When we were kids, our grandparents told us stories-especially when we were to go to sleep. Possibly, the logic behind this was that the mind reaches a more peaceful stage when told a nice story and becomes conducive to go to sleep. Recall that there were never stories that had no proper ending. Every story told to us had everything nicely wrapped up- the good guys win in the end, the evil chaps are destroyed and peace and harmony prevails all over. Satisfied, we fall asleep, dreaming of a nice, utopian state around us!
Do we realize how many stories we like to tell in the markets? We do it for the very same reasons learnt in childhood- to envelope ourselves with a utopian state! Everyone has their version. Curiously, the stories are always more or less the same. They are always about this friend, or a group that has made truckloads of money. There are two or three variants. It is either some fantastic inside information, or some loading up on a single stock at a low price or some great tipster, etc.
Then everything happens as expected or planned and everyone went home happy and rich. People like to tell stories like this over and over. Dan Gardner explains this in his book, Future Babble-Why Expert Predictions Fail and Why We Believe Them Anyway. Writing in the book , Gardner says, ‘People love stories, both the listening and the telling. It’s a central part of human existence, found in every culture, in every place, in every time…For explanation-sharing to work, however, a story cannot conclude with “I don’t know” or “The answer isn’t clear.”” The narrative should be complete. Incomplete stories do not work.
This is why perhaps there are market stories. For traders and investors to exist and continue doing what they are doing (and mostly, not succeeding), they need stories of resounding success to remain inspired. TV channels do their bit by propping up many players as winners or experts or some kind of champs at what they do. They create icons for the others to follow. RKD, RJ, NS and so many other ‘Wizards’ are another way of telling stories. And for lesser mortals of the market to listen. And repeat those stories to others. And so it goes on.
Gardner is right. We cannot live with an unclear answer. We cannot tolerate I don’t know as an answer although that is the only honest comment that one can make about the future. In the markets we are dealing all the time about the future. But our penchant for listening and telling stories prevents us from ever accepting uncertainty as a possibility.
Moral of this story therefore to overcome the habit of listening to or telling market stories. They are a distraction that we don’t need. Also they are just a way, many times, to hide our own inadequacies to ourselves. You can’t do a bigger disservice to yourself. Uncertainty is a given when dealing with the future. Instead of stories, find processes that can reduce the impact of uncertainty. That’s the real way to go.