How stories have affected Northern Rock
The recent situation at Northern Rock is a great example of the power of stories and storytelling. When the Bank of England announced that they were underwriting Northern Rock’s finances, both banks believed that this would reduce the risk for NR’s savers. But as many risk specialists will tell you, risk is as much a matter of perception than statistical reality. Within days thousands of ordinary, and often elderly customers were forming long queues outside NR branches. And the bank lost over £2bn in two days of trading. What is the mechanism that drives such a powerful reaction? What makes a seventy year old person sit or stand for over six hours outside a bank?
Jim Loehr of the Human Performance Institute talks about the role stories or narrative plays in the way we comprehend things. He draws on research by scientists in the US into why we think the way we do that concludes that our brain has evolved into a narrative-creating machine that takes whatever it encounters, no matter how apparently random, and imposes on it chronology and cause and effect logic. In other words we intuitively take facts, such as the Bank of England’s announcement, and shape them into stories (in this case our perceived story of the immanent collapse of Northern Rock). Steve Denning and others take this one step further. They talk about the ‘inner voice’ inside our head, that when we hear an external story, extrapolates it into a story with ourselves as the hero. So when we see the hero of a film having to part with his or her loved one, we project ourselves into their situation and in doing so share their emotion.
Now lets consider what’s going on in the mind of the Northern Rock savers. The Bank of England makes its announcement. Our saver takes this information and shapes it into a story, partly based on fact and partly based on their own assumptions – ‘my bank is in trouble’. Of course they are not the only ones to turn this into a story. The media are also playing the same game, and they are looking at it through the lens of sensationalism. Now our saver extrapolates the story into a new version, one in which they envision what will happen to their savings, and consequences on their lives. This story is so powerful, so full of risk, that it shapes beliefs that fly in the face of any counter logic (the Bank of England has just underwritten your bank!). And as we know beliefs drive behaviours.
Don’t let anyone tell you that the banking system is driven by numbers!