The Power of a Believable Story

Late one night, I was in my study, headphones on, listening to a podcast by investors abroad. They were discussing Anthropic's valuation.

I opened Excel almost without thinking. Revenue growth, profit margins, terminal multiples, discount rates: I filled in the cells, made the assumptions more optimistic, then more optimistic again. However far I pushed them, the result was still a long way from $2 trillion.

Just as I was ready to dismiss the valuation, the host changed tack. On a strictly financial calculation, he said, $2 trillion was hard to defend. But the company had brought together some of the smartest people in the world, people with ability and ambition. They might produce something that changed everything. Seen that way, perhaps $2 trillion wasn't so unreasonable.

There wasn't a new number in that argument. No revised model. No additional cash-flow forecast. Yet I'd gone from shaking my head to nodding.

Only after closing the laptop did I notice what had happened. The calculation hadn't convinced me. A story had.

Soros's idea of reflexivity suggests a way to understand this: people use narratives to make sense of the world, and the actions they take on that basis change the world. That's my interpretation, not a quotation from him. That night, it stopped sounding like an elegant observation and began to feel like a practical problem.

Here's the uncomfortable argument I want to make. We don't always calculate first and believe afterward. Often we use a story to understand what is happening and form expectations, then find the logic and data that explain our choices. Expectations lead to action. Action changes conditions, and those changes can lend the story credibility. Follow that process far enough and you reach power: the ability to make a narrative believable can become the ability to influence prices and direct other people's actions.

1. Every valuation contains a story

The figures need some care. In its May 28, 2026 financing announcement, Anthropic disclosed a post-money valuation of $965 billion for its Series H round. An August report in the Financial Times described investors expecting an IPO valuation of $2 trillion or more and a year-end annualized revenue run rate of $100 billion to $120 billion, compared with roughly $47 billion in May. The IPO valuation and year-end figures were investor expectations at the time. A revenue run rate extrapolates recent performance; it isn't realized full-year revenue. Neither figure should be mistaken for a completed offering price or an achieved annual result. The timetable and final price remain subject to formal disclosure.

As someone who studies economics, I'm less interested here in settling what the company is worth than in a different question. Why can a valuation resist our calculations and still seem plausible?

Because every input in the model contains an account of the future. A growth rate puts a number on how quickly you expect AI to spread through the economy. A discount rate expresses your view of uncertainty. In the discounted cash-flow valuation of a fast-growing company, terminal value often makes up much of the result. That value depends on what you think the company will eventually become. Change the story and the model produces a different number.

I'd put it this strongly: a DCF can give a story a mathematical stamp of approval. Reason hasn't disappeared. Its inputs may already have been chosen by the narrative.

2. Belief can move resources

Many investors acknowledge narratives but file them under sentiment, as a layer of atmosphere surrounding the real valuation. I think that understates their effect.

In Narrative Economics, Robert Shiller examines how stories spread and influence economic decisions. Soros's reflexivity approaches a related problem from the other direction: participants' beliefs can change markets, and market outcomes can change those beliefs.

Put those ideas together and a feedback loop emerges. A narrative shapes expectations. Expectations help direct capital, talent, and attention. Those resources alter what is possible, and the results can become evidence for the original story.

Consider the claim that a company has assembled the smartest people in the world. Believing it can draw in more talented people, along with money and computing resources. That makes the company more likely to produce something valuable, which appears to confirm the initial claim. It becomes difficult to distinguish a prediction from an outcome the prediction helped bring about.

This is where narrative acquires pricing power. Someone who can define a convincing future can influence what others will pay for it today. At the extreme, belief in the company can command more value than its present patents or cash flows.

3. The story behind your own judgment

An obvious objection is that some stories are just hype, and a rational investor should be able to tell the difference.

But what makes you decide that one story is sensible and another absurd? Often it's a deeper narrative you haven't noticed yourself using.

Take Elon Musk's ambitions for flying cars and reusable rockets. Such proposals have attracted ridicule, frequently on the grounds that they have no practical use. Many objections deserve serious answers: energy consumption, noise, safety, regulation, and cost all matter.

Still, the judgment that something has no use may contain an assumption: useful means commercially viable now. That can feel like common sense, but it rests on a particular account of value, one grounded in cash flows already demonstrated. Another account places value on expanding what might become possible. Those positions answer different questions about what should count as valuable; neither wins merely by presenting itself as common sense.

Behavioral economists call one version of this problem the framing effect. Describe the same facts through a different frame and judgments can change. Someone ridiculing an idea may believe they stand outside the story, on the side of facts, while remaining inside an unexamined frame of their own.

My suspicion is that people who laugh at other people's narratives often haven't noticed the one they live in. Recognizing that doesn't require believing every pitch. It means laying out your own assumptions before judging someone else's.

4. How stories become wealth and political power

One way to turn a narrative into something tangible is through wealth. A persuasive account of the future can secure capital, talent, and time on better terms.

Another is through political power. Consider MAGA. I'm interested here in the mechanism rather than endorsing or opposing its politics. Elections also depend on institutions, social divisions, and the media environment. Within that broader picture, what role did those four letters play in the rise of a businessman with no previous public office to the presidency?

The narrative has a recognizable structure. A lost golden age gives discontent a history. A boundary between allies and opponents identifies who belongs and who is to blame. A promise of restoration turns present disappointment into a direction for action. Then a hat compresses the whole account into a cheap, wearable, recognizable symbol. Identifying with it requires very little explanation.

That structure suits a world with scarce attention. A detailed policy program won't reach everyone. Four letters can. They offer an explanation, a shared identity, and a destination.

Wealth gives people influence over where resources go. Political narratives can influence where people believe they should go. Power can work by making people want to move toward you, before an order is ever given.

5. What makes a story credible?

Stories are plentiful. Belief is harder to secure. I see at least four conditions that help explain the difference.

A story must be easy enough to retell; otherwise it won't travel beyond its first audience. It must point toward a future worth participating in. It needs something people can examine: a product, a financial statement, or visible progress. And the person telling it needs to have something at stake.

Three ideas help make sense of this.

A Schelling point is a focal point around which people can coordinate without communicating directly. A compelling story can play that role for strangers: if everyone else is looking in that direction, I'll look there too.

Signaling theory asks what makes a signal credible. Talk is cheap, so words alone tell us little. Costly actions can carry more information.

Skin in the game adds a question about consequences: how much does the speaker stand to lose?

Together, these ideas suggest why audiences often examine the storyteller's commitment as closely as the story. Has the founder committed their own savings and career? Have talented people put several precious years into the same undertaking? A large commitment can strengthen credibility, bring in followers, and increase the narrative's value.

What someone is willing to risk can matter as much as what they promise. The same ambitious sentence can carry very different weight depending on who says it.

6. Believing without surrendering judgment

This argument needs a limit. Otherwise it becomes a dangerous story of its own: tell a good enough tale and anything goes.

Narratives help determine who gets a chance to face reality. Without a convincing account of what you're doing, you may struggle to raise money, hire people, or obtain the time to experiment. In that sense, a story can buy admission. Once inside, the results still matter. Cash flows, working technology, customer retention, and an organization's ability to deliver cannot be supplied by a better pitch. A narrative can buy time, but it can't postpone delivery forever.

For investors, the question is whether the price contains a defensible premium for future possibility or a bubble sustained by belief. I return to three questions.

Who believes? Are the believers independent of one another, with different reasons and real money at stake, or are they repeating the same claims inside an echo chamber?

How long can they wait? A story that needs five years to unfold sits uneasily inside a price that demands proof within one. That mismatch is a risk even when the underlying idea is sound.

How much is at risk? What have the founders committed? What have their followers committed? And can your own position survive a long delay, or an outcome that never arrives?

Belief in a great story doesn't make every purchase price a good one. Much of the future may already be in the price. The company can succeed while the investment disappoints. These are questions for thinking about risk, not investment recommendations.

Before deciding how much you believe, ask who else believes, how long they can wait, and what each of you stands to lose.

Writing this brings me back to that late night in my study. I thought I was judging the world independently through Excel. I was also interpreting it through a story I'd grown used to telling myself.

What story is doing that work for you?