A great example of taking a business model and turning it into a narrative with numbers (something that is critical for a good valuation report) is in a recent blog post by Dr. Aswath Damodaran (New York University Stern School of Business) on the unraveling of the WeWork IPO. “Valuation is a bridge between stories and numbers, and for young companies, it is the story that drives the numbers, rather than the other way around,” he writes. As for WeWork, he confesses that he “never liked the company,” but he does a good job at giving the company the benefit of the doubt. (Note: The post was done before WeWork shelved its plans for an IPO.)

Dark side: Damodaran also points out that there’s a danger when the story rules, which is what you have with a new company and what it says it will do in the future. There’s a risk that the “numbers become props or are ignored, that the pricing that is attached to a company can lose its tether to value,” he says. This is the peril of the “runaway story” that led to the meltdown of Theranos, he points out. “As we saw with Theranos, in its rapid fall from grace, there is a dark side to story companies and it stems from the fact that value is built on a personality, rather than a business, and when the personality stumbles or acts in a way viewed as untrustworthy,” he writes. As to how this relates to WeWork, Damodaran says he does not trust CEOs “who seem more intent on delivering life lessons for the rest of us, than on talking about the businesses they run.” Of course, Damodaran is working just from information found in the WeWork prospectus and other public information and not from management interviews.

Extra: Damodaran will give a keynote, “Narrative and Numbers: The Story Behind Your Valuation,” at the European Association of Certified Valuators and Analysts (EACVA) 13th Conference for Valuation Professionals in Berlin, Germany, December 5-6.