Hunt argues that once a narrative is widely known, the risk/reward profile changes dramatically. The real alpha is generated by identifying a variant perspective early and riding the wave as it becomes consensus. This "discovery phase" is where the most money is made.

Ben Hunt uses crypto as the prime example of a narrative-driven asset. Its price follows the rise and fall of different stories, such as the recent shift from a "DeFi" and "inflation hedge" story to a "Wall Street adoption" narrative with the launch of Bitcoin ETFs.

Julian Robertson's "story-based" investing wasn't about speculative narratives. It was a framework to ensure an investment thesis, like the supply-demand dynamics of copper, was logical and easily understood. If the core logic changed, the investment itself had to change.

Hunt argues that in today's 24/7 media landscape, a CEO's primary job has become crafting compelling narratives to capture investor imagination and justify a higher valuation. As he states, "a multiple is a narrative. A multiple is a story."

Howard Marks uses Warren Buffett's framework—'First, the innovator, then the imitator, then the idiot'—to describe the predictable lifecycle of investment trends. A strategy begins as a good idea for a few, gets copied by the masses, and eventually becomes an overcrowded, risky trade for latecomers.

A key investment criterion should be whether a company's story or sector, like AI or space, is compelling enough that a broad base of investors will eventually care. This narrative-driven screen helps identify stocks with high potential for future liquidity and multiple expansion, independent of current fundamentals.

Hunt pinpoints a confluence of factors that elevated storytelling to the primary driver of markets: 1) Central bankers and CEOs mastering narrative as a tool, 2) The 24/7 news cycle demanding content (stories), and 3) Smartphones as constant dopamine/narrative delivery devices.

Companies like Tesla and Oracle achieve massive valuations not through profits, but by capturing the dominant market story, such as becoming an "AI company." Investors should analyze a company's ability to create and own the next compelling narrative.

Investors often invent compelling secular narratives—like a permanent housing shortage or "Zoomers don't drink"—to justify recent price movements. In reality, these stories are frequently post-hoc rationalizations for normal cyclical fluctuations. The narrative typically follows the price, not the other way around, leading to flawed trend extrapolation.