Is Index Investing A Trap?

From the mailbag

Friends,

Last week I published Lessons From Ed Thorp’s Interview With Tim Ferriss. A reader reached out:

Hey Kris - hope you're well, I've been thinking about this post a lot. Not sure if you have time to respond these days, but here's what's been bothering me and I'd love to hear your thoughts on:

Ed uses the example of Madoff as not thinking for one's self and as an example of catastrophic loss.

But he also says the best strategy is to blindly buy the index. This is factually true, but so was investing in Madoff? I guess the dissonance is being afraid of what I don't know - the options tail wagging the dog, dispersion, the underlying volatility complex, the influence of central banks - I don't want to sound conspiratorial, my point is more that it all seems so complicated and potentially different than the given explanation in headlines that I can't help but worry it's analogous to Madoff.

I gave a medium-length gut-instinct response: