As passive index funds dominate markets, they become massive but indifferent shareholders. Unlike fundamental investors, they vote proxies based on institutional safety ("CYA") or political agendas, not on what maximizes a specific company's value, which fundamentally warps corporate governance.

For a large fund, selling a $2B position and buying a replacement is a $4B transaction with significant market impact. This illiquidity incentivizes working with a company's board and management to solve problems rather than incurring the high cost of divesting, turning large passive investors into de facto activists.

Investors can gain exposure to the luxury carmaker Ferrari at a substantial discount by purchasing shares in its largest shareholder, the Italian holding company Exor, which trades at a significant discount to its net asset value.

Uber's early, ambitious investment in autonomous vehicles faced opposition from a key investor. This investor preferred to protect existing gains rather than fund a long-term, capital-intensive project that could have transformed Uber into a trillion-dollar company, revealing a conflict between founder vision and investor risk aversion.

Public markets punish complexity, creating opportunities. Exor's diverse portfolio of cars, tractors, luxury goods, and media is so heavily discounted that the market value of its Ferrari stake alone is greater than the entire company's market capitalization.

Exor CEO John Elkann's decision to hold onto the company's Ferrari stake through market crises is a crucial, often overlooked, form of capital allocation discipline. Many managers fail by diversifying away from their best assets, whereas holding demonstrates conviction.

Dara Khosrowshahi justifies selling Uber's Zomato stake by stating his belief that operating businesses shouldn't act like investment firms. His core competency is building Uber's operational business, not managing a portfolio, which is a different skill set and not the best use of investor capital.

Rather than passively holding, Julian Robertson directly engaged with the management of his portfolio companies, such as Ford. He wrote letters challenging their capital allocation decisions, advocating for share buybacks over low-return acquisitions to unlock shareholder value.

The market is skeptical of Exor's ability to make new successful investments beyond its legacy Fiat/Ferrari spinoff. This skepticism contributes to the large NAV discount, as investors aren't convinced management can generate future alpha outside of its historical core holdings.