nocompatible always goes to insert mode

I'm tearing my hair out with this problem.

When I try to edit a file, it immediately takes me into "insert mode",
and I have to hit escape before I can navigate.

If I remove the line "set nocompatible" from my /etc/vimrc then the
problem goes away, but I require compatiblity mode for my autocmd's
(ie. remembering positions in files etc)

I must be missing a setting which determines what the defaults for
"nocompatiblity" does.

But I thought the default mode for "nocompatible" was "Normal" ?

If so, why is it always going into insert mode ? How do I change it
back ?

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