The public markets have long been sold to ordinary investors as a great way to make money over the long term, and most of the time it’s been welcome advice. Buy an index fund, and you own a piece of the most dynamic companies in the world. For decades, that was more or less true. But David Fiszel believes that the “buy and hold” tried-and-true strategy is at risk if big changes aren’t made soon.
"I am concerned that those invested passively in the market, including their retirement 401(k)s, may not realize they are owning 400 companies of the S&P 500 that will be disrupted by AI," says Fiszel, the founder and Chief Investment Officer of Honeycomb Asset Management. “For those who invested at critical moments of structural change, such as 2000 or 2007, it took 5-7 years just to breakeven”. That alone is a provoking statement from a man who has spent two decades navigating public and private markets. But Fiszel goes further. His deeper concern is not just about disruption. It’s about what’s missing from it.
The S&P 500 represents the American economy at its most vital. In practice, Fiszel argues, it is increasingly a lagging indicator, a snapshot of yesterday's winners while tomorrow's are being built entirely out of public view in the private markets to the benefit of institutional players and venture capital.
"There are so many terrific massive private companies that are not in the S&P 500 which are growing incredibly fast," he says. "I am just concerned that the average investor gets left behind.”
This is not a new observation in investment circles. What makes Fiszel's version distinctive is his conviction about the direction and its implications for ordinary investors but thinking about ways to solve it. Some of the best companies, he believes, have made a calculation: the costs of going public, the quarterly earnings pressure, the regulatory scrutiny, and the short-term thinking that public market participation demands, outweigh the benefits. And so they are staying private, with plenty of liquidity in the secondary market, leaving the average investor out. He notes, “Even when they do become public, the passive community that benchmarks the S&P 500 must wait as requirements are arcane and arbitrary. For example - inclusion rules such as a company must have been listed on an eligible exchange for at least 12 months or a company is required to have the trailing 4 quarters in aggregate result in a positive GAAP accounting profit in order to be added to the S&P 500 are rules that can be changed. These rules don't capture today’s behemoth private growth companies that are raising hundreds of billions of dollars and investing for the future rather than focusing on today’s earnings power.”
"Trillion-dollar private companies," he says, "need to be public quickly and including them from the outset would allow investors to participate sooner, rather than being left holding the bag. Valuation arguments aside, an equal-weighted S&P 500 index that includes companies such as SpaceX, Anthropic, and OpenAI would at least give investors a chance. If the best companies are not in the index, then the index is not what most investors think it is.”
Central to Fiszel's concern is the speed at which artificial intelligence is reshaping corporate value. AI is not simply making some companies more efficient. It focuses on value creation in ways that public markets are structurally ill-equipped to capture.
The companies building the most consequential AI infrastructure, the models, the chips, the data pipelines, the inference layers, are often private as capital is available to them. They are raising capital at valuations that would have seemed implausible five years ago, from a relatively small pool of institutional and sophisticated investors who have access to those rounds. Everyone else is watching from the outside.
Fiszel has been in that room. He invested in SpaceX before the company had a reusable rocket. He acquired stakes in Facebook, Spotify, and Palantir while they were still private. His track record of identifying transformational companies before they reach public markets is, by any measure, substantial. And what he sees now worries him.
"Not everybody gets to participate in that." The democratization of investing that index funds promised is being undermined by a structural shift that most retail investors have not yet fully recognized. That is the crux of it.
“While I’m bullish on AI overall, the dual impact of potential job losses for those very people relying on their future retirement accounts that may be impacted is a compounding issue that requires some proactive thinking”. The implications of Fiszel's thesis are significant, and not just for the institutional allocators who can access private markets. His concern extends to the millions of Americans whose retirement savings are parked in index funds and target-date vehicles that, by definition, can only own what is public.
If the most valuable companies of the next decade never go public, or go public only after the majority of their value creation has already occurred, then the 401(k) generation is, in effect, investing in a curated list of the companies that did not manage to stay private. It is a deeply uncomfortable idea, and one that mainstream financial planning has not yet grappled with in any serious way.
Fiszel does not pretend to offer a clean solution for retail investors. What he does have is a clear-eyed view of the problem. "I see a problem because there's going to be a lot of disruption happening, and it could impact the markets the way people are invested."
Nonetheless, his note of optimism is worth holding onto. "It doesn't have to be the status quo," he adds, "the companies need to take the risk that the IPO market is open and the indexes can adapt. Then it'll be okay."
What David Fiszel is describing is not a market crash or a bubble. It is arguably more structurally significant: a restructuring of where value resides and who has access to it. The public markets are not going away. But their role as the primary arena for wealth creation may be diminishing in ways that will take years to fully surface.
For investors who have built their financial futures on the assumption that owning the index means owning the best of what the economy produces, that thesis is worth stress-testing.
Fiszel has been stress-testing it for years. His investing philosophy explicitly includes private growth investments alongside its public stocks, precisely because he has long believed that the line between public and private markets is one of the most consequential divides in modern investing.
"Invest in the future and short the past," is the motto he has built Honeycomb around. In his reading of the current market, the past is an index that no longer tells the whole story. While the future is being funded in rounds that most investors will never see.