I don't think I'm talking past you -- your previous point was perfectly clear. You literally cannot have active investments if nobody invests with active investors or actively manages their funds themselves. This is tautological. So somebody has to invest with active investors, but Buffett is arguing it should be somebody else and not you.
If 99.99% of all assets are locked up in buy-and-hold passive index funds the prop traders can't do anything when a stock is mispriced because they can only trade with the handful of active investors that remain. With 65 trillion in equities a handful of prop traders can jump high and low all they want but the markets won't budge if nobody is buying or selling. The index managers on the other hand will be able to move markets with a keystroke, because whenever they decide that one stock in the index has to be replaced by another all the index fund money blindly follows.
