Narrative and Numbers: The Value of Stories in Business (Columbia Business School Publishing)

by Aswath Damodaran

stories can be one of five types: 1. The Horatio Alger story: This is a classic, especially in the United States, and it is a variant of the rags-to-riches story. Investors are attracted to this story by the tenacity of the founder in making something of himself or herself in the face of immense odds. 2. The charisma story: In this narrative the founder’s story is built around an epiphany, a moment when he or she gets a vision of business opportunity and then proceeds to fulfill that vision. Elon Musk has founded or cofounded many businesses, including SpaceX, Tesla, and SolarCity, but with each of these businesses, investors are as much drawn to him, as a charismatic founder, as they are to the companies themselves. 3. The connections story: In some businesses, it is who you know that gives you the advantage, and founders who have the right connections, either because of family background or due to their past roles as politicians or regulators, are given special deference. 4. The celebrity story: Investors are sometimes drawn to the celebrity status of a founder, in the belief this status will allow them to attract business and generate value. Jack Nicklaus, Magic Johnson, and Oprah Winfrey have all used their celebrity status to build successful businesses, with many investors being drawn to the celebrities’ names as much as to the businesses themselves. 5. The experience story: It is the track record of some founders that dra...