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Choosing The Red Pill

What a messy start of the year. The Chinese stock market has once again capitulated, spooked by disappointing manufacturing data, a rapid devaluation of the yuan, inadequate stock market rules and continuously poor government agencies’ communication; the OPEC cartel is deemed to have imploded; the disconnect between the Fed talk and the US economy seems to be have been growing, with three leading US economists openly criticizing the Fed for making a big mistake in December; and our usual doomsters (Lagarde, Roubini, Stiglitz) have not missed a chance to remind us this week of all the possible economic dangers ahead (the list of which is far too long for this note) alongside their best wishes for 2016. Merci! As always in these situations, some time is required to put things in perspective.

What to do in the meantime? Amongst other things, watch The Matrix (1999) again. The value of the movie goes far beyond sci-fi entertainment. Its storyline is actually precisely based on Joseph Campbell’s monomyth described in “The Hero with a Thousand Faces” (1949) as explained in this short Ted video. As argued in a Sunday note a few years ago (see below), Mr. Campbell’s work on the archetypal patterns of the world’s best stories throughout the ages is of paramount relevance to corporate stories, and thus to investor communication, including in conjunction with spin-offs, IPOs, sell-sides, mergers or acquisitions.

That was about telling a story. What about making a story, and perhaps even making history? Consider the following The Matrix scene between Morpheus (played by Laurence Fishburne) and Neo (Keanu Reeves):

Morpheus: […] Let me tell you why you're here. You're here because you know something. What you know you can't explain. But you feel it. You've felt it your entire life. That there's something wrong with the world. You don't know what it is but it's there, like a splinter in your mind driving you mad. It is this feeling that has brought you to me. Do you know what I'm talking about?

Neo: The Matrix?

Morpheus: Do you want to know what IT is? The Matrix is everywhere. It is all around us, even now in this very room. You can see it when you look out your window or when you turn on your television. You can feel it when you go to work, when you go to church, when you pay your taxes. It is the world that has been pulled over your eyes to blind you from the truth.

Neo: What truth?

Morpheus: That you are a slave, Neo. Like everyone else you were born into bondage, born into a prison that you cannot smell or taste or touch. A prison for your mind.... Unfortunately, no one can be told what the Matrix is. You have to see it for yourself. This is your last chance. After this there is no turning back. [Morpheus offers two pills to Neo, a blue and a red one]. You take the blue pill, the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill, you stay in Wonderland, and I show you how deep the rabbit hole goes.... Remember, all I'm offering is the truth, nothing more.... Follow me....

As per Campbell’s hero’s journey, many of the greatest stories start with a hero (here, Neo) suspecting something is just not right, but refusing to engage due to the scare of the unknown until s/he meets a mentor (Morpheus). In the featured scene, Neo, encouraged by Morpheus, accepts the “call to adventure”, chooses the red pill and “crosses the threshold” into the “special world” as described in more details below. Without this critical decision, there would be no story. And the world would not become a better place.

In the aftermath of the Great financial crisis, it became evident that no one could count on the macro-economic environment for an extended period of time to make things happen and drive equity stories. “Self-help” took center stage. Seven years on, it is bound to take a new dimension. Economic actors have to make their own story by accepting the call to adventure and by choosing the red pill. More than ever, investors crave exciting stories.

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