If Markets Get It Right in the End… Why Are We So Obsessed With Explaining Them?

There’s a comforting phrase investors like to repeat: “Markets get it right in the end.”

It suggests that short-term volatility is simply noise, that prices eventually converge with fundamentals, and that patient capital will ultimately be rewarded. It’s rational, reassuring, and widely accepted.

But here’s the uncomfortable question: if markets do get it right eventually, why do we spend so much time trying to explain them in the meantime?

More provocatively still, is explanation actually necessary for performance?
 

The quiet heresy behind the Renaissance

Jim Simons built what is arguably the most successful hedge fund in history. Renaissance Technologies’ Medallion Fund generated extraordinary returns over three decades, yet its philosophy challenges many conventional assumptions about investing.

If the data worked, they traded it. They preferred to understand why, but they did not require a complete economic theory before acting.

In fact, one of the firm’s core rules was never to override the model. There were no discretionary interventions based on instinct, no last-minute macro judgements layered on top of systematic signals, and no emotional second-guessing when markets turned volatile. The process ran as designed.

Renaissance traded signals that were statistically robust and repeatable, and while they preferred them to be at least somewhat explainable, they did not require a neat or fully formed economic narrative. In an industry that prizes explanation, that approach borders on heresy.
 

The myth of being right

There’s another detail that rarely features in the mythology of Medallion’s success: its win rate was only marginally better than a coin flip.

Just over 50 percent.

The edge wasn’t prophetic foresight or dramatic insight. 

It was structural. Extreme diversification, disciplined position sizing, meticulous execution, prudent but significant leverage, and a refusal to interfere with the system created the asymmetry. Being slightly right, consistently and at scale, was enough.

This challenges a powerful industry narrative. We tend to celebrate the investor who “saw it coming,” the strategist who correctly anticipated a regime shift, or the manager who made a bold contrarian call. 

Renaissance’s record suggests that edge may be less about brilliance and more about discipline.
 

Our attachment to narrative

Human beings are wired for stories, and investors are no exception. 

We want to understand why inflation is rising, why equities are falling, or why commodities are rallying. Explanation gives structure to uncertainty and creates the impression of control.

But markets do not compensate for narrative coherence. They compensate for positioning and risk management.

In many cases, explanations are retrospective. 

They tidy up what price has already done and provide intellectual closure after the fact. The uncomfortable possibility is that much of what we call analysis is sophisticated storytelling layered onto price action.

That doesn’t mean macro insight or fundamental research is irrelevant. It does mean that explanation alone is not synonymous with edge.

Data without context - or discipline without ego?

Of course, blind faith in data would be equally dangerous. 

Signals decay, market structure evolves, and correlations that once held can break down abruptly. Context matters, and so does judgement.

But what Renaissance demonstrated was not just the power of mathematics; it was the power of structure. A collaborative culture, a single unified model, aligned incentives, and a ruleset that removed ego from day-to-day decisions all contributed to its durability.

In other words, the edge wasn’t simply in knowing more. It was in resisting the impulse to intervene.

That principle feels increasingly relevant in a world saturated with real-time commentary, instant analysis, and algorithm-driven volatility. The danger is no longer a lack of information. It is an overreaction to it.

The professional investor’s dilemma

Most institutional and high-net-worth investors are not running black-box quantitative models, nor should they be. But almost every investor can benefit from a clearer articulation of the process.

•    How are positions sized?
•    What defines an exit?
•    How is risk budgeted across strategies?
•    When is rebalancing triggered?

These are the discretionary equivalents of “never override the model.” They create guardrails that prevent emotion from quietly influencing capital allocation.

Underperformance is often attributed to flawed ideas. In reality, it frequently stems from abandoning sound frameworks at precisely the wrong moment. Reacting to headlines feels nimble, but it can also be expensive.

So… do markets get it right?

Perhaps the better question is not whether markets eventually get it right, but whether we allow ourselves to stay aligned long enough for that convergence to matter.

Markets are not perfectly efficient, yet they are relentlessly competitive. Every trade reflects another participant’s conviction. In such an environment, the margin for emotional error is thin.

Simons did not attempt to out-argue the market. He attempted to measure it.

That distinction is subtle, but important.

Understanding markets will always have value. Structural forces, policy decisions, technological shifts, and behavioural trends shape long-term outcomes. However, explanation in itself is not a strategy.

If markets do converge on truth over time, the investor’s challenge may not be deciphering every narrative twist along the way. It may be building a process robust enough to endure the noise.

In an era defined by data abundance and velocity, perhaps the real edge is not knowing more than everyone else.

It may be interfering less than we think.

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