The importance of a narrative – Understanding the other side

As humans, we like to hear black or white statements, yes or no statements. These are statements made with authority and humans expect such statements from domain experts to build trust. Imagine you go to a doctor, and I play out two narratives – God forbid, the blood test indicates an abnormality which causes you to panic and the narratives are as below.

Narrative 1:

The doctor tells you with confidence that this requires a surgery and post the surgery you would be perfectly normal. He has done 100 such surgeries before and you should not have any issues post that.

Narrative 2:

The doctor asks you to give it time. With changes in your diet and lifestyle, there is a chance that you would recover better than today. While there are no guarantees, it’s a path worth trying.

The above was done across 100 medical students in a closed-door case study at Harvard Medical school and 95% of the students chose the former narrative. There were very few who wanted to question the longer-term impact on the surgery and how their body would react to it, instead, their decision was based on the tone and confidence of the doctor.

Why is this important?

In investing, which is what we at Itus speak about (if you had not realized), investing decisions are filled with strong narratives – by analysts, macro specialists, CEOs and managements. Within this noisy world of narratives and confidence, it is important to distill and look at the other side to see what one may be missing out on.

Today’s narrative: Every global problem becomes a +1 where India becomes a beneficiary. As an optimist, I would love for this to happen, I need to measure the other side to have a nuanced view too.

Story today: BASF seeks ‘permanent’ cost cuts at European operations

Clearly, with issues in China, Europe and global supply chains, the narrative for India to benefit is a strong one. However, is there another side to the same? The below snippet was taken from the BASF India conversation recently.

It’s important to understand that the world is never black or white. One gets paid to have strong beliefs with loosely held views.

The performance-related information provided in this newsletter/blog is not verified by SEBI. The content is intended solely for internal circulation and general informational purposes. It does not constitute investment advice or any form of financial recommendation.

The research information shared herein may contain inaccuracies or typographical errors. All liability for actions taken or not taken based on the content of this newsletter/blog is expressly disclaimed.

No reader, user, or browser of this Newsletter / blog should act or refrain from acting based on any information in this newsletter/blog without seeking independent financial advice. Use of, and access to, this publication or any links or resources provided within do not establish a portfolio manager-client relationship between the reader, user, or browser and the authors, contributors or Itus Capital.