> it excludes one or two stocks.

It's more than that. None of SpaceX, OpenAI, nor Anthropic will meet the criteria, and they will make up a significant part of the US stock market. Each of these companies is heavily investing their cashflow into growing the company and are unlikely to be profitable many years.

The inclusion criteria prioritizes companies that extract their cashflow into profit, and excludes companies that invest their cashflow into growing the company. For example, when Jeff Bezos ran Amazon he described his company as "famously unprofitable, And that is a conscious strategy and an investment decision." Amazon only joined the index in 2005, nearly 8 years after IPO, even though it was a significant member of the stock market at the time.

"The inclusion criteria prioritizes companies that extract their cashflow into profit", in almost all cases, yes. But if you want to buy into these newer stocks there are various high growth indices you can buy, no one is stopping you. If you want to buy into only one or two of those stocks then you can. It's a free market for stocks and it's a free market for indices. There's no regulation that says the S&P has to include certain stocks.

The issue is a contradiction with what S&P 500 claims to do vs what they actually do. S&P 500 claims to be the "best single gauge of U.S. large-cap equities". But if they exclude high-growth no-profit large-cap equities such as (Anthropic, OpenAI, SpaceX) from their index, then S&P is doing a poor job at what they claim to benchmark.

It's not not an insignificant oversight. The valuations of (Anthropic, OpenAI, SpaceX) total to ~5% of the total US stock market.

> S&P 500 claims to be the "best single gauge of U.S. large-cap equities"

Right...

> But if they exclude high-growth no-profit large-cap equities such as (Anthropic, OpenAI, SpaceX) from their index, then S&P is doing a poor job at what they claim to benchmark.

So it comes down to a difference of opinion between Standard and Poor's and tristanj. Go make the Tristanj500, include these companies, and make the same claim - "the actual best single gauge of U.S. large-cap equities". No one's stopping you.

And that approach famously hurt investors, the economy, and/or Amazon in what specific ways, exactly?

It meant that during this time, the S&P 500 index less accurately tracked the large-cap U.S. market.