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1,001 Nights Of Stock Market Stories
Submitted by Nicholas Colas of Convergex
1,001 Nights Of Stock Market Stories
There is an old Wall Street chestnut that goes, “It’s not a stock market; it’s a market of stocks.” Fair enough, but we’ll take a different approach today to complete this aphorism: “It is a market of stories.” Yes, it is stories that vie for our attention, define our realities, and spur us to action. Recent academic work on the subject reveals that the right narrative – ideally one with a strong human element – physically changes how we process information and make us more likely to empathize with and ultimately believe the stories we hear. Too fluffy a concept for you? The research we cite was partially funded by the U.S. Department of Defense’s Advanced Research Projects Agency (DARPA), and when they have an interest in something, rest assured it has a very serious purpose. As for applications in the world of investing, recognizing powerful stories earlier than the pack is pretty much the job description for analysts and portfolio managers alike. Just be aware that it is all too easy to fall for one as well.
As a child, my parents would tell me stories out of the “1,001 Nights”, a collection of Middle Eastern tales that (in Western form, anyway) include Aladdin’s Lamp, Ali Baba and the Forty Thieves, and Sinbad the Sailor. Only in adulthood did I read the actual translations, which makes HBO’s Game of Thrones look like a 1950s “Archie” comic book. Even the framing of the stories is pretty nasty. At the beginning of the first book we read about a king who, betrayed by his first wife, now chooses a young woman from his kingdom to wed every night. And then early the next morning he has them killed. “It’s not you, it’s me, but follow the man with the ax anyway”…
This goes on until the Vizier’s own daughter, Scheherazade, decides to put an end to the serial killing of the country’s maidens. She marries the king, but on their wedding night asks that her sister might visit for a few hours before the executioner comes at daybreak. The sister asks for a story, and Scheherazade obliges. The climax of the tale comes just as the sun rises, and by this point the King is so involved in the story that he grants Scheherazade a second day of life just to hear its conclusion. The next night she starts a new story, and the same thing happens at daybreak. Fast forward 1,001 nights of stories (2 ¾ years) and the King has fallen love with Scheherazade and they live happily ever after.
If you think this is just old-time storytelling with no place in a modern “Rational” society, consider that the U.S. Department of Defense funds research on how humans process stories through its Defense Advanced Research Projects Agency (DARPA). These are the same folks that brought you highly advanced drone technology, cutting edge night vision systems, micro-sized GPS for people and munitions, and, well, the Internet (original name: ARPANET). Their interest in storytelling is entirely pragmatic, as you can see from this 2011 posting on FedBizOpps (www.fbo.gov):
“DARPA is soliciting innovative research proposals in the areas of (1) quantitative analysis of narratives, (2) understanding the effects narratives have on human psychology and its affiliated neurobiology, and (3) modeling, simulating, and sensing-especially in stand-off modalities-these narrative influences. Proposers to this effort will be expected to revolutionize the study of narratives and narrative influence by advancing narrative analysis and neuroscience so as to create new narrative influence sensors, doubling status quo capacity to forecast narrative influence.” (Translation: Help us understand what stories will cause people to act – especially those stories that we can transmit from a distance – that’s what “Stand-off modalities” means.)
One of the researchers involved in this work is Paul Zak, a Claremont Graduate University professor, researcher, and popular TED conference speaker. In a Harvard Business Review blog posting last week, Dr. Zak outlined his recent research. Here is a quick synopsis with link to the whole post below:
- One important driver of human empathy is a neurochemical called oxytocin, which “Is produced when we are trusted or shown a kindness, and it motivates cooperation with others.”
- With DARPA’s funding, Zak’s team “Developed ways to measure oxytocin release noninvasively at up to one thousand times per second”.
- Through various studies, Professor Zak and his researchers isolated two drivers of oxytocin release in the human brain. The first is attention – people have to shut out all the extraneous noise around them and focus on the story at hand. The second was to have character-driven narratives, namely actual human beings that are relatable to the listeners/viewers. Put those two things together – as Zak does in a 2013 article published by UC-Berkeley about research that focused the story of a young boy dying of cancer – and you get genuine empathy.
- What does empathy get you? Well, crassly put, money is one outcome. In the Berkeley study, subjects volunteered a portion of their honorariums to charity after generating outsized amounts of oxytocin from a heart-wrenching video of a father and dying son. Moreover, in another experiment where some subjects received synthetic oxytocin through the nose, that group contributed 57% more to charity after watching numerous public service ads than the control (no external oxytocin group).
Storytelling clearly matters a lot more than just being entertained or enlightened. An attention-grabbing story about relatable people triggers an actual biological response which, in turn, drives us to action. In thinking through what this means for investors, I arrived at the following list:
- We need people in the mix in order to feel empathy. Wonder why the Federal Reserve does those quarterly press Chairperson press conferences? Communication and information, yes… Without them, however, it is far less likely that anyone will really connect with the story the Fed is trying to tell about the U.S. economy and its policies. Now, if you just don’t like the U.S. central bank, this isn’t going to work on you. Unless to get a hit of that synthetic oxytocin, perhaps. But if you are on the fence, associating a real person with an abstract policy may help. In short, you are more likely to “Buy in” to the policy and story.
- Some investment communities and industry sectors are more prone to “People stories” than others. Every decade or so the venture capital world goes through a meltdown, and part of that failure stems from an overreliance on a particular story. Think “Eyeballs” in 2000. More recently there was a good example of this published on TechCrunch yesterday, outlining the concept of “Fundraising Acceleration”. Apparently venture capitalists are marking up any hyper-growth startup with outsized valuations simply because there are relatively few of them. The idea is that these will be the big winners, so price is less of an issue than access to the equity of such companies. The story here: valuation doesn’t matter – people and narratives do. After all, valuation chatter doesn’t make for much empathy. But a successful serial entrepreneur and a hot new idea sure do. Until, of course, they don’t.
- Use this all to your advantage, and be aware of when you are being gamed. If you are presenting information, realize that the relatable, people focused narrative is your friend if used judiciously. And if you are watching a presentation, remember that you might be the focus of a purposeful manipulation meant to spark the creation of oxytocin and, by biochemical extension, empathy.
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They're studying us. I suspect it's not so they can make our lives better.
You know in WWII the Nazis had worked out exactly how many times they had to send people to the showers before they would feel OK going there and do so compliantly. The time after that was a somewhat different experience for those people.
This is the future, here and now. The weapons are silent and the war is quiet, but the battle rages in your mind. That is the theater. And don't assume you're too smart to be affected by it. You probably already are.
I am Chumbawamba.
see? thats right there is proof that they can force narratives onto us... the holohoax still works today
If it was a hoax then I guess my Grandfather lied to me.
Or maybe like 911 when a business associate of mine stopped returning my calls and I haven't heard from him since. He's probably just on a really long vacation, though.
if your grandpa really saw holokaust, he wouldn't be lying to u, instead he would be dead on a pile of 6 million bodies
He was a soldier in the US Army you fucking idiot.
at first, I thought to ask if he was a survivor or a soldier, but then I realized that it doesn't matter cause since no one ever found the remains of those 6 million ppl, so my last statement covered both cases, the only way for someone to have seen the holokaust is to be one of those said 6 million ppl... unfortunatelly I overestimated ur ability to come to the same conclusion as me
Good job up-voting yourself and downvoting me. You're pathetic. And perfect grist for the mill. Good luck going through life believing everything is a psyop and nothing actually happened anywhere ever. Next time somebody fucks you over good, and believe me they will, you're perfectly positioned for it, you can just tell yourself it didn't actually happen.
wat? If I ever cared about this upvote/downvote stupidity, I'd be at facebook, not here...
Now, I didn't say "nothing actually happened anywhere ever", those are your words... What I implied is that there's a lot of bullshit on the official narrative, I don't claim to know everything that happened, but I do claim that the truth about what really happened is very concealed... And contrary to what you said, I make this claim not based on beliefs or theories, but based on evidence that contradicts most things said about it, including your assertion about showers...
I'm sure what your grandpa saw was really shocking, but also I'm sure he didn't see everything that was there to be seen, he only saw the tip of the iceberg, and hence, concluded everything else said is true... I don't blame him, but in the end, your claims are only based on your grandpa's belief...
Can't we all just get along.....with our TBTF bankers?
Listen Zero's.
How do you like my oxytocin?
I feel bad for the author. Having this story posted on election night is like having your new TV series debut against the season finale of Breaking Bad.
Just watch the MSM...Bloom (Ice) burg
They have pretty girls ....so I watch sometimes
I saw the Farber(sp) interview....He was tryin not to say to much doom and gloom but every time Trish(Hottie) asked a question....he lafffed....thought (he-he)(you have no-clue)
Can I see your butt or boobs /sark (but really not)
MSM....either has no clue or they are paid to make us think everything is good
Listen.
Turn off the fucking TeeVee!
Who can I listen to if I turn off the TV....MY Internet is a kinda .... Ok I believe that conspiracy theory....Why do you think I'm here
Why do you always start off with listen.....I pay for that shit....I my addswells use it...Tell me something smart...I will listen....I always like to hear smart shit
The stories are created AFTER it is decided who will benefit and how.
wait a second, did he just tell a happy ever
after, mass murder, incest story?
i thought so.
Vizier is not the king, is some kind of advisor to the king
i'm glad to hear that. i thought it
was some mythological, greek revival, literary
piece from the middle ages. today, twisted as it is,
the incest version might be closer to the
truth?
Kittens and babies must have QE. All you need to know.
Is this all about time-share from the 80's?
Oxytocin rages in Catholic old ladies when they hear Ave Maria. Chassidics get a buzz when they read the Torah. Wanna-be atheletes (and jingoists) secrete oxytocin when team America wins at the Olympics.
157 million people secreted oxytocin when they heard Susan Boyle sing I had a dream.
Uncle Tom's Cabin makes much oxytocin.
The Holocaust..... well... that too.
Anyway, it's a market of lies.
ISIS has this “Stand-off modalities” shit down cold - cut off an Americans' head and post it to YouTube and the whole damn congress is ready for war.
I just operate on the principle that any plea from an establishment institution, whether it is charitable or otherwise is a con-game (sort of cynical, I suppose) because after the UnitedWay scandal and the priests and perverted Rabbis, I just figure, the Hell with it all. Just supporting most of these organizations helps prolong the inevitable; not proud of this stance but it's the way I "cope."
it has always been about stories from the dawn of
human consciousness, or was that the dusk?
never forget the name eddie bernays.
.
Edward Bernays
Public Relations Consultant
Edward Louis Bernays was an Austrian-American pioneer in the field of public relations and propaganda, referred to in his obituary as "the father of public relations". Wikipedia
Born: November 22, 1891, Vienna, Austria
Died: March 9, 1995, Cambridge, MA
Spouse: Doris E. Fleischman (m. 1922)
Children: Anne Bernays
Parents: Anna Freud, Ely Bernays
.
or julian jaynes.
.
Julian Jaynes
Psychologist
Julian Jaynes was an American psychologist, best known for his book The Origin of Consciousness in the Breakdown of the Bicameral Mind, in which he argued that ancient peoples were not conscious. Wikipedia
Born: February 27, 1920, Newton, MA
Died: November 21, 1997, Charlottetown, Canada
Books: The Origin of Consciousness in the Breakdown of the Bicameral Mind
Education: Yale University, McGill University, Harvard University
Nominations: National Book Award for Contemporary Thought
.
Seriously, how could you feel empathy for Loyd Blankfein mourning the death of his sons? And that, dear brothers, is how I block emotional manipulation.
DARPA circle jerks.