Hi Jason. Your statement is absolutely true: passive management is absolutely guaranteed (allowing for minimal tracking error) to underperform the benchmark by something like 0.03% per year (much less if you're a large investor). That's around three one-thousandths of the average annual return on stocks in excess of the risk-free rate of return, so it's definitely not much. And you're right, active management has upside risk--even when it is done poorly, never mind when it is done well. But investors can EXPECT to be worse off if they pay for active management.
Yeah, I guess I'm in a playful mood, so think of it this way: playing Russian roulette with bullets in five of the six chambers has optionality to the upside. But I don't expect to be better off because of it.