The Pros and Cons of Ripping-Good Yarns
“We love stories, true or not, almost from the cradle,” Bob Seawright says in a long but fascinating post in his Above the Market blog.
Stories, continues the chief investment officer for San Diego-based Madison Avenue Securities, help us make sense of the world by giving us “a frame of reference we can use to remember the concepts we take them to represent.” Some even say biology has a hand in it. In this view, our need to categorize concepts for future use is so vital to our survival we’re programmed to take pleasure in the process, whether participating as tellers or listeners.
This makes storytelling a boon to marketers — and more so to those marketing relative intangibles like financial planning. It may be appealing to claim you’ve got 20 years of experience and a track record of success; but a tale of how you developed a passion for helping people make sense of their finances is, on balance, better bait.
While this may be to the good (or at least the useful if you’re selling something), our love of stories can also lead us into a morass of confirmation bias. Again thanks to our hardwiring, we believe the parts of stories we’re predisposed to believe and discount the rest. More, the way we process details within stories can create distortions. Just as stocks with ticker symbols that make for pronounceable acronyms outperform “counterparts” that don’t, might not English-language media coverage of the smartphone industry be shaded by an unspoken sense that “apples” are more universally comprehended than “androids” or “galaxies”?
Seawright’s point is we inhabit private echo chambers in which ideas ricochet and resonate depending how pleasing and affirming they strike us. To him, that demands we “rethink our prior interpretations and conclusions,” so that we may have “a fighting chance to correct the mistakes that we will inevitably make.” Advisors should make sure the stories they tell others aren’t just empty narratives. Equally, they should be sure the stories they tell themselves — fees on assets are always better than commissions, say, or fiduciary-like is as good as fiduciary — don’t simply form narrow and delusional loops.