Stories of fear and hope drive the economy because the stories we tell ourselves are the same stories that we live by.
Reading a book called The Death of Money by Jim Rickards – it struck me that stories create the world we live in for better or for worse.
Rickards believes that we’re heading for the demise of the dollar, the cornerstone of the International Monetary Fund. When the dollar collapses, he asserts that the entire monetary system will fall with it. Of course Rickard reminds us that the IMF has collapsed three times already in 1914, 1939 and in 1971 and when it did, the super-power nations got together to create some “new rules of the game,” pushed the reset button and play resumed.
So what’s the problem if the IMF collapses again? Isn’t it just a case of ‘new balls please’ to coin a phrase from the Wimbledon tennis championships?
Apparently not! Rickards goes on to explain that to avoid deflation during the liquidity crisis in 2008 the Federal Reserve has already trashed its balance sheet with quantitative easing measures and so when the next storm comes, liquefying further is not likely to be a realistic option.
Now that’s probably enough about the book to help you decide of you want to read it or not although I’m compelled to add that it’s really well written and Rickard laces it with stories throughout.
What’s intriguing is the extent to which our global economy is driven by stories. Rickards highlights the problem of deflation, which, he claims, the Fed has been determined to avoid, hence the level of quantitative easing. The signal of deflation creates a cascade of fear amongst consumers that in-turn drives their behavior. Everyone stops spending and the economy enters a vicious cycle and then the signal becomes the reality. In other words we tell ourselves stories that drive our behaviour and create the very thing that we fear.
These stories take hold like pandemic thought viruses and the majority of people and businesses become infected by them and act on them. That turns a problem situation into a crisis.
We’re forever hearing about consumer confidence in the news. It’s what governments are striving to rebuild. Their work is focused on creating positive signals that will reignite consumer confidence. They know that when we feel hopeful we begin to tell ourselves more positive stories about spending. Our stories of hope drive our spending behavior and that in-turn leads to the virtuous cycle that is needed for economic growth to gain momentum.
Our stories of hope can become problematic when they become delusional. The Celtic Tiger is a classic case in point and the UK during the late 1980’s suffered the same fate. In both cases the fall from a great height was painful making the recovery challenging. Once we’ve had our fingers burnt we continue to tell ourselves fearful stories for a long time, about what might happen if we get too close to the spending fire.
So, beyond the obvious impact of the economy on businesses what else does this have to do with business? We are storytelling creatures and our business world is full of narratives. Some can be outmoded and holding the organisation back while others are worth keeping in full or partially and may need to be evolved. We need to understand these stories because often they are hidden – we can be stuck in fear, frozen in status quo or deluded in ecstasy blinkered to an iceberg that needs to be circumvented in the future. The ideal is to navigate with a story compass that is realistic, motivating and grounded in the present and to have a savvy eye on the future so that we can course correct rapidly whenever we need to.
Jim Rickards draws conclusions in his book about what the new economic story might be and how, if we believe it, we can make sure that we act wisely. However it’s Jim Rickards’ story and how it influences our activity and plays a role in driving the future depends, to some extent, on whether we buy into it.
After all, the stories that we tell ourselves are the stories that we live by. Where else can you see stories shaping the business world in such a powerful way?
About the Author:
Claire Taylor is co-founder of The Story Mill – a business that creates innovative programmes to support organisations to make their brands more human and foster a culture of authenticity and innovation. We run engaging storytelling workshops including: Storytelling in Leadership, Influencing, Branding, Strategy, Culture and Innovation. Browse our website: www.thestorymill.co.uk for more information.