Over the weekend I watched an interview with David Einhorn, who is undoubtedly far more intelligent than I am. He explained that performance had been poor over the last couple of years because the type of investing they do simply hasn’t been working. It is very interesting to watch how many great investors struggle to adapt when the market changes. What worked for ten years becomes part of who they are, and changing it feels almost like admitting they were wrong. But markets change. And if you cannot change with them, eventually your old edge becomes your biggest weakness. And to me, that is the entire lesson. Markets do not reward you for being loyal to a strategy. They reward you for adapting. Last year I told the story of my favorite client, Oscar. In 2022, when the market was down around 20%, Oscar was up around 20%. A big reason was the way I used the $VIX. If you look at the comments below that story, someone told me that you cannot compare Oscar’s performance with someone who doesn’t know how to use the $VIX. But we are in the business of making money. How can you afford to know only one way to make money? Only know how to be long stocks. Only know value investing. Only know technical analysis. Only know momentum. Only know volatility. A strategy is just a tool. The goal is not to prove that your favorite tool works. The goal is to make money. Around the same period, I was also consulting for a hedge fund that had started operating in 2021. Luckily for the fund manager, the environment at the time was almost perfectly suited to the strategy we were using. We were using primarily VIX-related trades, and between 2021 and 2022 the returns looked extraordinary. The fund was still small because it had just started, but on a percentage basis it was outperforming its peers by a very large margin. By the time the market was down around 20%, the fund was still up around 10%. That was exactly when I believed the opportunity had shifted. Equities had become significantly more attractive, while the $VIX trades that had worked so well for us were becoming increasingly dangerous. I told the hedge fund manager it was time to change. Reduce the volatility trades and start buying stocks. He had no interest in buying equities. His reasoning was simple: the $VIX trades had worked incredibly well. Why stop doing what was working? But that is exactly the trap. I disagreed strongly enough that I issued a formal letter. Always put things in writing, even with friends. When people look back at the past, they have a convenient habit of forgetting exactly how things happened and avoiding responsibility for the decisions they made. In the letter, I explained the risks I saw in continuing with those volatility trades and why I believed the volatility landscape had changed. He decided to continue anyway. The following months were catastrophic. Meanwhile, Oscar and the portfolios I directly managed rotated into stocks and were up substantially. There is no strategy that deserves your loyalty. Sometimes the right tool is VIX. Sometimes it is equities. Sometimes it is value. Sometimes it is momentum. Sometimes it is cash. Your job is not to become emotionally attached to what made you money yesterday. Your job is to recognize what environment you are in today. It is not necessarily the smartest that survives. It is the one that adapts. Markets are not much different. Your edge is not VIX. Your edge is not value investing. Your edge is not understanding tech. Your edge is not mastering macro. Your edge is being able to change when the market changes.