement means you don't have to actively manage your money for real returns, but money managers now also have the power to determine which companies deserve to grow.

As finance got more complex, institutions without a sophisticated in-house investment team have also increasingly outsourced these decisions to third-party investment managers, enabling this sector to grow 14.6% in 2025 to $3.5T. This subcontracting chain extends even more where further specialization is required. As the chain gets longer, not only are you further removed from such decisions, but capital efficiency also suffers as each layer hyperoptimizes for their own mandate rather than the portfolio.

In addition to money managers buying individual stocks, many are also turning to various fund structures. This creates even more structural demand with less discretion as buying becomes mechanical. For example, if a money manager purchases the S&P 500, which tracks 500 established US companies, the index structure will automatically buy all companies within the index. More complex structures such as Collective Investment Trusts have also captured more than a third of large American 401(k) plans (i.e. defined-contribution pension), with firms like BlackRock using this structure to build private equity into retirement plans.

Once your money has reached all these companies, what is it actually used for? This goes beyond the attention-grabbing headlines of how your retirement funds are bankrolling SpaceX AI buildout or how Toys "R" Us was driven to bankruptcy due to private equity incentives.

Both public and private equity fund real businesses, jobs, and innovation. Both have also produced well-documented harm which went beyond just the company and affected communities. Your money is already being routed into both, so what's left isn't a choice between public or private markets. Rather, it's a clearer picture of what you're already funding and why both structures split the same way: real gains when there's real competition and real harm when there isn't.

The same mechanism drives the outcomes in both structures, just applied differently:

• Public Companies: Contestable ownership disciplines a company into generating real value as shareholders can challenge management through voting or selling. Where ownership is concentrated, there are more opportunities for extraction.
• Private Equity: Buys a company with borrowed money and transfers that debt to the company itself (similar to buying a house and covering mortgage payments via renting it out). Where the company grows, the debt gets repaid through real expansion. Where it doesn't, extraction is the only remaining lever.

Neither case answers the more important question which is whether your money is going to causes that you believe in. By funding the winners, money managers get to decide which companies survive using the power of other people's money. What drives those decisions will be determined by a narrower mandate which usually boils down to maximizing profits. Crucially, who gets a say in these decisions usually leaves out most of the people affected by them, and that is by design.

Opting out of this default means taking back control of your finances. The switch from having someone else manage your money for you to being responsible for your own decisions is an intimidating jump for most. There is a growing spectrum of financial products that make that jump more manageable, letting you choose the level of control you're most comfortable with. Every hop removes another middleman, which leaves more of your money to compound instead of being paid out in fees, but also brings you closer to deciding for yourself how your money should be used.

Crucially, having more control over your finances doesn't mean sacrificing returns just because you're not a market expert. Across 11 markets globally, and over the more than two decades, the majority of actively managed funds have consistently underperformed a standard index fund. This means that if you're not ready to pick your own stocks, investing directly in an index fund saves you significant fees while likely outperforming most actively managed funds. Some of the largest index fund managers, BlackRock and Vanguard among them, have started offering proxy voting programs that let investors opt in to vote their own share of the fund directly. The tradeoff is that a committee still decides which stocks are in the index in the first place, and therefore which companies your money reaches.

Values-aligned funds provide another alternative, where the fund allocates your money and votes on your behalf according to its own investment principles. This allows for more passive investment into funds that align with your personal values, across categories like ESG, faith, industry focus, and more. Such funds change whose judgment you're trusting, an acceptable tradeoff for most.

Direct ownership rarely beats the market, but it lets you fund something you believe in, and it buys you a vote. Investing directly also requires the most due diligence and isn't for everyone, given the higher highs and lower lows. Direct ownership buys you a seat closest to the table, but that also means showing up to the table.

Every dollar you own carries some power, and it's not by accident that the default option hands that power to the system itself. Recent developments such as proxy voting have shown that the system is evolving, but it will only continue to do so if there is demand for it. This piece has shown the mechanism and the levers available. It's still up to you whether to pull one the next time you see a public company or private equity headline that infuriates you.