By Will Hubbard Regardless of location or team loyalty, I think a part of us all resonates with the Detroit Lions’ recent win over the Minnesota Vikings. That victory not only concluded Detroit’s regular season with an impressive 12-5* record, tying its best performance set in 1991, but it also marked the team’s first NFC North division win since 1993. The Lions, perennial underdogs, are participating in a narrative worthy of an Academy Award–winning film. Football is a great proxy for American beliefs and passions. According to a study by St. Bonaventure University , 72% of Americans watch live NFL games, and nearly 60% watch at least two hours of live NFL football per week. When compared to the 79% of Americans participating in employer-sponsored retirement plans like 401(k)s, it seems reasonable to draw parallels between how we approach sports and investing. Changing the play when the play changes Winning 12 games during the regular season and tying a record powerfully illustrates that past performance doesn’t guarantee future results. The wave of excitement on my social media feed signals a strong belief in the potential for a change in the tide. I’m sure plenty of friends and family members will be placing their bets against Matthew Stafford and the Los Angeles Rams in the upcoming playoff game—a bet motivated by the idea that things can change. The idea that change is inevitable and hard to predict is fundamental to active investment management. This approach recognizes history as a valuable guide, yet it emphasizes the need for investors to adjust their expectations in light of new information and trends, just like football fans. It’s fascinating to hear investors express confidence in simply buying the S&P 500 and leaving things to chance, given its strong performance over the last decade. Yet suggesting that you should keep betting on the Pittsburgh Steelers and New England Patriots to win the Super Bowl just because they are historically successful franchises would be met with skepticism. Evolving paths to victory The following chart shows Super Bowl wins by team from 1967 to the present. The Detroit Lions, with zero Super Bowl wins, are not even included on the chart. The success of the Patriots and Steelers can be attributed to a few key factors. The Patriots’ six Super Bowl victories are inextricably linked to Tom Brady, the winningest quarterback in NFL history. Meanwhile, the Steelers’ success in the 1970s is often credited to the guidance of coach Chuck Noll, who was said to be excellent at draft selections. The Steelers’ achievements in the mid-2000s were propelled by Big Ben Roethlisberger’s formidable arm, which led the Steelers back to Super Bowl victory. Talking about the success of these teams in terms of a few key ingredients such as a perceptive coach or record-setting quarterback echoes discussions of passive investing today. We have frequently reported that a handful of stocks dominate market-cap-weighted, passive indexes based on their past performance. However, it’s crucial to shift our focus from what those few stocks have done to what they might accomplish in the future. The following chart is from April 2023, but the point is still the same: Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla are dominating the major U.S. equity indexes. But how did that happen? Remember what Apple was doing in 2006? In 2008? I do. In 2006, I first purchased shares. Sadly, I sold them—a good learning experience. I was captivated by the advancements in Apple’s tech—let’s not forget the iconic G4s—and by its game-changing iPod. The launch of the iPhone in 2007 was a defining moment, and I got my first iPhone 3G in 2008. Early iPhone adopters might remember people asking your thoughts on it and if they could “check it out.” It was new and cool and relatively few owned one. People’s perception of Apple’s potential at this time was akin to how we thought of Tom Brady following his impressive track record at the University of Michigan with 710 attempts and 442 completions. Where would he go next? Where would Apple go next? Apple went from being a niche computer company to the world’s most valuable corporation. The company’s technology has become an integral part of our everyday life, to the extent that families often joke about excluding members who don’t use an iOS device because it “ruins the blue boxes.” That’s a tremendous amount of influence! Furthermore, Apple’s market share skyrocketed from nonexistent before the introduction of the iPhone to a commanding 58% today. Similarly, Tom Brady, once the 199th draft pick in round 6, went on to lead New England to six Super Bowl championships. The comparison is meant to highlight how specific factors can drive success—and how those specific factors can change. As proponents of dynamic risk management, we are continuously considering how past data drives the possibility of future results. Buying Apple today would be a lot like betting on Tom Brady to win another Super Bowl had he not retired. Would you bet against it? Probably not. Would you consider it a sure thing? Probably not. Passive investing is fundamentally a bet on the past—like expecting the New England Patriots to clinch another Super Bowl because of Tom Brady’s historic performance as their quarterback, or banking on the Steelers for a win based on Chuck Noll’s famed 1974 draft picks. Recognizing that the Patriots aren’t in the playoffs this year, or that the 1974 draft choices are unlikely to help Pittsburgh much next year, underscores this point. Similarly, investing in the NASDAQ 100 Index based on past performance is like thinking Apple’s iPhone will definitely acquire another 58% of market share, or that Tom Brady is sure to win another six Super Bowls, or that Chuck Noll will continue to produce amazing draft picks for the Pittsburgh Steelers. Investors need to be mindful of the implications for their investment decisions and remember that not all winners win forever. Leadership can change, which can change results. Time to take a look at your investment “playbook” The Detroit Lions have endured a long playoff win drought, marked by many changes in coaching and player personnel. However, the current lineup seems to be something special, and the tide seems to be turning. Having zero Super Bowl wins since 1967 doesn’t mean they will never achieve a victory. For those who are firmly in the passive investment camp yet also hoping to see the Lions continue their march toward a Super Bowl championship next month, it’s an opportune moment to reflect: Does your investment philosophy truly align with your beliefs and expectations for change? *For the record, the call against Detroit in Dallas was garbage, and the Lions should have ended the season 13-4.