Not refuting your assertion, but the concentration of power in tracking funds is a looming problem. The FT did a bit on it last week. Here's something similar from the motley fool:
Only a looming governance problem, but not in any way a financial performance problem. Only the latter will trigger any real reaction from the markets, and Bogle thinks that won't likely happen until 70% of market under passive indexing at a minimum.
Governance concerns are not structural and addressable when it reaches a critical mass. I wouldn't be overly concerned, just put in a word when someone starts to lobby for regulation requiring delegating voting power back to index investors, and fund managers having to vote the preponderance of pro-rata voted shares.
https://www.fool.com/investing/2018/12/01/vanguards-founder-...