For centuries, it has been established that people have an innate yearning for stories. This led these notes to introduce 'The Hero with a Thousand Faces' (1947) and its monomyth as a tool to design powerful equity stories ten years ago. To elaborate, Andrew Stanton, the American director at Pixar and contributor to ‘Toy Story’ and ‘Finding Nemo’, explains that movie audiences beg ‘Make me care... Please, emotionally, intellectually, aesthetically, just make me care.’ I believe investors feel the same when considering investment opportunities. In fact, the plea takes an even bigger dimension when considering the need to address environmental and social factors: If stories help provide a meaning to investors and the broader stakeholders base, they are perfectly suited to promote a well-crafted corporate purpose which meets sustainability objectives.
And yet, most investor relationship communications come short of including basic storytelling ingredients. It is as if storytelling is still seen as superfluous, even denaturing - a skill perhaps best left to fictional artists, far away from the serious world of business and its decide-plan-execute modus operandi. But with dreadful quarterly result announcements ahead, heightened levels of uncertainty and talks of a new world post COVID-19, storytelling deserves some renewed attention.
Aaron Sorkin, the genius American screenwriter behind ‘A Few Good Men’, ‘The West Wing’ and ‘The Social Network’, says that stories are subject to rules. Like many other screenwriters, he cites Aristotle’s ‘Poetics’ as the mother of instruction manuals for drama. Most screenwriters seem to agree that a story, and each of its chapters or scenes, ought to rely on Aristotle’s three acts: ‘A whole [story] is that which has a beginning, a middle, and an end’. In this respect, Vince Gilligan who created ‘Breaking Bad’ (see also ‘Breaking Bad Economics’) argues further that structure is more important than dialogues: ‘the real storytelling is about building its scaffolding.’
Talking about structure, Shonda Rhimes, the American TV producer of ‘Grey’s Anatomy’, states that the first act must imperatively start with an imbalance, a problem or conflict to be resolved by the main character(s). Mr. Sorkin agrees and refers to the concept of ‘intention and obstacles’ as the starting point of any good story: ‘Drama is intention and obstacles, somebody wants something, something is standing in their way of getting it.’ Similarly, Quentin Tarantino’s formula relies on establishing high stakes situations, preferably from the beginning, as in the opening scenes of ‘Kill Bill’ or ‘Inglorious Basterds’. When a movie or book has tension, the audience is engaged.
This storytelling rule contrasts with the typical structure followed by investor communication. In fact, a lot of time and effort is spent to minimize the discussions about the obstacles faced by an organization and instead to promote its secured path to success thanks to a long list of favorable drivers. This is counterproductive, in my opinion. Consider a company prepared to readily acknowledge its challenges: it would be able to build a stronger track record or story as it successfully tackles them, from one chapter or episode to the next. This not a novel concept: in his accounts of the Gallic Wars (c.50BC), Julius Caesar put significant emphasis on the strength of his opponents to glorify his battle wins and build an aura of invincibility.
It is no wonder that so-called ‘self-help’ stories are particularly appreciated by investors. Since they relate to some form of corporate turnaround, these equity stories rely upon the identification of challenges to overcome, with the progress measured with excitement over time. Intention and obstacles.
In reality, all equity stories are self-help stories, and this is perhaps even more evident during the current economic crisis. In this age of authenticity, intention and obstacles is the formula which will get the audience… invested.