There is a puzzling contradiction at the heart of America’s economy. Investors are sinking more and more money into the stock market. Indexes are reaching record highs. But a growing number of American companies are refusing to participate in public markets at all.

Over the past 30 years, the number of companies that sell shares on markets such as the New York Stock Exchange and Nasdaq has fallen by roughly 50 percent. Fast-growing big-name companies like Anthropic, SpaceX, Databricks and Anduril — companies that in all likelihood would have gone public in the previous decade — are choosing to remain private instead.

The impact can be felt in every corner of our economy. The decline of our public markets goes hand in hand with the meteoric rise of private equity, which too often weakens companies and leaves them less committed to their employees, customers, suppliers, lenders and communities. Most everyday investors can no longer buy into some of the country’s fastest-growing businesses. The stock market’s impressive performance, on which so many retirements depend, is growing increasingly tenuous, as its returns rely on an increasingly narrow slice of the economy. Innovation is declining. Economic concentration is increasing.

I have spent more than a decade trying to understand what is going on, and I have come to believe that the culprit is public company governance, the system in which many different groups, all pursuing their own agendas, generate rules for how public companies ought to be managed. These rules, norms and regulations — which tackle such issues as who gets to be a director, how executives should be paid, in what ways companies ought to respond to climate change — are constantly accruing and building on one another until this obscure process generates towering structures that, like a great coral reef, can tear out the bottom of a boat.

These governance practices are often well intentioned, but there is no evidence that they are meeting their goals. In some cases they make no difference, and in others they make things worse, but none appear to work reliably. This coral reef provides no support for aquatic life; it exists only as a navigational hazard for shipping.

To understand what’s happening, let’s discuss a fictional, fast-growing tech company called Ontology. It’s the sort of company that every country in the world wants and America produces in relative abundance. Around five years after their initial investment, Ontology’s investors want their money back. Managers could sell Ontology to a larger competitor (often these days a large tech company) or to a private investor (often a private equity fund). The other option is to list Ontology’s shares on a public stock exchange.