Unit 3 · Level 1 · The narrative trap
Stories beat statistics
Economist Robert Shiller calls them narrative epidemics: stories that spread like viruses and move billions. 'Digital gold.' 'This time is different.' 'AI changes everything.' Your brain evolved around campfires, not spreadsheets. One vivid story about a neighbour's coin gains beats a base rate every time. Markets run on stories long before they run on numbers.
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What you get asked
Why do narratives move money more powerfully than statistics do?
A story travels person to person and carries emotion with it; a spreadsheet does neither. Contagiousness, not accuracy, is what moves crowds.
The internet story of 1999 was TRUE. It really did change everything. The Nasdaq still fell about 78%. The lesson?
The question is never just 'is the story true?' but 'what does the price already assume?'. In 2000, the price assumed perfection and got reality.
Match the narrative to the question it's dodging
Terra's Anchor protocol promised ~20% 'stable' yield; roughly $40B evaporated in a week in 2022. One unanswered question was the entire red flag.
A narrative can be completely true and the ___ still terrible.
Story quality and trade quality are separate questions. Price, timing, and what's already assumed decide the second one.
Your defence when a thrilling money story reaches you:
Feel the story, then check the cohort. The rest of this unit builds exactly that muscle. 🐜
The rest of this unit
Stories, gurus, and viral feeds: how a good tale empties a portfolio.