I live in the storytelling capital of the world. I tell stories for a living. You're probably familiar with many of my films, from Rain Man and Batman to Midnight Express to Gorillas in the Mist to this year's The Kids Are All Right.

But in four decades in the movie business, I've come to see that stories are not only for the big screen, Shakespearean plays, and John Grisham novels. I've come to see that they are far more than entertainment. They are the most effective form of human communication, more powerful than any other way of packaging information. And telling purposeful stories is certainly the most efficient means of in everyday life, the most effective way of translating ideas into action, whether you're green-lighting a $90 million film project, motivating employees to meet an important deadline, or getting your kids through a crisis.

PowerPoint presentations may be powered by state-of-the-art technology. But reams of data rarely engage people to move them to action. Stories, on the other hand, are state-of-the-heart technology—they connect us to others. They provide emotional transportation, moving people to take action on your cause because they can very quickly come to psychologically identify with the characters in a narrative or share an experience—courtesy of the images evoked in the telling.

Equally important, they turn the audience/listeners into viral advocates of the proposition, whether in life or in business, by paying the story—not just the information—forward.

Much of what I know about narrative and its power I learned over the course of working in the entertainment industry. In the early 1980s, I was chairman of PolyGram Filmed Entertainment as well as a producer at that studio. I was pitched a movie to finance and distribute based on a book then titled The Execution of Charles Horman. It told the true story of Ed Horman, Charles's father, a politically conservative American who goes to South America in search of his missing journalist son. Ed joins with his daughter-in-law Beth, who, like her husband, is politically polarized from the father, in prying through bureaucracy and dangerous government intrigue in search of their son and husband. Gradually, the father comes to realize his own government is concealing the truth.

Although the project had enlisted a great filmmaker—Oscar winner Costa Gavras (for the thriller Z)—I didn't find it compelling. A Latin American revolution was a tough sell for a commercial American film, along with the story of a father who had no relationship with his son and the fact that you already knew the ending: The son is dead without the father ever finding him. This story was dead on arrival as an investment.

Out of courtesy, I met with the father, who knew I was not a fan. After a few polite introductions, he nodded to some pictures of my then-teenage daughters on my bookcase. "Do you really know your children?" he asked. "Really know them?" He went on to tell me a story—that the search for his son was more a search for who he was than where he was, because he always suspected he was dead. But the journey was a revelation, not least about the many values father and son in fact shared. It was a love story, not a death story.

His narrative migrated from my heart to my head to my wallet. I green-lit the movie, called Missing. Jack Lemmon took on the role of Ed Horman. The same question asked of me was the one that sold Lemmon on the movie, too—the Trojan horse that got directly inside his psyche. He was, after all, a father. Missing won the Oscar for Best Screenplay. It also won the highest honor at Cannes, along with the Best Actor award for Lemmon.

The first rule of telling stories is to give the audience—whether it's one business person or a theater full of moviegoers—an emotional experience. The heart is always the first target in telling purposeful stories. Stories must give listeners an emotional experience if they are to ignite a call to action.

By far, the most effective and efficient way to do that is through the use of metaphor and analogy. More than mere linguistic artifacts, these devices are key components of the way we think, building blocks of the very structure of knowledge. In their swift economy, they evoke images and turn on memory, with all its rich sensory and emotional associations, bringing the listener into the story, cognitively and emotionally, as an active participant—you might say, as coproducer.

"We perceive and remember something based on how it fits with other things. One way the brain sorts things is by metaphors," says psychologist Pamela Rutledge, director of the Los Angeles-based Media Psychology Research Center. "When you're describing things in a story, you are creating visual imagery that engages you in multiple ways." The brain does not distinguish between a lived image and an imagined one. "You're bringing your own stuff to the story, which is reinforced through the emotions associated with the experience," says Rutledge.

The brain may be prewired for stories, but you still have to turn it on. Most compelling stories have a sympathetic hero. And they are shaped by three critical elements—a challenge, struggle, and some resolution. "There's a huge cognitive comfort just in knowing you're on a story arc," says Rutledge. "We can tolerate the of the challenge because we know there will be resolution." As psychologist Jerome Bruner famously said, "Stories are about the vicissitudes of human intention. Trouble is what drives the drama."

I thought I knew the trouble that Bethany Hamilton faced. I had first heard of her on Halloween 2003, when I was in Kauai, Hawaii. The then-13-year-old, the daughter and sister of surfers, had been winning surfing contests since the age of 8 and was on her way to becoming a world champion. Practicing that morning, she paused for a moment with her left arm dangling in the water. In seconds, a 14-foot tiger shark ripped off the arm just below her shoulder. Friends frantically paddled her, hemorrhaging profusely, to shore, crafted a tourniquet out of a surfboard leash, and rushed her to the hospital. A few weeks later, she was back on her board, teaching herself how to surf with one arm. Months later, she was winning championships again and, aiming for the grand prize, earned a spot on the U.S. National Surfing Team.

I thought the kid probably had a lot of grit. But that was the last I thought of her until 2009, when producer David Tice came knocking on my door to sell me on a small independent film to be based on Hamilton's autobiography, Soul Surfer. Tice talked numbers and budgets. I was unmoved. Nobody says, "Hey, let's go down to the AMC theater, I hear there's a film there that came in on budget." I passed on the project.

Then one afternoon, Hamilton herself showed up on my doorstep in Kauai. Dressed in a sleeveless top, with no prosthetic arm, she seemed shockingly at ease. I asked where her came from. She said, "The shark may have eaten my arm but I was determined it was not going to devour my dream." She credited her faith for getting her through.

"And now I see the bigger purpose for my life," she told me.

"To realize your dream to become a surfing champion?" I asked.

"No, my purpose from God," the girl explained. "To help others know God's love. I want my story to inspire others to never give up, no matter what. That's why I hope this movie gets made."

Bethany's story was not only more compelling than the producer's budget figures, but I realized it would appeal to a wide audience—teens, surfers, Jaws fans, religious believers, and the business folks needed to bring the movie into the marketplace. "I'm in," I told her. When I retold her tale to the president of Sony Pictures, they were in, too. This spring, Soul Surfer will be released nationwide. Stories not only move us, they motivate us because we can see in them echoes of possibility for ourselves.

Stories, it turns out, are not optional. They are essential. Our need for them reflects the very nature of perceptual experience, and storytelling is embedded in the brain itself.

While we all feel ourselves to be unified creatures, that is not the reality of our experience or our brains. There is no central command post in the brain, says Michael Gazzaniga, professor of psychology at the University of California at Santa Barbara. Rather, there are millions of highly specialized local processors—circuits for vision, for other sensory data, for motor control, for specific emotions, for cognitive representations, just to name a few modules—distributed throughout the brain carrying out the neural processes of experience.

What's more, Washington University neuroscientist Jeffrey Zacks told me, such modules monitor external experience not continuously but in a kind of punctuated way, a process he calls event sampling. "The mind/brain segments ongoing activity into meaningful events," he says. How is it, then, that they function as an integrated whole and we experience ourselves that way?

Because we tell ourselves stories, Gazzaniga says. There is in fact a processor in our left hemisphere that is driven to explain events to make sense out of the scattered facts. The explanations are all rationalizations based on the minuscule portion of mental actions that make it into our consciousness.

Desperate to find order in the chaos and to infer cause and effect, the left hemisphere—in a module Gazzaniga dubs "the interpreter"—tries to fit everything into a coherent story as to why a behavior was carried out. The brain takes information spewed out from other areas of the brain, the body, and , and synthesizes it into a story. If there is not an obvious explanation, we fabricate one.

Gazzaniga knows this from decades of work with so-called split-brain patients, people in whom the connection between right and left hemisphere has been surgically severed. With no transfer of information between hemispheres, such patients can't possibly know why they are, say, raising their left hand after Gazzaniga "sneaks into the right hemisphere" to give a command to do so. Yet, when asked what they thought their left hand was doing, they invent a story to explain why their left hand was moving.

"Consciousness," says Gazzaniga, "does not constitute a single, generalized process." It involves widely distributed processes integrated by the interpreter module." The psychological unity we feel emerges from the specialized system of the interpreter, our built-in storyteller, generating explanations about our perceptions, memories, and actions and the relationships among them. What results is a personal narrative, the story that confers the subjective experience of unity, that solid sense of self.

We literally create ourselves through narrative. Narrative is more than a literary device—it's a brain device. Small wonder that stories can be so powerful.

Further, stories can be a stand-in for life, allowing us to expand our knowledge beyond what we could reasonably squeeze into a lifetime of direct experience. Zacks has found that vividly narrated stories activate the exact same brain areas that process the various components of real-life experience. "When we read a story and really understand it, we create a mental simulation of the events described by the story," says Zacks. His studies, which use brain imaging technology, show that readers borrow what they can from their own knowledge, based on past experience, to mentally reproduce the sights and sounds and tastes and movements described in a narrative.

Just as it is for everyone else, it is often essential for me to use the emotional resonance of stories to persuade others to act on my . In the early 1990s, I was chairman of Sony Entertainment. Lots of Sony films (and music) were being plundered by commercial pirates in Thailand, robbing the company (and many others) of millions. Off I flew with the corporate head of Sony and the Japan-based chairman to plead for help from the king of Thailand. I spent the whole flight preparing my story in a way that would move King Bhumibol to action. The clincher would be an appeal to his heart—as a musician himself, surely the king would understand that if musical artists couldn't support themselves, they'd be forced to abandon their dreams.

As I was led into His Majesty's enormous reception chambers in the fabulously ornate palace, I half expected to see Yul Brynner step into view. Instead, I came face to face with a towering figure in white, his pristine jacket covered with badges of many colors. I immediately launched into my prepared story. Out of the corner of my eye, I noticed that Sony's chairman was tweaking his head at something across the room. I plowed ahead. Then the chairman grabbed my sleeve. I said, "I'm almost finished with the king. I think he gets it." The chairman hissed under his breath, "Guber san, this man is not the king. That's the king, over there," and nodded to a figure in a rumpled gray suit on the other side of the room. "This man is the guard."

Recovering my composure, I confessed my gaffe to the king and told an abbreviated version of my story. The king responded with his own story of his music being pirated. "If I can't protect my own music in my own country," he shrugged, "how can I help you?" Oops, maybe my perfect story wasn't so perfect after all. But stories can work in mysterious ways. Months later, King Bhumibol issued an edict enforcing some of Thailand's piracy laws.

Which brings me to my final point about telling purposeful stories. Because they are so important, it's wise to prepare your stories in advance. But before you launch into your script, take some time to learn about your audience. What you discover will determine how you tell your story. You want to make sure your audience is with you. You can't get anywhere without them.