This is not about the recently concluded Jharkhand election, it is about trying to apply Shiller’s book on the economic narrative. Most of us are not economists and do not really understand the lead and lag indicators. We see crowded airports, theaters, malls – and assume that the economy is booming. Just as you reach home your servant tells you that her son who was working as a delivery boy in a dot com has just been laid off and the family is devastated. We are not trained as economists (which is good and bad!).

In the 2019 election Namo and team had done well and the names like “Pappu” stuck well on the opposition and they romped home. I also saw young drivers from UP saying “my friend’s bua got a house” . They were sure that housing, cleanliness, etc. was far more visible than a “falling GDP” or bank interest rate. Honestly I have no clue how the economy is doing, but the results of the listed companies is surely not too great to write home about. I am convinced that the stories tell you far more than the numbers. For example Indigo has created a far better “on-time” performance image than say Air India. Yes I have suffered far more with AI than with Indigo. It is important I guess for companies, political parties, fund managers, etc. to control the narratives. What are the stories that say a Mirae asset management is able to generate is far more important than how was the performance in the immediate past quarter.

Like Shiller says in his book “narratives are like a disease” – we use the same word, do we not? We do say ‘viral fever’ and “this story has gone viral”. So fund sales people, fund managers, etc. need to create narratives – and make sure that it reaches the optimum number of people. I do think that Amfi did a great job with the “mutual fund sahi hai” – it changed the narrative from “mutual funds are subject to market risk” – which is what people ALWAYS said before this campaign. It is always difficult to say whether the narrative drives the behavior or whether the behavior pushes the narrative harder.

Somewhere the narrative changed from “it is smart to buy a house to live” to “it is smart to rent a house”. Similarly the  need for a car – to show off has evaporate simply because anybody can buy a car. Imagine the fact that for a 5k emi your lowest employee can get a second hand car! Of course 94% of Indians still aspire for a car, but “buying a car” is not so important a narrative as “starting a SIP”. Amazing narrative change by Amfi. I find the IRDA is trying to change the narrative, lets see how the efforts to say Pehle life insurance campaign works.