By Joel Nee
The theme for CSF’s recently concluded Futures Conversation 2023 was “Ways of Seeing: Narratives Amidst Uncertainty”. Given contemporary shocks, it examined how societies construct narratives for meaning, thereby shaping reality and being shaped by reality. From the conference, I was struck by the reality-moving force of narratives, as introduced by various personalities whose perspectives I would otherwise have not even conceived of. The common thread of these frequent personal “aha!” moments was that these narratives and new ways of seeing the world were previously overlooked by me — hidden to those not clued-in to their shibboleths, and veiled by their abstract and difficult-to-quantify nature.
Inspired by the day’s happenings, this piece summarises my thoughts on some aspects of narratives, threads that were broadly shared across the multitudinous narrative accounts we heard during the conference. Specifically, from my takeaways about macronarratives, I explore fads through the lens of Hyman Minsky’s Financial Instability Hypothesis, and briefly draw its implications for futures thinking.
Macronarratives, otherwise known as conventional wisdom or mainstream orthodoxy, are community-level (howsoever defined) narratives that are broadly and deeply shared. They are contrasted against micronarratives, which are held at the individual level. Examples include religion and various political and economic -isms; however, macronarratives are not necessarily all far-reaching. They generally possess a few characteristics:
1. Inertia: macronarratives are difficult to overturn. In many cases, they are so widely ingrained and normalised as to banally fade into the background, like someone feeling stationary on a moving train, or a fish that is unaware of water. In other cases, even where macronarratives are recognised and questioned, they are cognitively and organisationally costly to challenge. This could be due to macronarratives’ power as a focal point and coordination tool. Their convenience as the default confers legitimacy by sheer continuity, and makes following its precepts the path of least resistance. To continue the train analogy, stopping a moving train is hard; to continue the animal analogy, slaughtering “sacred cows” is sacrilegious.
2. Momentum: macronarratives exhibit “win-more” attributes, where their acceptance powers further acceptance. This is because of emotional and social factors. The widespread and fervently-held nature of macronarratives might be entangled with various emotions (greed, fear, pride, shame, etc.). Coupled with social considerations such as in-group/ out-group dynamics, macronarratives can exert strong push and pull factors to get on board the hype train. Therefore, a network effect results: the emotional and social persuasiveness of the macronarrative to the soon-to-be converted grows as its number of adherents grows, lemming behaviour that feeds on itself. This is especially because narratives are seductive, memorable, and easy to understand, which is why stories go viral while facts and figures do not.
3. Resistance: macronarratives are resistant to, though not immune from, reality. Due to the inertia and momentum they possess, macronarratives might hold long after their relationship with reality has collapsed. To be clear, most macronarratives are indeed minimally semi-credible and somewhat tethered to reality, at least initially. However, on occasion, they may deviate wildly from fundamental conditions and display a reckless and random relationship with reality, akin to a bull in a china shop. Nevertheless, reality’s gravity might be resisted, but is not completely escapable. Eventually, macronarratives that veer too far off usually adapt or smash into reality’s wall, typically resulting in obvious discontinuities. (Macronarratives may also be contested by other macronarratives, a situation that can be resolved in many ways, but this is a discussion for another time.)
With these characteristics, the next section explores macronarratives’ connection to fads, as analysed by Minsky’s Financial Instability Hypothesis.
Fads are a collective impulse by a social group for objects or behaviours. While macronarratives are usually intangible, fads are the observable, tangible manifestations of underlying macronarratives. Minsky’s Financial Instability Hypothesis provides a framework linking the two. While Minsky was an economist, and the Financial Instability Hypothesis was grounded in an economic context, its lessons are applicable far beyond that field. This is because, unlike the mathematical equations and models that remain the convention in mainstream economics, the Financial Instability Hypothesis was stated verbally as a description of behaviour in phases — a narrative describing macronarratives, if you will. Its description of behaviour has significant transferrable insights across any domain involving collective human behaviour, like fads.
The Financial Instability Hypothesis has four phases:
1. Hedge: in this phase, lenders and borrowers are cautious in lending and borrowing. The parallel to non-financial contexts here is prudence — a “normal”, non-faddish equilibrium state.
2. Speculative: in this phase, good market conditions have persisted, and lenders and borrowers are increasingly confident. The parallel to non-financial contexts here is thrill — the green shoots of a fad have sprouted. The inertia and momentum characteristics of macronarratives have asserted themselves, along with their cognitive, emotional, social, and organisational dynamics.
3. Ponzi: in this phase, excellent market conditions are seen as the new normal, and lenders and borrowers lurch towards complacency. The parallel to non-financial contexts here is mania — the fad is in full swing. The resistance characteristic of macronarratives has asserted itself, with collective behaviour unjustified by any reasonable interpretation of reality.
4. Minsky moment: in this phase, a critical mass or tipping point of lenders and borrowers realise that asset valuations are unrealistically optimistic, leading to a collapse in financial confidence and asset values. The parallel to non-financial contexts here is capitulation — the fad is dying. The final resolution and obvious discontinuities of the resistance characteristic of macronarratives have arrived, with the macronarrative adapting, smashing into reality’s wall, or being contested by another macronarrative.
Hence, the Financial Instability Hypothesis provides a framework for comprehending fads and the influence of underlying macronarratives at each phase. To give a brief illustration of fads and macronarratives through the lens of the Financial Instability Hypothesis, we turn to the cryptocurrency fad of 2020–2022:
1. Hedge: with the total value of cryptocurrency (otherwise known as market capitalisation) at a fairly muted level through most of 2020, we can take this as representing a “normal”, non-faddish equilibrium state of prudence.
2. Speculative: by mid-2021, the market capitalisation of cryptocurrency roughly doubled. Thrill set in, as did the inertia and momentum characteristics of the “Number Go Up” macronarrative. The logic of simple extrapolation was seductive, intuitive, and difficult to shake: having doubled, why can’t it double again? “Number Go Up” attracted legions of early adopters peer pressured into a fear-of-missing-out on the next big thing, a “win-more” mechanism that fed on itself the more adopters it attracted.
3. Ponzi: by end-2021, the market capitalisation of cryptocurrency roughly doubled again. Mania set in, as did the resistance characteristic of “Number Go Up”. Untrustworthy actors embarked on a debt-fueled binge that conjured supposed value out of nothing. Celebrity promoters likened buying cryptocurrency to the breakthrough of visiting Mars — both involved Going Up, after all. All manner of vaguely related techno-futuristic ideas such as non-fungible tokens and decentralised finance skyrocketed, with their prices and hype far outstripping any realistic assessment of intrinsic value. Businesses with nothing to do with the field rushed to produce a Web3 strategy.
4. Minsky moment: by mid-2022, the market capitalisation of cryptocurrency was cut to a third of what it was at the peak in end-2021. With global financial conditions tightening, capitulation set in, and the sheer overindulgence of the “Number Go Up” macronarrative smashed into the reality that trees do not grow to the sky.
This is just one example of how Minsky’s hypothesis provides a framework to relate fads and macronarratives. We could name any number of other fads — Beanie Babies, Hello Kitty, Pet Rocks, Kony 2012, the South Sea Bubble, and the historical arc of communism — that went through, to varying degrees, the four phases outlined, fueled by various diverse macronarratives.
The final section briefly examines how futures thinking allows us to get a handle on macronarratives and the potentially impactful fads they may drive.
To reiterate, in powering fads, macronarratives possess inertia (difficult to overturn), momentum (“win-more” attributes), and resistance (to reality). Futures thinking allows for a better reckoning with these characteristics of macronarratives by uncovering blind spots and challenging assumptions. In so doing, it identifies, questions, and reimagines macronarratives, thus enabling better awareness and understanding of how macronarratives might shape faddish behaviour. For example, through environmental scanning for and sensemaking of “weak signals” i.e. discreet indicators of latent macronarrative dynamics, futurists might counter the inertia and resistance of macronarratives by drawing attention to them. Additionally, through scenario planning i.e. narratives to comprehend plausible future states, futurists may expose and challenge and momentum of macronarratives by providing alternative paths to the prevailing macronarrative, alleviating pressures to conform to it. These approaches might empower organisations and individuals to react appropriately to the speculative and Ponzi phases of a fad.
Raising recognition of macronarratives is important since, when seeking out drivers of perception and behaviour organisations and individuals tend to focus their attention on facts and figures over macronarratives. This is because facts and figures are “hard” i.e. tangible and easily appreciable, while macronarratives are “soft” i.e. intangible and difficult to ascertain. Nonetheless, despite their fuzzy-edged abstract nature, macronarratives can be no less impactful than facts and figures in moving reality, as fads show. Futures thinking offers a means to get to grips with macronarratives and their impact.
Futures Conversation 2023 happened to coincide with Singapore’s 2023 presidential election (one was clearly more important than the other). Amidst all the mind-bending discussion on narratives, I couldn’t help but wonder, given the backdrop: the result of any election was “hard” — a person elected, power vested, policies enacted. But what more influenced the outcome both before and after than narratives battling with reality and each other? “Soft”, unreliable, malleable sentiment, the stories people and communities told themselves, rocketing through the mightiest halls of power and the humblest coffeeshops. No less influential in its constructive impact, but much more difficult to study. In small, imperfect ways, this macronarrative model, Minsky’s hypothesis, and futures thinking offer paths through narratives’ fog of intangibility.
Joel Nee is Foresight Analyst at the Centre for Strategic Futures.
The views expressed in this blog are those of the authors and do not reflect the official position of Centre for Strategic Futures or any agency of the Government of Singapore.
 Minsky, Hyman. 1977. “The Financial Instability Hypothesis: An Interpretation of Keynes and an Alternative to ‘Standard’ Theory.” Challenge 20: 20–27.
 Cf. John Maynard Keynes, “It’s better to be conventionally wrong than unconventionally right.”
 With reference to ideas about narratives from Yuval Noah Harari, ideas about legitimacy from Vitalik Buterin, and ideas about game theory from Thomas Schelling.
 With reference to ideas about System 1 and System 2 thinking from Daniel Kahneman.
 Bullock, Olivia, Hillary Schulman, and Richard Huskey. 2021. “Narratives are Persuasive Because They are Easier to Understand: Examining Processing Fluency as a Mechanism of Narrative Persuasion.” Frontiers in Communication 6. https://doi.org/10.3389/fcomm.2021.719615.
 With reference to ideas about narratives from Yuval Noah Harari.
 With reference to Charles Kindleberger’s displacement theory.
 Cf. Irving Fisher’s famous proclamation that “stock prices have reached what looks like a permanently high plateau” right before the stock market crash of 1929 and the Great Depression.
 For an entertaining run-down of the entire cryptocurrency fad, refer to Zeke Faux’s book of the same name.
 With reference to Sohail Inayatullah’s Causal Layered Analysis.