As early as middle school, the world divides us into storytellers and number crunchers, and once divided, we stay in our preferred habitats. The numbers people seek out “numbers” classes in school and go on to “numbers” disciplines in college (engineering, physical sciences, accounting) and over time, lose their capacity for storytelling. The storytellers populate the social science classes in school and then burnish their skills by becoming history, literature, philosophy and psychology majors. Over time, each group learns to both fear and be suspicious of the other and by the time they come into my valuation class as MBA students, that suspicion has deepened into a divide that seems unbridgeable. You have two tribes, each one speaking its own language and each convinced that it has a monopoly on the truth and that the other side is the one that is wrong.
I must confess that I am more a numbers person than a storyteller and that when I first started teaching valuation, I catered almost entirely to those of my ilk. As I have wrestled with valuation questions, one of the most important lessons that I have learned is that a valuation that is not backed up by a story is both soulless and untrustworthy, and that we remember stories better than spreadsheets. While it did not come naturally to me, I started to animate my valuations with stories, and over time, I have rediscovered the storytelling side that I have suppressed since sixth grade. While I am still instinctively a left-brainer, I have, in a sense, rediscovered my right brain. It is this experience of tying stories to numbers (or vice versa) that I have tried to bring into this book.
On a personal note, this is my first book written in the first-personal singular. While you might find the repeated use of “I” and “my” off putting and perhaps an indication of an outsized ego, I realized as I was writing about my valuations of individual companies that the stories that I was telling about these companies were my stories, reflecting not only what I thought about these companies and their managers, but also my reading of the landscape. Thus, I will describe my attempts to tell stories about Alibaba in 2013, Amazon and Uber in 2014 and Ferrari in 2015 and to convert these stories into valuations Rather than use the royal “we” and force you, as readers, to adopt my stories, I felt it would be much more honest (and more fun) to let you pick apart my stories and disagree with them. In fact, the best use that you can put this book to is to take my story about a company, say Uber, think about what parts of my story you disagree with, come up with your story and then value it based on that story. A related peril of laying bare my narratives on real companies is that the real world will deliver surprises that will make each of my narratives wrong, and sometimes horrendously so, over time. Rather than be scared of that prospect, I welcome it, since it will allow me to revisit my stories over time and improve and enrich them.
I will try to wear many hats in this book. I will, of course, spend a great deal of time looking at companies, as an investor from the outside, and value them, since that is the role that I most frequently play. I will sometimes play the role of an entrepreneur or founder trying to convince investors, customers and potential employees of the viability and value of a new business. Since I have not founded or built any multi-billion dollar companies, you may not find me convincing, but there is perhaps something of value that I can offer. In the last few chapters, I will even look at the connection between storytelling and number crunching through the eyes of top managers of publicly traded companies, with the admission again that I have not been a CEO of a company in my lifetime.