Good morning [%first_name |Dear Reader%],

Take any story series (think LotR, Game of Thrones, Harry Potter) and you’ll find that while there may be multiple strands, they all serve to strengthen the central tale. Like how the branches and roots of a tree head off in all directions, but the trunk always remains the centre. 

Such central stories are simple and short, you can sum them up in a line or two. 

Nobel laureate novelist Kazuo Ishiguro, for instance, summarises the inspiration for his first two novels in a few sentences.

This concept isn’t foreign to companies either. Except that often, they figure out their central stories after they have built their businesses. Airbnb is an example—its central narrative isn’t about the homes you can rent or exploring the world or new experiences. It’s about creating a world where anyone can belong anywhere. (If you want to learn more, you can check out this piece by investor and author Douglas John Atkin. It’s an interesting read.)

Anyway, the point of today’s edition is pretty straightforward: disconnected and seemingly unrelated strands can hold up a strong central story. But if those strands end up pulling in conflicting directions, the whole narrative comes crashing down. 

Consider China, which is dealing with an economic crisis. This week, the IMF cut the country’s 2022 gross domestic product (GDP) growth forecast to 3.3% from 4.4%. This would be the slowest growth recorded by the country in over four decades, excluding 2020, the year that bore the brunt of the pandemic. 

China’s current story of woe has been traced back by several commentators to one inciting incident two years ago, when the government announced its ‘three red lines’ approach to real estate lending. Essentially, China asked its real estate developers to reduce their reliance on debt. If they wanted to borrow, they would have to meet three specific balance sheet conditions. 

Then, to control the pandemic, it also announced its ‘Covid Zero’ stance. 

Both are well-intentioned policies. But taken together, they’re teaming up to destroy the Chinese government’s central growth narrative, and are why the public is losing faith and trust in the government.