The Value Investing Myth
One misstep for “value investors,” one giant descent for investing
Introduction
Investing is one of the few disciplines where clarity of language matters as much as clarity of analysis. Yet, many of the biggest disputes in law and finance trace back to four deceptively simple words:
Investing, Speculation, Gambling, and Gaming.
At the top of this hierarchy sits a subtle but consequential definitional fallacy: the notion that “value investing” is a distinct category. This single linguistic error has shaped how generations of investors think about markets—and its consequences reach far beyond the textbooks.
How Conceptual Errors Propagate: Seven Steps
Conceptual errors rarely remain confined. They ripple outward, influencing perception, regulation and practice. Here’s the seven-step pattern:
1. “Value investing” becomes a type of investing
A definitional fallacy.
Imagine a simple geometry question: What does everyone think of equal-sided squares?
The phrase ‘equal-sided’ is redundant. A square already has equal sides.
“Value investing” works the exact same way.
The word value adds nothing to the definition of investing. Treating it as a distinct style is a categorical error.
2. The public infers new categories of investing
A rational—and predictable—consequence.
Once one group brands itself as “value investors,” it implies the existence of other types of investing. The public, following this cue, infers additional categories. The inference is entirely rational—and predictable.
3. New instruments are interpreted as investing
Conceptual categories applied to practice.
When multiple investing categories appear, new instruments get slotted into the framework. Regulators and even legislators take note. The conceptual map becomes the regulatory map–even when the instruments don’t meet the original criteria.
4. …but some of these instruments are not investment contracts
Regulatory posture.
Categorizing non-cash-flow-generating assets as “investing” is one thing.
But legally, are they investment contracts?
If yes → public protections apply.
If no → they don’t.
Recent regulatory and legislative trends lean toward no.
5. The opposite is true: Non-cash-flow-generating assets are not investing
Our position.
Investing requires intrinsic value.
Without it, the activity is not investing.
Once “value investing” became a style, the public’s understanding of investing blurred. Growth, momentum, meme and more broadly, speculation of all stripes began to masquerade as investing, even when they lacked fundamental justification.
6. …but some may still be investment contracts
Also our position.
A product can fail to qualify as investing yet still qualify as an investment contract under the law. The term exists to protect the public, whether the public needs full and fair disclosure of material information (20th-century finance) or full and fair disclosure that would ensure that the public understands what they’re purchasing (21st-century finance).
Statutory language and legislative intent matter.
Precision in definition ensures protections are applied correctly, not assumed.
7. The public receives neither clarity nor protection
The inevitable result.
It all began with “value investing.”
By branding themselves too effectively, they created a philosophical prison: One that diminished their own value proposition and misled the broader market.
New “investing categories” emerged.
Speculation was mislabeled as investing.
Regulators responded to the wrong problem.
Failing to ensure that the public knows what they are buying contradicts both the text and the spirit of the law.
Conclusion
Most major disagreements in law and finance stem from definitional slippage. Clarifying language restores the foundation for sound reasoning, better regulation, and more informed investing.
Investing, properly understood, is inherently about value.
Treating “value investing” as a distinct style is a conceptual trap.
Recognizing this is the first step toward restoring clarity—for markets, regulators and investors alike.
To paraphrase Neil Armstrong:
One misstep for “value investors,” one giant descent for investing.
A Note on Access
Ideas that clarify thinking, sharpen judgment and correct misconceptions should be accessible to everyone. This argument—showing how the term “value investing” has been misused—is most valuable when read, shared, and reflected upon, not locked behind a paywall.
So, we decided to remove all the paywalls.
You now have free access to F27, forever.
