Being Right for the Wrong reasons when Investing
You nail the outcome but misattribute the driver. Price goes your way not because the virtue-story was true, but because power, plumbing, and payoffs pointed there.
What “right for the wrong reasons” really means
You nail the outcome but misattribute the driver. Price goes your way not because the virtue-story was true, but because power, plumbing, and payoffs pointed there. If you keep thinking the story did it, you’ll miss the next move (and size too small).
Meta-rule: In captured systems, prices clear on who gets paid + who turns the knobs, not on who’s “right”.
Why it happens (and why it persists)
Narrative laundering: Winners explain wins with ideals (innovation, fairness) because “we captured the standard and got regulatory tailwind” won’t pass compliance.
Principal–agent shielding: Portfolio Managers need memos clients can stomach. “We bought the surveillance substrate” becomes “mission-critical analytics”. I’ve covered this in my article “Overton Window Management in Investing“.
Default gravity: Adoption happens because it’s on by default, not because it’s “better”. Winners then retro-fit a quality story.
Legibility premium: Regulators buy what they can audit. Accuracy is secondary to admissibility. The public hears “safety”; the price moves on lineage knobs.
Paperization smoothing: Flows into wrappers (ETFs/futures) move price by balance-sheet mechanics; pundits backfill high-minded reasons.
Exploit: Track cash/status flows, defaults, standards, and knobs. Let others worship ideals.
Field guide: patterns that scream “you’ll be right for the wrong reasons”
Standards become enforcement. A spec (security, provenance, ID) quietly turns mandatory. Prices rise because procurement turns into annuity, not because “customers fell in love”.
Perimeter policy flips. App stores, banks, clouds change Acceptable Use Policiess. Adoption surges because the fence moved, not because UX did.
Proof, not performance, is paid. Buyers budget for audit trails and rollback, not the sexiest model. Platforms with signatures and lineage beat raw horsepower.
Subsidy ratchets. Tax credits and guaranteed offtake, then “market momentum”. It wasn’t market — it was policy.
Paper beats spot. Price action is basis/arbs/rolls; the crowd calls it “sentiment”.
Case studies (impolite version → what actually paid)
NVIDIA
Polite story: best chips + ecosystem.
Revealed preference: supply capture + CUDA moat + hyperscaler capex mandates + export policy that blessed their SKU mix.
Alpha: You were right because of vendor lock + procurement cycles + policy — not just FLOPS.
Microsoft (Gov/Compliance)
Polite: productivity.
Revealed: default surface for compliance + identity (Entra) + eDiscovery. CIOs buy admissibility; M365 is the trojan horse.
Alpha: Right because defaults + audit, not because Teams was lovable.
Visa/Mastercard
Polite: convenience.
Revealed: network rules = private law, interchange diplomacy, chargeback rails regulators understand.
Alpha: Right because policy utility and merchant lock-in, not because “innovation”.
Stablecoins vs BTC (Medium-of-Exchange)
Polite: “crypto payments revolution”.
Revealed: compliance-friendly rails for merchants/banks; travel rule is implementable; chargebackless USD beats volatile BTC for Medium-of-Exchange.
Alpha: Right because policy fit and FX simplicity, not “freedom”.
Palantir
Polite: AI analytics.
Revealed: policy-grade operating system: lineage, consent, rollback, evidentiary artifacts + Authorization to Operate + cross-border template reuse.
Alpha: Right because governance + admissibility in a low-consent world, not generic “AI”.
Tells that you’re about to be right for the wrong reasons
RFP verbs: prove, attest, lineage, revoke, rollback.
App-store/bank/cloud Acceptable Use Policy updates precede any statute.
“Pilot” programs ship with no sunset and telemetry reporting.
Committees create bodies (task forces, standards alliances) with the same members as the likely vendors.
CFO commentary shifts to “compliance attach” and “seat expansion via regulation.”
Avoid being “wrong for the right reasons”
You’ll be morally right and financially wrecked if you:
Bet on “better tech” without the knobs (identity, rollback, audit).
Bet on “freedom rails” vs default rails when perimeter power is aligned against you.
Anchor to truth when the market pays for stability (e.g., paperizing BTC crushes tail vol while preserving a managed uptrend).
Counter: Only buy against the current when perimeter enforcement is weak, switching costs low, and carrots rich. Otherwise you’re a martyr, not an investors.
Checklist
Incentives: who monetizes compliance? who pays for non-compliance?
Control: who owns OS/app store/bank/cloud? what Acceptable Use Policy (AUP) knobs exist?
Stability: which vendor reduces headline/operational risk? (those win)
Revealed preference: what they do (drafts, pilots, AUPs) > what they say
Entry: fear spike + Policy Synchronization Coefficient/Legibility Pressure Index rising
Exit: clarity PR + index inclusion
Bottom line
In captured markets, truth is optional; control is not. You get paid by aligning with who controls defaults and standards — and expecting the press release to lag the plumbing. If your thesis can’t be said in a nice memo, you’re probably early — and that’s where the alpha is.