We all love stories; we relate to them and we remember them. From the beginnings of recorded history, stories have been used to inform, to convince, to convert, and to sell, and it is no surprise therefore that businesses have taken to storytelling. In this chapter I look at how storytelling has been central to learning, why stories continue to have so much power over us, and why the need for storytelling has actually increased in the information age. If the first part of this chapter is about the good side of storytelling, the last part is about the dangers of runaway storytelling and how the emotional appeal of stories can lead to bad decisions.
Storytelling Through History
Stories have been with us since the very beginning of time. In 1940 a group of children in France came upon cave paintings of animals and a human being that can be traced back more than 33,000 years (to between 15,000 B.C.E. and 13,000 B.C.E.). The first printed stories, which tell the story of a Sumerian king, Gilgamesh, are from 700 B.C.E. and were recorded on stone pillars, but there is also evidence that the Egyptians wrote stories almost 3,500 years ago on papyrus. There is evidence of storytelling in every ancient civilization.
Illustrative of the staying power of these ancient stories are two classics, Homer’s Odyssey and Aesop’s fables. Homer is believed to have spun his yarn for the ages in 1200 B.C.E., predating the creation of a written Ionic Greek language by almost 500 years. Aesop lived around 550 B.C.E., and his stories were not recorded until almost 200 years after his death. Ancient religions in almost every part of the world have spread their messages through stories, whether they be the Bible, the Koran, or the Bhagavad Gita. Through much of this time, these stories were passed on from generation to generation in oral form, but in a testimonial to their power, the core of these stories stayed remarkably intact.
With the invention of the printing press, stories acquired both bigger audiences and staying power, as they took book form and traveled across many lands. That in turn allowed for the creation and nurturing of universities and formal education, though only a small proportion of people were able to read and write. These “learned” people still used the power of the spoken word to pass stories on to the unlettered. Literature majors around the world read Shakespeare, but it is worth remembering that his plays were written to be performed at the Globe Theater. The bottom line is that it is not just that the history of humanity and the history of storytelling that are entwined, but that without storytelling to carry it through time, we might not know our own history.
The Power of Stories
So what is it that gives stories their staying power? It is a question researchers have tried to answer, not only to understand the allure of stories but also in the hope of using these findings to help people tell better and more memorable stories.
Stories Connect
A well-told story connects with listeners in a way that numbers never can. The reasons for the connection are varied across both stories and listeners, and the extent of the connection can vary in intensity. In recent years scientists have turned their attention to why and are finding that the connections may be hardwired into our brains as chemical and electrical impulses.
Let’s start with the chemical explanation. Paul Zak, a neuroeconomist at Claremont Graduate University, identified a neurochemical called oxytocin, a molecule in the hypothalamus of the human brain.1 He argues that oxytocin, whose synthesis and release is associated with trust and caring, is created and released when a person listens to a powerful story (or narrative) and that this release can lead to changes in the listener’s postnarrative behavior. In addition, during stressful moments in stories, the brain releases cortisol, allowing the listener to focus. Other research also finds that happy endings trigger the limbic portion of the brain, its reward center, to release dopamine, a trigger for hope and optimism.
Greg Stephens, Lauren Silbert, and Uri Hasson have a fascinating study of how electrical impulses in the brain seem to respond to storytelling in what they term “neural coupling.”2 In particular, they report on an experiment in which a young woman tells a story to twelve subjects, and the brain waves of both the storyteller and the listeners are recorded. They note two phenomena as the story is told. The first is that the brain waves of the storyteller and listeners synchronize, with the same parts of the brain lighting up for both, although there is a time lag on the part of the listeners (as they process the story). To test whether it is the story itself that made the difference, the story was told in Russian (which none of the listeners understood), and the brain wave activity ceased, thus illustrating that it is the story (and understanding it) that seems to make the connection. The second and more intriguing finding is that during some parts of the story, the listeners’ brain impulses precede those of the storyteller, suggesting that involved listeners start predicting the next steps in the story. Overall, as the synchronization in brain waves between the storyteller and those listening to the story increases, communication becomes more effective.
There is one final aspect of storytelling that is worth emphasizing. Peter Guber, in his book Tell to Win, notes that when listeners are absorbed in a story, they become more willing to accept arguments uncritically, that is, to drop their guard.3 Melanie Green and Tim Brock, two psychologists, argue that in these fictionalized worlds, listeners change the way they process information and that highly absorbed listeners are thus less likely to detect inaccuracies and inconsistencies in stories than are less involved listeners.4 That allows storytellers more license to develop story lines that otherwise would have been challenged, but as we will note later in this chapter, this is a mixed blessing in business storytelling, since it is abused by con men and fraudsters.
The bottom line is that storytelling can draw in listeners and get them to act in ways that they would not have acted had they been presented with just the facts. As an added bonus, if you can get listeners to become absorbed in your stories, they are more willing to accept your assumptions and perspective, and thus your conclusions.
Stories Get Remembered
I have been teaching for more than three decades and am lucky enough to still run into students from decades past who reminisce fondly (at least in front of me) about my classes. It is astonishing how often and how well they remember the little anecdotes and stories I have scattered through my classes over time, though the details of the classes and the numbers have long been lost in the fog of their memories.
I am not unique in this experience, as studies indicate the staying power of stories. Stories get remembered much better and for longer periods than numbers. In one study, subjects were read stories and expository texts and their memory was tested later.5 Even though the content was the same, the stories were remembered about 50 percent more than the expository passages. As to why some stories get remembered more than others, researchers hypothesize that it is causal connections within the story that make them more memorable, especially if subjects have to work to make inferences and see the connections. Thus, when subjects are given different versions of the same paragraph to read, they are less likely to remember the paragraph if the causal relationship is either too obvious or very weak, but are more likely to remember it if the causality is understated but requires some work on the part of subjects to connect.
If there is a lesson I have learned from these studies for storytellers, it is that stories work best if they not only involve listeners but require them to think on their own and make their own connections. Those connections may very well have been the ones I wanted them to make in the first place, but it is not only more effective but also more memorable if listeners make them, rather than having them force fed. As with so much else in life, when it comes to storytelling, I have discovered that less is more.
Not only do stories allow for emotional connections between storytellers and listeners and get remembered more vividly and for longer periods, they can elicit listeners to act. As part of his research on storytelling, Paul Zak also looked at whether the increase in oxytocin, the neurochemical that he identifies as the one released during stories, was associated with actions after the stories had been told. In one experiment, in which subjects were asked to watch public service announcement videos produced by the British government, the increase in oxytocin resulting from watching the videos was measured and higher increases were associated with bigger donations to the charities mentioned in the videos.
The studies also found that some stories evoked bigger increases in neurochemicals and thus elicited more actions than others. For instance, narratives with dramatic arcs to them resulted in more responses than flat narratives, as did stories that caused viewers to become more engaged with the story characters.
The Special Case of Business Stories
If stories allow for stronger connections, are remembered longer, and spur action, it should come as no surprise that businesses have used storytelling to advance their interests with different constituent groups. With potential investors, the storytelling is designed to encourage investors to attach a high value to the business and invest their capital. With employees, the stories that businesses tell will be designed to get them excited about working for a company. With customers, business narratives are aimed at getting them to buy products and services, perhaps at premium prices. The stories told to each group may be different, and in some cases even inconsistent, a potentially troubling issue we will return to later in this book.
The most obvious use of storytelling in business is in selling and advertising. Not only are the very best salespeople effective storytellers but advertising is built on telling stories that not only prompt customers to buy your products and services but to remember (and value) brand names.
In business education, storytelling is a key part of all teaching and it has been formalized in the case study approach. Every good business case is a narrative or story that is meant to not only illustrate a key concept but also to do it in a way that students will remember that concept for long periods. As with any good story, the cases are written in ways that nudge students toward what the instructor believes is the right answer, and as with any good story, that nudging can turn to manipulation if misused.
In investing, storytelling is an integral part of both investment philosophies and recommendations. There are many investors who steer away from numbers and data and instead invest in story stocks, that is, businesses with compelling narratives. Even those analysts and investors who do look at the numbers often try to provide a structure for those numbers with stories. In sell-side equity research, for instance, it is the analysts who tell the most compelling stories about the sectors that they follow and the companies that inhabit that space who are most valued. With investment legends, it is striking that we remember famous investment feats as stories, rather than numbers. For instance, one of the most frequently repeated stories about Warren Buffett is that of his investment in 1964 in American Express. The company had been tarred by a scandal when it lent money to a commodity trader, Tino DeAngelis, who used contaminated salad oil as collateral; when the fraud was unearthed, American Express stock collapsed in value. Buffett made the assessment that the company’s credit card business was not only unaffected by the scandal but worth many times more than what the company was trading for, and invested 40 percent of his investment partnership’s money in the stock, which paid off as the stock rebounded. While Buffett’s collective profits from this investment amounted to only $33 million, a paltry sum relative to his other winnings, the American Express story gets told and retold in value investing circles as a testimonial to how doing your research can pay off big time.
CASE STUDY 2.1: STEVE JOBS, MASTER STORYTELLER
As someone who has been a longtime Apple user, I watched Steve Jobs rise to mythical status, primarily because of his success at transforming not just Apple as a company but also the landscape of the music and entertainment businesses. While there are many aspects of the Jobs legend that you can point to, some good and some bad, one quality for which he stood out was storytelling. That quality came through in his famed annual presentations, when, clad in his signature black mock turtleneck, he used the latest Apple products to lay out his narrative for the company. In particular, his 1984 keynote (during which he introduced the Macintosh) and his 1997 presentation (during which he unveiled the iMac) stand not only as bookends to the process but showcase his ability to tell a story.
In 1984 computers were the domain of tech geeks, with the infamous Microsoft command lines separating the handful who were technologically savvy from those who were not. Steve Jobs saw a future in which the rest of the world would have to use computers and would have neither the willingness nor the inclination to learn these commands. Using the traditional desktop and file folders as his devices, his narrative was one that saw the computer as a tool that anyone would be able to use just as easily as they moved papers on their desks. In 1997 the world had bought into the idea of computers as essential business tools, useful for churning out documents and spreadsheets much more efficiently than typewriters. Again, Steve Jobs used the iMac, with its quirky shape and coloring, to tell the story of computers as vehicles for delivering music and entertainment into homes, laying the foundations for Apple’s rise in the following decade.
Note that these two instances also illustrate another important truth about business storytelling. The stories that Steve Jobs told on both occasions were compelling and forward looking, but he (and Apple) did not benefit from the 1984 story reset. In fact, the Macintosh floundered under the weight of design choices and software limits, some of which arose from Jobs’s own weaknesses, and it was Microsoft that learned the lesson, redesigned Windows, and almost drove Apple into oblivion. The 1997 launch of the iMac took a while to bear fruit and it was only five or six years after that Apple was able to reap any benefits. The lesson to be learned is that good storytelling is an integral part of building a business, but even the most compelling stories do not guarantee riches and rewards.
Storytelling in a Technology/Data Age
This should be the golden age for numbers, with increased access to immense amounts of data (big data) and improved data-analytic tools and machine power, and as we will see in the next chapter, there are signs that it is. Ironically, though, it is exactly this surge in number-crunching and computing powers that has created a greater demand for good storytelling, often as a counterpoint to masses of numbers. As we have access to more information, there is evidence that it is having the adverse effect of making it harder to retain that information. Assaulted by data overload, our brains stop processing the data and, as a Scientific American article points out, we are increasingly using the Internet as an external hard drive for our memories.6 In an article in the New York Times, John Huth argues that our reliance on technology has made us break knowledge into pieces and lose sight of the big picture, perhaps creating a space for storytelling to fill.7 I don’t know whether these or other explanations hold water, but in financial markets, increased access to information has made investors feel less comfortable, not more so, when they make judgments. There is evidence that it has exacerbated many of the behavioral problems that have always afflicted investment decision making. As a consequence, investors seem to be more drawn to good storytelling now than in generations past.
We are also subject to more distractions in our lives, some digital but some not, and those are having an effect on how much attention we pay to what is happening around us. In fact there is evidence that as we increasingly multitask our way through the day, not only are we missing much of what is happening around us but the memories we form tend to be less robust and thus more difficult to retrieve. Again, storytelling may be what gets us to pay attention and remember.
Finally, the growth of social media has expanded the scope for storytelling. Not only do we have much larger audiences for our stories (all those Facebook friends), but there is always a chance that one or more of these stories can go viral, spreading across the globe at breathtaking speed. Businesses are quickly tapping into this trend as they try to get their stories on social media and spread virally. My colleague, Scott Galloway, has a Digital IQ Index that he uses to measure how companies are faring in digital space, and it is clear that those that lag are redoubling their efforts (and spending more money) to catch up.
The Dangers of Storytelling
As we noted in an earlier section, stories are powerful because they connect with people’s emotions, get remembered, and elicit action from listeners. It is for each of these reasons that stories can be extremely dangerous, not just for listeners but also for storytellers. If the last section made a case for telling and listening to stories, you should consider this section a cautionary one about the dangers of letting stories alone drive decisions.
When master storytellers create fictional lands and take us to them, the perils of setting aside skepticism and following them into these lands are small. Thus, I can spend a weekend in J. R. R. Tolkien’s Middle-earth or J. K. Rowling’s Hogwarts and emerge none the worse for the immersion, and perhaps inspired by their creativity. In business, we face a different test for storytelling, since we are investing, accepting employment offers, or buying products, and if we make these decisions based just on stories, we are risking a great deal more.
The field of behavioral economics is of recent origin and represents the intersection of psychology and economics. Put succinctly, behavioral economics lays bare all of the quirks in human nature that lead people to make bad decisions, especially if they base these decisions on emotion, instinct, and gut feeling. Daniel Kahnemann, a father of this field, takes us on a romp through the fields of human irrationality in his book Thinking, Fast and Slow and notes some of the biases we bring to decision-making processes that stories can easily exploit.8
It is not just listeners, though, who are in danger of letting emotions run away from the facts. Storytellers face the same problem, as they start to believe their own stories and perhaps act on them. In effect, stories feed into the biases we already have, reinforce them, and make them worse. As Tyler Cowen pointed out in a TED Talk critiquing the wave of popular psychology books asking people to trust their instincts:
The single, central, most important way we screw up [is that] we tell ourselves too many stories, or we are too easily seduced by stories. And why don’t these books tell us that? It’s because the books themselves are all about stories. The more of these books you read, you’re learning about some of your biases, but you’re making some of your other biases essentially worse. So the books themselves are part of your cognitive bias.9
In an earlier section, I noted that one of the benefits of storytelling is that as listeners get more absorbed in stories, they tend to become much more willing to suspend disbelief and let questionable assertions and assumptions go unchallenged. Much as that may be a plus for storytellers, it is exactly what allows con men and fraudsters, usually master storytellers, to spin tales of big riches and separate listeners from their money. Quoting Jonathan Gotschall, “Master storytellers want us drunk on emotion so we will lose track of rational considerations and yield to their agenda,” a benefit for a moviemaker but not a worthy testimonial for a business story.10
The Fickleness of Memory
It is true that many storytellers draw on personal memories in coming up with their stories, and if they tell their stories effectively, these stories will be remembered for far longer. As researchers are discovering, human memories are fragile and easily manipulated. In one study, researchers were able to convince 70 percent of their subjects that they had committed crimes as adolescents that resulted in police action, when in fact none of them had done so.11 In another study, researchers were able to leave their subjects with the memory (false) of having been lost in a shopping mall as children, even though they had not.12
To the extent that business stories are often built around the experiences of the storytellers, it is easy to cross the line between real and imagined experiences. Founders who invent improbable rises from poverty, portfolio managers who claim to have had the foresight to get out just ahead of market collapses, and CEOs who invent struggles with nonexistent business challenges may, with repeated retelling of their stories, start believing them. This is not to suggest that stories are always made up or full of falsehoods but to show that even well-meaning storytellers can sometimes reinvent their memories and that those listening to those stories might not be remembering the stories the way they were actually told.
Numbers, the Antidote
A key difference between a story told purely to entertain and a business story is that the latter is (or should be) bounded by reality and the real world does not reward business storytellers for just being creative. In fact one of the perils of letting storytelling drive business decisions is that it is easy to cross the line and wander into fantasyland. In business storytelling, this can manifest itself in dysfunctional forms:
• The fairy tale: This is a business story that follows the standard script for the most part, but at some point in the story, the narrator lets his or her hopes replace expectations and the creative juices flow. Not surprisingly, these stories end well, with the narrator emerging the victor with a successful business as bounty.
• The runaway story: A close relative of the fairy tale, this story sounds so good and the protagonist is so likable that listeners overlook major gaps in the story or failures of logic because they want the story to be true.
The bottom line is that storytelling left unchecked can easily lose focus, and in the context of business stories, that can be dangerous for everyone involved.
If stories play to emotions and past experiences are skewed sometimes by false memories, you can see the advantages of introducing numbers into the conversation. When a storyteller has wandered into fantasyland, the easiest way to bring him or her back to Earth is with data that suggests the journey is either impossible or improbable. Similarly, when a story is so powerful that it overwhelms listeners, all it may take are a few pragmatic questions about what it will take to deliver the promised outcomes to bring listeners back to their senses.
CASE STUDY 2.2: THE CON GAME—STORYTELLING WITH A SUBVERSIVE END
Con games are as old as human existence, but what is it that allows them to survive? And what makes some con games so much better than others? While there are many answers, the one common element that all con artists seem to share is that they are master storytellers, capable of sensing the weakest spots in their listeners’ emotional armor and exploiting the power of storytelling to get their victims to buy into the stories.
In his classic on market bubbles, Charles Mackay describes how salespeople through the ages have used stories to promote and push up prices on everything from tulip bulbs to shares in obscure companies, and why investors continue to fall for these stories.13 The rise of financial markets and the growth of media have allowed storytellers to expand their audience and, with it, the potential for damage that they can create.
In more recent times, Bernie Madoff pitched an investment scheme in which he claimed he would buy about fifty of the hundred largest market cap stocks, timing his buys “opportunistically” (leaving investors with the impression that he had found a way to time markets well) and then using put options to limit potential losses. The key selling ingredients were threefold. The first was that the strategy was “too complicated for outsiders to understand” and too proprietary to be described in detail. The second was that it was supposedly so well designed that it would never lose money, even in bad months for the market. The third, and perhaps cleverest component, was that the strategy would make moderate rather than exceptionally high returns. Madoff’s targeted risk-averse individuals and foundations, many of them Jewish, like he was, and by keeping his promised returns low enough to sound “reasonable” and his clientele “exclusive,” he was able to get by for almost two decades without key questions being asked.
CASE STUDY 2.3: THERANOS—A STORY THAT SOUNDS SO GOOD THAT YOU WANT IT TO BE TRUE
The Theranos story has its beginnings in March 2004, when Elizabeth Holmes, a nineteen-year-old sophomore at Stanford, dropped out of college and started the company. The company was a Silicon Valley start-up with a non–Silicon Valley focus on an integral but staid part of the health-care experience, the blood test. Based on work she had been doing in a Stanford lab on testing blood for the SARS virus, Holmes concluded that she could adapt technology to allow for multiple tests to be run on much smaller quantities of blood than needed for conventional tests with a quicker and more efficient turnaround of results (to doctors and patients). In conjunction with her own stated distaste for the needles required for conventional blood tests, this became the basis for the Theranos Nanotainer, a half-inch tube containing a few drops of blood that would replace the multiple blood containers used by the conventional labs.
The story proved irresistible to just about everyone who heard it—her professor at Stanford who encouraged her to start the business, the venture capitalists who lined up to provide her hundreds of millions of dollars in capital, and health-care providers who felt this would change a key ingredient of the health-care experience, making it less painful and cheaper. The Cleveland Clinic and Walgreens, two entities at different ends of the health-care spectrum, both seemed to find the technology appealing enough to adopt it. The story was irresistible to journalists, and Holmes quickly became an iconic figure; Forbes named her the “the youngest, self-made, female billionaire in the world” and she was the youngest winner of the Horatio Alger Award in 2015.
From the outside, the Theranos path to disrupting the blood-testing business seemed smooth. The company continued to trumpet its claim that the drop of blood in the Nanotainer could run thirty lab tests and deliver them efficiently to doctors, going so far as to list prices on its website for each test, with costs dramatically lower (by as much as 90 percent) than the status quo. In venture capital rankings, Theranos consistently ranked among the most valuable private businesses with an estimated value in excess of $9 billion, making Holmes one of the richest women in the world. The world seemed truly at her feet, and to anyone reading the news stories, disruption seemed imminent.
The Theranos story started to come apart on October 16, 2015, when a Wall Street Journal article reported that the company was exaggerating the potential of the Nanotainer and that it was not using the Nanotainer for the bulk of the blood tests it was running in-house.14 More troubling was the article’s contention that senior lab employees at the company found that the Nanotainer’s blood test results were not reliable, casting doubt on the science behind the product. In the following days, things got worse for Theranos. It was reported that the Food and Drug Administration, after an inspection at Theranos, had asked the company to stop using the Nanotainer on all but one blood test (for herpes) because the FDA had concerns about the data the company had supplied and the product’s reliability. GlaxoSmithKline, which Holmes claimed had used the product, asserted that it had not done business with the start-up for the previous two years, and the Cleveland Clinic also backed away from its adoption. Theranos initially went into bunker mode, trying to rebut the thrust of the critical articles rather than dealing with the substantial questions. It was not until October 27, 2015 that Holmes finally agreed that presenting the data that the Nanotainer worked as a reliable blood-testing device would be the most “powerful thing” that the company could do. In the months following, the setbacks continued, as more evidence emerged of problems in the company’s labs and with the blood testing technology. By July 2016, the company’s future looked bleak as the FDA proposed a ban on Ms. Holmes from operating labs, and business partners (like Walgreens) abandoned the company.
If a Hollywood screenwriter were writing a movie about a young start-up, it would be almost impossible to come up with one as gripping as the Theranos story: a nineteen-year-old woman (that already makes it different from the typical start-up founder) drops out of Stanford (the new Harvard) and disrupts a business that makes us go through a health ritual we all dislike. Who among us has not sat for hours at a lab for a blood test, subjected to multiple needle pricks as a technician drew large vials of blood, waited for days to get the test back, and then blanched at the bill for $1,500 for the tests? To add to its allure, the story had a missionary component to it of a product that would change health care around the world by bringing cheap and speedy blood testing to the vast multitudes who cannot afford the status quo. The mix of exuberance, passion, and missionary zeal that animated the company came through both in speeches by and interviews with Holmes.15 With a story this good and a heroine this likable, would you want to be the Grinch raising mundane questions about whether the product actually works?
Conclusion
Stories are critical in business. They allow businesses to connect to investors, customers, and employees at a level that pure facts or numbers cannot, and they induce action. They do come with negatives, especially when they are unchecked with facts. Storytellers tend to forget reality and make up imaginary worlds where success is guaranteed. Listeners who buy into the stories let them proceed without skeptical questioning, often setting aside doubts or inhibitions, because they want happy endings. If this book has a mission, it is to provide you with a template that will allow you to continue to be creative in your storytelling, while also introducing enough discipline into the process to warn you when you are crossing the line into wishful thinking. If you are someone listening to a business story, this book can act as a checklist to ensure that you don’t let hope become expectations.