The Power of Stories

We all know a good story when we hear one, right? And the best part is that we always remember it too!

Why does that happen? I was curious about it. Scientifically, it is due to certain physical aspects at play in our brains, along with some chemistry being triggered. The brain's Broca's area and Wernicke's area are involved in processing language in a way that allows us to visualize a story from what is being seen or read.

What's the significance of this? If your presentation does not convey a clear message around the data visuals being shared, viewers will subconsciously assign their own meaning and interpretations to it. The consequence? Misinterpretation!

Moreover, to my surprise, when we convey any message through a story, not only are the language processing parts of the brain at work, but so are the sensory ones—chemicals associated with empathy and distress are also at play (https://allgoodtales.com/science-behind-storytelling/).

This reveals a simple fact: stories help listeners, readers, or viewers retain information in a digestible way. This is why a good story leaves a lasting impact.

Please watch this YouTube video (https://www.youtube.com/watch?v=jbkSRLYSojo), which shows the correlation between lifespan and per capita income for 200 countries over 200 years in just 4 minutes. The fun fact is that the presenter analyzed over 120,000 data points, but what you will remember is not the data, but the underlying story driving the data.

From this, we understand why it is important to convey our data or analysis through storytelling. But why create an impact at all? The answer is to leave behind some wisdom (insights) that helps make an “optimal” decision.

Do Financial Models tell a Story?

The simple answer is good models do enable stories to be told.

This is because the model is structured in such a way that the model's logical flow, how inputs get turned into outputs, is itself the story. It’s attempting to capture the storied reality of the business. Does the business have recurring revenue? That’s one part of the story. Does the business sell add-on services? That’s another part of the story. These parts gradually build up so the model storifies the business. If you can’t explain why the inputs were chosen as they were, that's a good indication you don’t understand the story of that business.

You can argue how compelling the business story is, maybe manufacturing businesses aren’t the most exciting story but nonetheless there is some business story that a good model will enable to be told.

How do you make Stories memorable?

The framework for stories can often be boiled down to STAR, which you might be familiar with as a good way of giving structured examples for competency based interviews.

Situation - Setting the context of the problem or challenge you are aiming to overcome.

Task - The task is the objective that is the focus of the action.

Action - This is the key part of the story, what specifically was done to help achieve the task.

Result - This part of the story is about providing finality by answering if the action did ultimately end up helping address the task. This can be expressed both qualitatively & quantitatively.

There will never ever be one single framework for stories as part of their beauty is in their variety.

As modelers the questions I believe we should be asking ourselves are:

• Do I understand the story of this business?
• Does this model represent the story of this business?
• Do the outputs enable users to make stories about this business?

Do you think of Financial Models as stories? Do we sometimes try to overfit data into a storied narrative?

Please feel free to leave your comments and past experiences below.