Metaphors and stories: threat or menace to explanations ?
The central role of metaphor and narrative in human thought. Professor Cowen HERE, is only the latest to build on this theme although importantly, he concentrates on the negative, blinding aspects of the tendency. Nowhere is this more clear than in the "stories" that surround investments.
Choosing a metaphor presupposes a conclusion. For instance, there's no way to hear "the Chinese economy is a bubble" without unconsciously associating the country's outlook with fragility and inevitable disappearance of a soap bubble. If we describe China's GDP as similar to a hot air balloon on the other hand, our subconscious will immediately become more suceptible to the argument that upcoming government stimulus will right the economic ship. (You see what I did there - the use of the word "ship" is insidious.)
Good metaphors are a double-edged sword and their ubiquity in stock pitches suggests investors remain on their guard, never accepting one outright no matter how successfully it seems to communicates the situation.
Via Interloping.
Cowen: I was told to come here and tell you all stories, but what I'd like to do is instead tell you why I'm suspicious of stories, why stories make me nervous. In fact, the more inspired a story makes me feel, very often the more nervous I get. So the best stories are often the trickiest ones. The good and bad things about stories is they're a kind of filter. They take a lot of information, and they leave some of it out, and they keep some of it in. But the thing about this filter, it always leaves the same things in. You're always left with the same few stories. There's the old saying, just about every story can be summed up as, "A stranger came to town." There's a book by Christopher Booker, he claims there are really just seven types of stories. There's monster, rags to riches, quest, voyage and return, comedy, tragedy, rebirth. You don't have to agree with that list exactly, but the point is this: if you think in terms of stories, you're telling yourself the same things over and over again.