Leadership, Ethics, and Trust, Financial Foundations Framework

Of Narratives and Numbers

Image from October 2021 GFR

It is probably safe to assume that finance officers are more comfortable with numbers than most of the decision-makers the finance officer supports. These decision-makers are likely more comfortable with narratives. Numbers are often part of the conversation, but psychological research shows that people often grossly misunderstand and/or misuse numbers in favor of their preferred narrative. Of course, finance officers are people too, and they can fall prey to the same pitfalls as less numerate people. A better understanding of the relationship between narratives and numbers can help us structure decisions more wisely. In this article, we will explore narratives and numbers in four parts:

  1. What we see is all there is
  2. We string that into a casual story
  3. We continually confirm that story
  4. We translate our inferences imperfectly.