Scandals often lead to grants for State-Embedded companies
Scandal → contrition → mandate → grants → standards → preferred vendor → lock-in.
The Re-Credentialing Playbook (7 beats → 3 phases)
Phase I — Manufacture Cover
1) Trust Shock (the “failure”)
Public breach, crash, outage, misrating, scandal.
Goal: create political cover and attention budget.
2) Ritual Contrition
Fines, hearings, monitors, “independent review,” leadership swaps.
Goal: reset optics without changing the control surface.
Phase II — Convert Shock into Mandate
3) Mandate Reframing
“This domain is too critical to fail → higher baseline required.”
Words to scan: critical infrastructure, secure-by-default, zero trust, provenance, admissibility, resilience.
4) Grants & Pilots
Emergency awards, pilot money, funded “fixes” given to the same actor (and its friends).
Watch: budget reprogramming, BARDA/NSF/DARPA/HS grants, EU calls, emergency procurement.
5) Standards Seat
Offender sits on the committee writing the new rule.
Words to scan: attest, lineage, revoke, rollback, audit-by-default, kill-switch, data rights, ATO (Authorization to Operate).
Phase III — Make It Stick
6) Preferred-Vendor Filters
New standard “incidentally” matches the incumbent’s stack; only 2–3 vendors can clear it at scale.
Insurers, app stores, banks, hyperscalers mirror the standard in their AUPs (Acceptable Use Policies).
7) Lock-In Mechanisms
Multi-year renewals, pre-authorizations, template ATOs (Authorization to Operate), certification gates, liability shifts.
Ratchet: pilots → defaults → requirements → penalties for non-adopters.
Revealed preference: scale + telemetry > purity. The “punishment” is an investment memo.
One-Glance Detection: Is this re-credentialing or real punishment?
Green lights (it is re-credentialing):
Grants/pilots land within 3–9 months of scandal.
Offender remains on standards bodies / working groups.
App stores, banks, clouds echo new rules in AUPs (Acceptable Use Policies).
“Temporary” measures keep renewing.
Leadership swap, architecture intact.
Red lights (rare, true punishment):
Ejection from standards bodies.
Cross-jurisdiction procurement blacklists.
Structural remedies (break-up, forced tech divestiture).
Multi-year grant freezes and loss of perimeter access (OS/bank/cloud blocks).
If you don’t see the reds, assume consolidation, not exile.
Positioning Rules
Buy windows
On scandal headlines (forced sellers).
When draft guidance drops with the verbs above.
When perimeter AUPs (Acceptable Use Policies) quietly change.
Trim/harvest
On “we fixed it” PR waves.
On index inclusion/consultant frameworks (crowd arrives).
Into “regulatory clarity” ramps (IV rich → overwrite calls).
Real-world Examples
Microsoft (SolarWinds & 2023–24 breaches): textbook 7-beat. Outcome: Entra/Defender/Purview as default controls; GCC-High, ATO templates accelerate.
Palo Alto (platformization): insurer & critical-infra standards favor platform controls → point tools culled.
Meta/YouTube/X (post-CA → DSA era): provenance/age-ID mandates → ADBE/AKAM/NET/RELX win.
HSBC/JPM: AML consent decrees → they co-write typologies → smaller cross-border fintechs squeezed.
Boeing: safety mandate + preserve aerospace → deeper lock-in; primes funded.
Pfizer/GSK: settlements → preparedness budgets/stockpiles → majors + picks-and-shovels entrench.
CRAs/Big Four: “more oversight” → more mandatory ratings/assurance = bigger moat.
Equifax: breach → government ID/eligibility growth → bureaus stronger.
NYSE/Nasdaq: outages → Reg SCI upgrades they alone can implement.
Telco outages: resilience templates → attestation levers at device/network.
A simple Re-Credentialing Probability Score (RPS)
Score each 0–2 (0 = absent, 1 = weak, 2 = strong):
Grant momentum (funding within 3–9 months)
Standards presence (committee seats + language matches stack)
Perimeter echo (app store/bank/cloud AUPs align)
Insurance gating (named controls/vendors)
Procurement shortcuts (emergency, single-source, ATO templates)
Policy Synchronization Coefficient (ally synchronization within 6 months)
RPS ≥ 8/12 → Buy. 6–7 → accumulate on dips. ≤5 → watch only.
Where the alpha really hides (beyond the obvious)
Front-run standards verbs. “Attest/lineage/rollback/admissible” = court-grade AI and data governance money inbound.
Follow insurance underwriting. When insurers write the control families, selection collapses to 2–3 platforms.
Perimeter > Parliament. Watch OS/app-store, bank, cloud AUPs; they implement the rule before the law.
Budget math > newspaper math. If the fine is a rounding error and CAPEX is multi-year, buy.
Pairs, always. Long the re-credentialed platform / short the idealist with no compliance surface.
Exploit VaR (Value at Risk). Scandals create forced sellers in the liquid winners; scale in before grants/standards print.
TL;DR
Scandal → contrition → mandate → grants → standards → preferred vendor → lock-in.
If committees + grants + perimeter AUPs align and the budget math favors CAPEX over fines, you’re not watching punishment — you’re watching re-credentialing.
Trade it: buy the contrite standard-setter on heat, front-run the rule-book, and sell into “clarity”.
Lens, always: incentives > ideals; control > fairness; stability > truth — and price revealed preference, not sermons.
None of this should be considered investment advice.
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