What Do We Need To Be True?
Rusty Guinn
April 6, 2021·44 comments·Money
The stories that define how capital moves, how businesses operate, and how policy gets made feel immutable. They're not being constantly defended because they seem beyond question. Yet entire industries, legal structures, and compensation systems have been built on the assumption these stories stay true. When the conditions that keep these narratives in place begin to shift, the ground doesn't just move. It reveals how much weight was resting on things nobody was even supposed to question.
- Fundamental market narratives aren't defended through argument because they're considered beyond argument. Nobody writes "most people believe inflation stays low" the way they write opinion pieces. The assumption is so embedded that it needs no missionary work. That invisibility is exactly what makes it dangerous to miss when it's changing.
- Institutions have structured themselves around these stories in ways that make reversal nearly impossible without self-destruction. Investment policies, executive compensation, product design, legal frameworks, and entire business models assume certain narratives remain true. A major asset owner can't simply pivot to believing in inflation without colliding with decades of law and convention.
- The real barrier to narrative change isn't data or evidence but what powerful groups need to remain true.Executives rewarded for growth-at-all-costs need cost inflation to remain invisible. Asset managers earning fees on bond allocations need deflation assumptions to persist. Politicians need globalization framing intact to avoid accusations of something worse.
- Cultural memes act as invisible load-bearing walls, making it feel immoral or irrational to question certain narratives. Opposing globalization feels like opposing democracy or freedom itself. Changing inflation expectations feels like rejecting progress. These entanglements mean the crowd won't shift beliefs even when conditions change.
- The question that matters isn't "what's the data telling us" but "what do we need to be true in order to keep functioning as we are structured to function?" Until that threshold breaks, until the cost of maintaining the narrative exceeds the cost of abandoning it, even obvious contradictions will be absorbed without changing what anyone actually does.
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Comments
Well done, Rusty, really well done!
So much of who we think we are - who we want, nay, need to be - is wrapped up in the stories we tell ourselves about what needs to be true.
I am reminded of a line in the Falcon and the Winter Soldier where Bucky and Sam are talking. Sam is questioning whether Cap was right in believing in him. Bucky tells Sam that he can’t think that way. Because if Cap was wrong about Sam, then he was wrong about Bucky and that is something that Bucky can not live with. So he needs Cap to be right about Sam. Incredibly powerful moment.
Water indeed. Well done.
I’ll pile on one last nautical analogy that I think helps me to frame what you’re talking about.
This isn’t looking at descrbing the water in which we swim. It’s looking at how the water can change such that we have to adapt a new form of swimming. Quickly. Before we drown in the changing waters. How long can you swim the same way before you have to alter course because what you’re doing just isn’t working.
Man, this is like one of the two big philosophical/existential questions along with “How do you fight the monster without becoming the monster?” How shaky are the fundmental truths that you’ve built the most basic building blocks of your day on? How little has to change before those fall apart? As Rusty mentions, ther’s a ton of friction because of how much is entangled and tied up in a system that needs to work one way. But eventually, you’ve gotta go with the water.
“What do we need to be true?”
I’m pretty sure this is the driving force behind every story humanity has ever told.
Brilliant article! I will be meditating on the implications of this framing for a while.
Others have called this the “truth-shaped hole.” Unspoken assumptions that the writer/messenger/Missionary doesn’t mention encircle a gap in the picture - that itself becomes a picture once you have enough of the data around it.
Ugh, is there an “edit” button? I meant to say “leaves a gap in the picture” or “leave an outline that encircles a gap.” Either one of those makes sense.
Very thought provoking Rusty , it got me thinking ? - you know who needs the deflation narrative to exist - the U S Government, with that 30 trillion dollar anvil hanging around its neck an increase in rates that would occur if the real inflation rate was known would put it out of business. At least as we know it today.
That is why no matter how high inflation really goes I believe the CPI and other measures will be manipulated to show 1-2%. With hedonic adjustments they can basically make it say whatever they want. The bond market might balk but they will print enough to make sure that never happens for long. That lie will be protected to the end.
Very well expressed.
Because we are fish and not birds. We can’t evolve fast enough to keep up with the changes in the water.
frog in boiling water. it will be too late.
The currency (US $) would be the logical pressure relief valve to the hedonically adjusted, mis-measured CPI and the QE to handle the epic deficits. But (and I hate when Economists throw in “on the other hand”), the dollar is the reserve currency and it historically catches quite a bid when anything in the connected global financial brew turns sour. Our current account and budget deficits should change that narrative, but the narrative hasn’t tainted that water…yet. The dollar failing to rally in the next legitimate risk-off environment would be enough to flip that switch. Voila, we would have inflation that the Fed won’t stop. I didn’t say, “can’t stop”, the politics of tightening financial conditions when well below full employment will be avoided for long enough to get them way behind the curve.
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