They’re All Friends in the Index
Also board diversity, benefit corporations, @y and spy stuff.
You know the theory. Common ownership of multiple companies in the same industry by big diversified institutional investors should cause the companies to compete less: If all their profits are going to the same place (the investors who own all of them), then no one should care about which particular company earns the profits; all they should care about is that the total profits are as high as possible. So nobody should compete on price; they should raise prices, not care about market share, and make total profits as high as possible to please their common owners.
It’s not really a theory about index funds, but I sometimes jokingly call it “should index funds be illegal” because the rise of institutional common owners is connected with the rise of big index funds. The archetypal common owners are BlackRock and Vanguard and State Street, the “Big Three” index-fund providers, who by necessity own lots of competitors in lots of industries.