A strategy to communicate
In the financial world, the influence of marketing and communication is seriously underestimated. While everyone thinks the world consists of hard figures, many financial decisions are based on stories. In fact, we sell each other stories. A story is remembered 22 times better than facts and figures alone. Brain activity increases fivefold when people listen to a story. And not only do they listen, but they can also even feel, taste, and smell the story. Good financial analysis should pay more attention to the influence of the story.
After economists first began to collaborate with sociologists and psychologists in the field now known as behavioural economics, developments in journalism and marketing are causing an even greater shift. It can be seen in the creation of Bitcoin, the rise of Tesla, and in the ‘whatever it takes’ approach to the financial crisis. The United Nations is making good use of it in its Responsible Development Goals, a huge marketing success. The influence of the story on the economy is not new. Keynes already talked about animal spirits that explained why an economy came out of recession, but it is only thanks to the start of the field of narrative economics that applications in practice exploded. A narrative is more than a story. A story has a beginning, middle, and end. Narratives have an open ending, the reader can still influence the outcome. It invites the reader to participate, to share. For example, by means of a meme: a comical film or an amusing image that is shared en masse on the Internet.
A narrative is a connection of stories with an uncertain outcome that lies in the distant future. Elon Musk thought that the chance of success for Tesla was so small that he only dared to put his own money into it at first. Only with the right narrative could Tesla become so big. So even if the founder does not believe in it, fiction can still become reality. Then it is only a small step to Mars. The ability to tell stories is what really sets humans apart from all other animals. In fact, it is something that artificial intelligence has yet to match. Take Bitcoin. Every right-minded person knows that it is little more than a pyramid scheme, but now that the SEC has put its stamp on Coinbase’s IPO, this virtual reality is invading our daily lives. A good example of the use of different narratives is the website Reddit, where users determine the content, a truth that is constantly changing, but the most important source for young investors.
Strangely enough, we are at the end of the era of grand narratives. Religions and ideologies once provided guidance, but we are increasingly missing the common horizon. Yet our ability to share stories is greater than ever. Thanks to the internet and social media, such a story goes viral in no time. The experience is more important than the reality. This has even led to the creation of fiction that is completely divorced from reality. It is up to the recipient to determine whether something is true or not. Truth has become something subjective and by labeling the original truth as fake news, the difference between virtual reality and reality is no longer determined by whether one is true or not. Narratives offer more grip than reality.
Every company, therefore, needs a narrative to make its strategy tangible, based on a long-term vision, and to enable the proper participation of the various stakeholders. Just like religions and ideologies, a corporate narrative gives direction. Different stories next to each other make a narrative stronger. Today, a company’s communication is about the right content and especially a lot of storytelling, which requires creativity to combine different academic disciplines. Communication with stakeholders is about consistency, transparency, and commitment to the right narrative around the company.
As a result of the corona crisis, the government’s role has increased. The government is a reflection of society. This means that the reputation of a company has become more important and the use of the right narratives can make or break a reputation. It ensures authenticity and the genuineness of the products, the company, or the brand. It creates connection and that creates trust. As soon as the reader can identify with the story, you immediately play into the favour factor. Since a narrative mainly looks ahead, the low interest rate has increased the importance of narratives. After all, the weight of future cash flows has become increasingly important. With a negative interest rate, the future is even more certain than the present. With the help of a narrative, many so-called anomalies in the market can be explained. The disadvantage, however, is that narratives can constantly change. Still, it is worthwhile to think about the narrative, take it into account in your next investment decision.