Every day we see how the power of narrative overwhelms the power of facts. Distorted perception, based on skillfully chosen words, defeats unbiased analysis.
Sometimes, a good press release or analytical article works magically, but not for enlightenment, but for managing emotions. Using an example based on real events, let's imagine two competing companies, Alpha and Omega.
Both publish IFRS financial statements, but Alpha has an influential "independent" blog.
Scenario 1: Weak Alpha results.
Alfa's net profit fell by 25%. In the blog, we see the headline: "Alfa maintains operational stability during a period of turbulence." The following text follows:
"The company's net profit amounted to X million rubles, which, against the background of macroeconomic difficulties, indicates stability. It is important to note the 5% revenue growth and the preservation of market share."
The reduction of an industry-critical ratio, say, the debt burden (Net Debt/EBITDA), is mentioned in passing or omitted altogether. The emphasis is on the positive, and the negative is a temporary phenomenon.
Scenario 2: Omega's weak results
Omega's net profit also fell by 25%. The same blog comes out with the material: "Omega demonstrates an alarming drop in efficiency."
"The company showed a 25% drop in net profit, which casts doubt on the implementation of its strategy. Revenue growth of 15% did not help offset rising costs, and the key indicator of the debt burden continues to deteriorate, increasing investor risks.".
Here, the same revenue growth is no longer an achievement, but only serves as a contrast to highlight weakness. The key coefficient is highlighted.
The techniques are obvious:
- Selective emphasis: The same indicator for "one's own" - "made up", for "someone else's" - "showed a drop".
- Ignoring the context: For your company, the macro environment is an excuse, for someone else's, on the contrary.
- Narrative control: The decision on which indicator is the main one and which is the secondary one is made not by the analyst, but by the editor, based on the desired emotional message.
Why does it work?
The human brain searches for simple and understandable stories. It is easier to read a ready-made conclusion that is emotionally colored ("an alarming situation" vs. "investing in the future") than to independently conduct an hour-long analysis of dozens of pages of IFRS.
This pressure on emotions creates an information noise that drowns out the bare facts. An analyst, investor, or journalist who is under
