December 6, 2017
Big data and storytelling
By Simon Kearney
There’s a book on company valuations that I recently finished called Narrative and Numbers: The Value of Stories in Business by Aswath Damodaran an academic at the Stern School of Business at New York University. As a storyteller for businesses I thought this would be a treasure trove of insights.
It confirmed what we already know about the value of a good story in this era of “innovative disruption”. Tesla is more valuable than Ford (at the time of writing) despite the fundamentals because we’ve bought into a bigger Tesla story of batteries, electricity and driverless cars. Tesla has told a story that it’s a tech and energy company as much as a car company, and it is working. And recently it seems GM has taken a leaf out of the same book and been rewarded as well.
Basically the idea is that if you can convince investors that you’ve got a better story than the next guy, or especially the old guys, the market will reward you.
The book lays out four basic ingredients to telling a corporate narrative which I’ll detail below but it is Damodaran’s focus on numbers and uncovering unseen biases that hold greater insights for storytelling about businesses.
Storytellers and data scientists
Firstly, he says: “As numbers come to dominate so many business discussions, people are trusting them less, not more, and falling back on stories.”
This is because stories are needed to explain the increasing, in fact overwhelming, amounts of data we see. Damodaran makes the case that the need for storytelling has increased in the current era of big data. Hence, whenever someone advertises for a data scientist they should be looking for a storyteller next - or even better at the same time. I’ve always felt that there’s no point in doing interesting things in business if you don’t have someone on standby to recognise and tell that story - otherwise all that good work will often amount to nothing in the eyes of the public.
“It is data overload that we face, not information overload,” Damodaran says. “Behavioural economists have established conclusively, our decision making has become even more simplistic and irrational because we have all this data at our disposal."
For our industry this is crucial to understand yet data storytelling still focuses on things like data visualisations. There's a great piece in Forbes from last year which highlights the main point.
Your data may hold tremendous amounts of potential value, but not an ounce of value can be created unless insights are uncovered and translated into actions or business outcomes.
While LinkedIn says that data scientist is one of the hottest job categories at the moment, the storytelling side of it will need to catch up soon as businesses discover the value they're missing out on by not communicating their insights well enough.
The science is behind this approach. People remember stories much more than numbers. The only thing I remember from my statistics course at university was the yarns the lecturer told in a bid to help us retain some of the concepts he was teaching. It has been shown that people are 12 times more likely to remember a story rather than a statistic.
We "suspend our disbelief" when we listen to or read stories which makes us more susceptible to the storyteller convincing us that their point of view is correct. Which is probably why most TED Talks are more story than stats.
No excuse for liars
Now you might take this to be an invitation to fall back on the con man’s mantra that nothing sells better than a good story, no matter how true, but no. Nothing punches a hole in the hard-won reputation of a great person or company than exposing a lie, especially one told at an institutional level.
Because Damodaran focuses on uncovering biases in decision making about valuations, he makes the case that a good story is not a tool for a dodgy business to hide behind.
“When you are forced to unveil the story that backs your numbers, your biases are visible not just to the rest of the world but to yourself,” he says.
If you can combine a good story with your numbers it actually makes it harder for people to imitate you, he says. There are apparently investors out there who invest in “story stocks”, i.e. businesses with compelling narratives.
“Numbers are dangerous because they come with the illusions of control, precision, and objectivity and can be easily imitated,” he says. “The capacity to combine stories with numbers makes it more difficult for others to imitate you, if you are successful."
The four ingredients of business storytelling by Aswath Damodaran
1. "It has to be simple: A simple story that makes sense will leave a more lasting impression than a complex story in which it is tough to make connections.”
2. "It has to be credible: Business stories need to be credible for investors to act on them. If you are a skillful enough storyteller you may be able to get away with leaving unexplained loose ends, but those loose ends will eventually imperil your story and perhaps your business.”
3. "It has to inspire: Ultimately, you don’t tell a business story to win creativity awards but to inspire your audience (employees, customers, and potential investors) to buy into the story.”
4. "It should lead to action: Once your audience buys into your story, you want them to act.”
He says something elsewhere in the book that I would add as point 5.
5. "Stories work best if they not only involve listeners but require them to think on their own and make their own connections."
And finally, a warning to the wise.
“No corporate story is a timeless classic."
No narrative is impervious to news, Damodaran rightly points out. So a bad news story that disrupts a certain narrative has undoubtable force. This is probably why Donald Trump seeks to undermine the mainstream news media at every opportunity. Facebook is currently the most obvious victim of this failing at the moment, as it's narrative keeps coming unstuck by revelations about fake users, fake news and fake ads.
If you want to know more about how to tell good business stories drop me a line at firstname.lastname@example.org where we work on compelling, authentic narratives every day with a team of world class journalists, film-makers and creatives.
Material for this article was sourced from: Damodaran, Aswath. Narrative and Numbers: The Value of Stories in Business (Columbia Business School Publishing). Columbia University Press. Kindle Edition.