The Narratives We Live By

We all know a few things. Or at least we think we do. We nod along when we hear them, maybe even repeat them at dinner or in slightly more self important WhatsApp groups. But internalizing them, or really appreciating them, seems to operate on a different clock entirely. One fine day you wake up and think, oh shit. Yes. Not because you didn’t understand it before. But because you hadn’t quite let it sink in to the point where it rearranges furniture in your head.

I’m rambling here, but I’ve probably come to the conclusion that the greatest strength of humanity is our ability to build narratives and stories and then, somehow, convince the world to go along with them.

Now of course, we know this. It sounds like something you’d underline in a book. But sit with it for a moment.

Language, for instance. It’s just sounds. Or squiggles. There is nothing inherently “tree” about a tree. No cosmic reason that those four letters should summon up leaves and bark and shade. And yet, because enough of us agree, tree is… well, tree.

Money is even stranger. At least language has some evolutionary charm to it. Money is, when you strip it down, a story we've all agreed not to question too hard. A piece of paper, or increasingly a few digits on a screen, that we have all decided is worth something. Not just something, but time, effort, stress, ambition, and occasionally, dignity. You can spend your entire life chasing it, losing it, multiplying it, or explaining it away, all because we collectively agreed to believe in it.

And then there are the bigger stories. Nations. Borders. Companies. Even markets. None of these exist in a physical sense the way a rock does. You can’t stub your toe on “India” or “the Nifty 50”. Not literally, anyway.

Which brings us, somewhat uncomfortably, to investing.

Because markets are, at their core, giant narrative machines. Prices move not just on earnings or cash flows, but on stories about earnings and stories about the future. Sometimes those stories are grounded, sometimes they are hopeful, and sometimes they are borderline delusional but told with such confidence that they briefly become reality.

A company is “the next big thing” until it isn’t. A sector is “uninvestable” until it quietly compounds in a corner. And occasionally, something genuinely transformative comes along, but by the time the narrative reaches you, it’s already been priced in three times over.

The tricky part is that narratives are not optional. You can’t opt out of them. We like to pretend that there are “story people” and “numbers people,” but in reality, we are all buying some narrative. The spreadsheet just makes it feel more respectable.

This is where I love Aswath Damodaran’s work. His whole point, if you strip away the academic packaging, is that valuation is a bridge between stories and numbers. A good narrative has to be translated into inputs. Growth rates, margins, reinvestment. And once you do that, the story becomes testable.

Because a story that cannot survive contact with numbers is not a narrative. It’s a pitch. And the reverse is also true. Numbers without a story are just as fragile. A model can look precise and still be meaningless if the underlying narrative is confused, borrowed, or simply wrong.

So the question is not whether to believe in narratives, but which ones to treat with suspicion and which ones to tentatively trust. And more importantly, whether the narrative you are buying can withstand even a slightly hostile spreadsheet.

As always, thanks for reading.