One of the great failings of fundamental analysis is its reliance upon the narrative as its means of communication. Brokers will often ask analysts – whats the story? Meaning how can I sell this to the client. We are hardwired for narrative rather than data and this causes us enormnous problems in everything from dealing and listening to politicians to health care. During each interaction we would rather hear the story and not the facts.
Stories can be a way for humans to feel that we have control over the world. They allow people to see patterns where there is chaos, meaning where there is randomness. Humans are inclined to see narratives where there are none because it can afford meaning to our lives—a form of existential problem-solving. In a 1944 study conducted by Fritz Heider and Marianne Simmel at Smith College, 34 college students were shown a short film in which two triangles and a circle moved across the screen and a rectangle remained stationary on one side of the screen. When asked what they saw, 33 of the 34 students anthropomorphized the shapes and created a narrative: The circle was “worried,” the “little triangle” was an “innocent young thing,” the big triangle was “blinded by rage and frustration.” Only one student recorded that all he saw were geometric shapes on a screen.
More here – The Atlantic