This tweet below has stayed in my mind ever since reading it.
“Company narrative metagame management is one of the primary roles of a good CEO and most do a poor job of it. Managing your narrative is a big aspect of capital allocation and can create or destroy fortunes for your shareholders.” – LIZquidity, Original Tweet
Good CEOs drive narrative, they are storytellers. The value of being a good storyteller for a public company is obvious since a huge portion of a public company’s value comes from its perception by others. Therefore, if a CEO can portray the company in a good light and tell a compelling story about the company and where it’s going, they can create great value for shareholders thereby lowering their cost of capital and increasing the value of their own shares and options.
Jeff Bezos’s narrative around reinvesting nearly all profits back into Amazon gave the company’s stock tremendous value even as profits remained low for years. Herb Kelleher needed a strong and compelling narrative to win the numerous anti-competitive lawsuits he faced even before the first flight. After winning them, Herb then created the Southwest story of low fares and efficiency to attract great employees, customers, deals to acquire aircraft, and to build a robust company culture. Where would Tesla stock trade today if Elon Musk was gone and all that mattered was fundamentals? Storytelling matters.
In small companies, is the same true? Are owner-CEOs storytellers and can good storytelling increase the intrinsic value of their business?
I think the answer to both is yes. Owners need to sell the story of their company to customers. They have to tell a story to a bank on why their company can repay a loan. An owner has to sell investors on the company and craft a narrative around the value their investment can create. Perhaps most powerfully, owners use storytelling to rally their team and hire and train new employees. Masters of storytelling can create value for their company through each of these groups.
An owner tells variations of a core story to each stakeholder, but the main elements of storytelling exist in all. An immersive plot, relatable characters you want to root for, a problem to unite against. Having the ability to weave these elements together in a cohesive manner and convince a listener to act on your story has power and creates value. Searchers and small company investors have a chance to change and/or create a new narrative about a company they are acquiring. It may be wise for the new owner to spend some time thinking about the company’s current story and how they might change it to be more compelling to the company’s stakeholders.
Sometimes I think a more valuable college major for myself would have been writing or English, rather than accounting. But storytelling exists even in accounting. After all, numbers tell a story about the company’s history, where it stands today, and where it might lead. Accounting doesn’t tell you how to weave elements of a company into a convincing and interesting story, but it does teach you how to understand those elements better. I believe all majors and disciplines help explain certain elements of a story, and it’s up to the student and future leader to decide how those elements should go together. As a current or future business owner, how do you use the elements you know best to tell a story about your company?
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This video is a fascinating thesis saying Everything is a Remix, from art to music to movies to business. There are obvious parallels I’m sure you’ll pick up to owning small companies and I noticed several within my own podcast. After all the podcast is simply a remix of small companies, investing, audio, and interviews. This was my favorite link from this week, shoutout to PermanentCapital on Twitter for the source.
Mike Boyd’s newsletter The Business of Family is fantastic and I highly recommend subscribing. Mike has also created a podcast around the topic which is great as well. Mike is a close friend of mine and was willing to be a guest on the show when I had practically zero downloads. He’s incredibly smart and generous with his time and anything he writes or releases I read immediately.
Tobias Carlisle had Connor Haley from Alta Fox Capital, a microcap focused investment fund, on his podcast back in October and I listened to it this past week and came away really impressed with his thought process around investing. I think microcap public stocks and small private companies are very alike and it’s interesting to hear how small companies are viewed in the public setting.
I’m an airplane geek and this is what this website is going to look like in 30-40 years…
If you found an interesting article, podcast, or interview that I missed, please let me know, I’m always looking for interesting stuff.