Can a good story change economic reality?

Good to see you too. And you're here because we know that numbers and data move economic decisions, but. But so do stories.

Or they can come in multiples and narrative constellations. AI comes to mind. From Sam Altman saying AI will create new kinds of jobs, to Nvidia's Jensen Huang saying it's the beginning of a new industrial revolution, to Elon Musk, we

We'll look at how these stories gain power, the narratives that sparked a tech revolution. And I promise it's not all AI. We'll talk about how economic narratives lean more into power than truth and explain why they really matter in the world of investing.

Traditionally, economists only looked at data with hard numbers. But then Robert Shiller came along and said, wait a minute, people don't make decisions only with data. Stories really matter. In fact, these narratives are important economic data.

But his idea on economic narratives caught on with other economists, including other Nobel laureates.

Daron won the Nobel Prize in 2024 for his work on institutions and how they affect a country's prosperity.

So what turns a baby economic idea into a real force?

In other words, economic narratives often have powerful people repeating the same story.

Robert Schiller theorized that it's not necessarily about truth. These stories can be non factual. They may need a whiff of truth, but as long as someone powerful is spinning it and they sound good, these narratives can influence you, how you spend, save. And they especially affect investors.

And like Musk, Lesseps was the public face of an ambitious engineering project. He sold a future before the technology was fully proven and bent reality to fit his version of it.

Sold good pitch. Lesseps went back to Europe to sell shares primarily to French individuals for 500 francs. That was roughly the amount of average annual income. Then he told them the story that global trade would benefit European manufacturers. Also at the time, the Brits were doing their colonial thing. And he added that the canal would help the British army should they need to move their troops around the world.

But building the canal would take longer than Lesseffs anticipated, With brutal conditions for the workers. They slept in the open desert and moved rocks with pickaxes and baskets.

French industrialists invented a more efficient way to dredge the area. A technological advance that was not a guarantee when the project started.

The Suez Canal eventually opened in 1869. And the value of shares in the company would go on to quadruple from the time he started selling them and pay an annual dividend of 15% in the late 1800s.

And Lessevs was a bit too cocky about the building environment, downplaying the tropical illnesses that killed workers and publicly claiming that there would be no future earthquakes in the area after one did occur.

The Suez and Panama Canals are good examples of economic narratives we're seeing today. A big infrastructure buildout with huge financial and political consequences that may need a few lucky breaks.

Economic narratives can change your reality. They can even defy gravity for a time like Lessep Suez success. But eventually reality catches up like it did in Panama.

Favorite is kind of doing a lot of work here, but about terrorists are paid by the other country.

Okay. Could be here all day.