Analyzing stories can lead to good, long-term investments. Entrepreneurs spin myths that teach employees values and lead to economic power. What happens when the founder dies? Here at Seeking Alpha we have a love of numbers. The best analysts here compare balance sheets, tease out EBITDA, or throw prices on charts in a continuing search for market advantage. But the best longer-term investments aren’t like that. The best places to put your money for five or 10 years are in entrepreneurs, and what entrepreneurs do is tell stories. Many numbers-oriented analysts don’t like to hear this. They listen to Jeff Bezos at Amazon.com (NASDAQ: AMZN ), or Elon Musk at Tesla (NASDAQ: TSLA ), and they say, this can’t be right. The numbers don’t add up. But the stories do. And when the stories make sense in the world, when they make sense of the world, when the entrepreneur can lead a team to scrupulously follow a true trend, the numbers will follow. This is how transformative change happens. Want an equation? Here’s one: M x V = P. Myths times values create power. Entrepreneurs create myths. The myths are meant to teach values, and create a corporate culture that can hold economic power. The myth is where the company came from, the values are what the company – by extension its employees – represent to the market. Through myths teaching values, corporations can have power even after the entrepreneur has left the scene if the story they tell remains true. I understand that analyzing companies through their stories is counter-intuitive to Seeking Alpha readers. It doesn’t yield short-term buy or sell recommendations. It doesn’t tell you how to trade assets against one another, or account for quarterly performance. But it can tell you where to invest. Stories can, of course, lead you astray. Many people bought the Enron story Ken Lay told. Many people bought the MCI story Bernie Ebbers told. Some investors even bought the stories that Martin Shrkreli told. Stories, and story-tellers, are compelling. As a journalist, I am in the business of analyzing stories. What I try to do is to match story against performance, against reality, and against the story itself. · Does the company’s performance indicate that the story needs to change, or are transitory effects in the market just putting it in the market’s shade? If it’s the former, sell. If it’s the latter, buy. · Does the story have any chance of becoming true? Does it match the longer-term trends within the market? Does the story describe things as they are, or more important as they will be? · Is the story being followed? Is the company on the path of the story, or has it lost its way? Does the story describe a world that no longer exists, like the story of James Cash Penney (NYSE: JCP ) does today? General Electric (NYSE: GE ) has stayed on the Dow Jones list since Charles Dow first created it in 1896 thanks to stories. Each CEO tells a story, transforms the company to match the story, and is then followed by a new leader with a different, transformative story of their own. The GE of Reginald Jones was not the GE of Jack Welch, and the GE of Jack Welch is not the GE of Jeff Immelt. The usefulness of a story can run out. The IBM (NYSE: IBM ) story, first told 100 years ago by Thomas Watson Sr., is about salesmen leading managers toward better ways of doing things. But technology changes so fast today that salesmen can’t lead this process. Thus IBM has lost its way. Every great entrepreneur is, first and foremost, a story teller. Warren Buffett (NYSE: BRK.A ) (NYSE: BRK.B ) tells the story of value investing. Larry Page (NASDAQ: GOOG ) ( NASDAQ: GOOGL ) tells the story of search. Intel (NASDAQ: INTC ) has followed Moore’s Law for over a half-century. My beat is technology, and what I’ve learned is that the dominant tech stories get under trends and drive them. Microsoft (NASDAQ: MSFT ), under Bill Gates, understood that if you control the operating system, you control everything above it. Apple (NASDAQ: AAPL ), under Steve Jobs, is about devices being central to the technology experience. Salesforce.com (NYSE: CRM ) is a story stock, about applications driving the cloud. Every story has a sell-by date. As the world changes, so stories must change, and a founder’s story will often die with the founder. This can set a company on auto-pilot, as in the case of Wal-Mart (NYSE: WMT ), unless new leaders find new ways to tell that story. A founder’s death, or retirement, thus becomes a crucial moment in corporate history. Can their story be re-interpreted? Will the company allow such a re-interpretation? Does that re-interpretation hold up? This is what Satya Nadella is trying to do with cloud at Microsoft. It’s what Tim Cook is trying to do at Apple. The point is my investment strategy is to measure stories, not numbers. Do they hold up? Do they make sense? Are these myths building values that have lasting economic power? I admit it’s not for everyone, but it works for me. And that’s my story.