The Power of Narratives

Source: Karthik Raman on LinkedIn

The Power of Narratives

Amazon’s Jeff Bezos hates PowerPoint, or presentations, for a very good reason. In 2004, Bezos sent an email with the subject line “No powerpoint presentations from now on at steam.”

It reads:

A little more to help with the reason "why."

Well structured, narrative text is what we're after rather than just text. If someone builds a list of bullet points in word, that would be just as bad as powerpoint.

The reason writing a 4 page memo is harder than "writing" a 20 page powerpoint is because the narrative structure of a good memo forces better thought and better understanding of what's more important than what, and how things are related.

Powerpoint-style presentations somehow give permission to gloss over ideas, flatten out any sense of relative importance, and ignore the innerconnectedness of ideas.

Any time an Amazon employee has an idea to be discussed, they are asked to write a 4-6 page memo called a “narrative”. As Steve Jobs demonstrated, a presentation can be a powerful tool to deliver a message to a mass audience, but presentations provide it does work poorly when you want to deliver your logical thinking. The same goes for bullet points. It is easier to write in bullet points than in full sentences because you do not need to think very hard when writing bullet points. Very often, from one bullet point to another, there is no logical connection. A set of bullet points can simply be a list of information without structure or coherence.

We read hundreds of presentations of our existing and prospective managers. To be honest, their 100 hours spent on thoughtfully-designed colourful presentations are often wasted because all of them look the same.

When we assess our investment ideas, we use narratives. While it takes twice or three times longer to write in the narrative format than in bullet points, a narrative is a much better tool to explain “the interconnectedness of ideas” (Bezos). Gathering information is important, but analysing the information with clear logic is critical for our success.

Based on our experiences, great investment managers write thoughtful letters. The letters do not have to be long or frequent, but the letters are good enough to share the managers’ thoughts with their investors. A good example is, of course, Warren Buffett, who writes excellent annual letters to shareholders.

The Private Investment Brief, published by Nadav Manham (email: manham@privateinvestmentbrief.com), is an example of a good narrative that we find very helpful for our business. The Private Investment Brief is a narrative (or a story) of one investment manager and a few of their investment ideas. There are similar publications, but the Private Investment Brief is different from others in a few points.

First, the style is different. Most similar publications use an interview format rather than a narrative format. The interview makes it easier for readers to understand the logical flow but is not always helpful to deepen your logical thinking. When you talk, you do not need to be perfectly logical. Most publications choose the interview format because it is faster and cheaper as you can just transcribe recordings into text. Nadav spends a lot of time on each interview (5-6 hours per article) and on writing.

Second, Nadav picks under-the-radar managers. Most similar publications pick famous managers because everybody wants to understand the next Warren Buffett. It is difficult to find great minds in the crowd before they discovered by the media. Since managers do not pay Nadav for the opportunity to be the subject of his memos (only subscribers do), Nadav’s view is independent, thus his memos reflect his high ethical standards as a journalist. Most of the time, we find his opinions to be very fair and honest.

The biggest challenge as an allocator is time. Very often, we need to make investment decisions after meeting an investment manager only 2 or 3 times (or less than 6 hours since most meetings last less than 2 hours). How can we build up our conviction level for the next 10 years after spending shorter hours than your nightly sleep? It is possible, but difficult. To supplement our meetings, we read all the letters written by the managers (sometimes a few hundred pages over 10 years period) and speak to many references who know them better than we do. Nadav’s narratives are an additional—but extremely powerful— source of information that can help us make a better judgment. Nonetheless, you should not regard Nadav’s memo as another source of new managers. You still need to get your hands dirty to find good managers. Instead, you should learn how good, young managers think about investing and use that thinking process to help your search. Reading a good narrative will make you think. That is the power of narratives.