The other day I was reading a new picture book to my daughter (her first time hearing it). The book was The Rise and Fall of Oscar the Magician by Matthew Porter. Page one introduces Oscar the Magician. Page two introduces another magician named Milton. My daughter took one look at the picture of Milton and immediately said: "I bet that's the bad guy." When I asked her why she thought so she said: "He looks like a bad guy, and there has to be a bad guy." Questioned by a friend who was there about this conclusion she added something along the lines of "Well, I have a lot of books."
There you have it, folks. Understanding of the need for conflict in a story, at age five. Milton does have a rather sinister mustache. And it does become clear almost immediately that he is, in fact, the bad guy. Without Milton's shenanigans, there would be no Rise and Fall of Oscar the Magician. There might be Oscar, but there would be no story. The fact that my daughter understands this stems directly from the large number of books that we've read to her.
In moments like this, I feel that I am doing something right as a parent.