Category Archives: BUSINESS WEEK

Luddites revisited — attacking high-frequency traders, speculators and assorted other market “vipers”

Posted on by
Reply

Andrew Jackson, the country’s seventh president, was famous for railing against the financiers of the early 1800s. They speculated on “the breadstuffs of the country,” he warned. “Should I let you go on, you will ruin 50,000 families and that will be my sin! You are a den of vipers and thieves. I intend to rout you out and by the eternal God, I will rout you out.”

The quote, a favorite of bloggers who fret about plots to establish a new world order and such, would be at home today in the superheated arguments over high-frequency trading. The latest diatribe, I’m sad to say, comes from a dear friend and former colleague at Bloomberg Businessweek. Peter Coy writes, “The bigger the financial sector, the more dangerous it becomes.” He bemoans the flood of smart people going into the business, noting that a quarter of Harvard’s brainiacs in the early 2000s were drawn into investment banking and like fields. And he complains about banks “cranking up their trading operations in a way that imperils the financial system once again.”

His indictment, based on the May 6 flash crash, is headlined “What’s the Rush?” And his subhed warns “The American financial system is erratic and voracious, and keeps score in milliseconds. Here’s how to rein in the beast.” Among his prescriptions: a transactions tax of a few cents per $100 to “throw sand into the gears of high-frequency trading,” higher margin and collateral requirements, and steps such as new taxes to reduce corporate debt (on the idea that we’re being assailed by waves of “debt-fueled speculation.”)

Oh, come now, Peter. Let’s dial it down a bit. First, while the Great Recession was in part the fault of Wall Street, it was not a high-frequency phenomenon. Rather, we can blame bad securitization practices, flawed housing policies in Washington, poor market oversight and a raft of other well-documented problems. Superfast trading may have helped stocks crater, but it was not the force that drove them down.

Yes, one must admit that May 6 was not a good day for the high-frequency set. No matter how short-lived, the $800 billion plunge in the value of U.S. stocks that day was worrisome. Stocks such as Accenture slipped to a penny from $40 (before bouncing back) in trading patches as short as eight seconds. Clearly, something was amiss in the superfast computers at the likes of Getco.

But let’s keep a few things in perspective. First, after going haywire the market did correct itself. Prices came back, in most cases rapidly. The Dow lost 1,138.69 points from its high in crazed intraday trading on May 6, but closed just 341.9 points down, and regained all that and then some by May 10. Erratic? No doubt. Voracious. Okay, but when have traders been anything but?

Let’s concede that there’s something bizarre about high-frequency trading. Its relationship to real value in stocks is remote at best. So, too, is its connection to fundamentals such as corporate strategy, earnings power, savvy management. All that good stuff that financial journalists, MBAs and CEOs – and maybe even the odd stockbroker — prize is a few solar systems away from the zippy stock-swapping at Hard Eight Futures, Quantlab Financial and such. Those guys, snapping to the beat of their own algorithms, don’t give a hoot about such things. It’s all numbers, bro.

Let’s concede, too, that the liquidity the HFT pack supposedly brings is an illusion. It is most likely gone when most needed. The simile Peter uses – “like a swimming pool that dries up just as you jump off the high dive” – is apt (hat’s off to his wordsmithing). It’s hard to see just what value the high-freqs bring to anyone but themselves.

But, so what? Speculators, those oft-reviled folks who put the zing in stock markets, have always been in the game for the gamble. They see Wall Street as a massive roulette wheel and believe that any way they can tilt the spin to their favor – legally – is fair play. In an odd way, they are cousins to technical analysts who have long played markets free of the burden of fundamentals. Are we to ban the technical folk because their charts are more like astrology than investment? They, too, are an odd subculture of market players whose powers over stock movements one could decry.

Surely, there needs to be policing to make sure high-freqs don’t misuse the power they have to move markets. They do swap millions of shares in ridiculously short periods of times, all but blind to fundamental values. At times, they account for disturbingly high amounts of volume. If they intentionally – or through glitches – knock stocks down to absurd levels to profiteer in some market-cornering way, they need to be rapped hard for that. Fines, perhaps, or suspensions of trading privileges could be used to rein them in.

But imposing transactions taxes or worse seems like overkill. Such steps would penalize all players for the perfidy of a few. Let’s use the scalpel instead of the meat-axe and target the bad boys, not just the folks looking for an edge of a few milliseconds on the next guy.

By the way, it’s passably ironic that Peter’s employer, Bloomberg, as well as Dow Jones and other data-providers are tripping over themselves to serve up market data ever more quickly to the high-freq bunch. Some go so far as to rent space to traders — at premium prices — so they can house their computers cheek-by-jowl with providers’ machines and save milliseconds of transmission time. What these providers know, just as traders do, is that timely information is still everything in this game.

Every technological advance that changes the playing field makes folks nervous. Luddism is a natural reaction. Moreover, the markets have long been the playground of innovators and, as a consequence, the targets of critics. In 1887 the head of the Chicago Board of Trade forcibly removed telegraph gear from the floor of the CBOT because he couldn’t abide the electronic links to notorious Chicago bucket shops, as recounted by Rutgers historian David Hochfelder. One NYSE broker in 1889 complained that the “indiscriminate distribution of stock quotations to every liquor-saloon and other places has done much to interfere with business.”

We may not like the high-speed folks. We may deride them as little more than turbocharged gamblers, as Rain Man-like idiot savants unfairly using their powers to enrich themselves while adding nothing to the game. But they will be players so long as there’s money to be made. We can take the profit out if they don’t play by the rules (and, by the way, maybe some of those smart Harvard types in finance can cook up better rules to keep market ripples from becoming tsunamis). Let’s not, however, make life onerous for everyone in the process.

McGraw-Hill: Time for a Deal?

Posted on by
1

It’s only business. But that was a hard and personal lesson for many staffers at BUSINESS WEEK Magazine. It may yet become a tough lesson for the leaders of McGraw-Hill Cos.

When McGraw-Hill, my employer of 22 years, cut BW loose by selling it to Bloomberg last year, plenty of BW folks felt betrayed. They had committed their careers to the magazine and bought the argument of leaders there that the eighty-year commitment the McGraw family had to the weekly was a forever thing. So long as a McGraw was in charge, McGraw-Hill (MHP) would never sell it, the leaders counseled.

Well, they were wrong, of course. BW, viewed at McGraw-Hill as just another money-losing Internet victim, was quickly snapped up by the business wire. And soon, despite assurances from the Bloomberg camp that the deal was more about buying talent than a big brand name, most of the 200-plus BW vets were let go. It was a harsh dose of the business world’s version of realpolitik, the kind of thing BW folks had reported on but that few of them had experienced. With its formidable global reporting force, Bloomberg just didn’t need all that pricey BW talent.

Now, pundits are vaunting the idea that McGraw-Hill could – or should – be in someone’s sights. Pearson PLC, the $9 billion-a-year British publishing company, is one of the names floated as the perfect acquirer. Textbooks, synergies, global footprint, etc. Such takeover talk, which has long dogged $6 billion-a-year McGraw-Hill, seems as rational and predictable as Bloomberg’s interest in BW. The 101-year-old MHP has been struggling lately with single-digit declines in both net income (down 8.6% last year) and revenue (down 6.3%).

It is perhaps sad, but former BW folks are likely salivating at the prospect of MHP’s demise as an independent company. Turnabout is fair play, as the British say. Even more than that, however, many BW vets have stock options that have been underwater for a few years now [full disclosure: as former chief of correspondents for the magazine, I’m among them. I took a modest number of options with me when I left last year before Bloomberg appeared on the scene]. MHP’s shares traded as high as $72 in mid-2007. They now struggle around $30, after dipping below $24 last fall. In purely stock-market terms, the company seems like a flatliner whose glory days are long behind it.

McGraw-Hill’s challenges loom as high as BW’s once did (and still do). Uncertain prospects cloud the future for MHP’s once high-flying Standard & Poor’s ratings machine, given the vagaries of government regulation, general litigiousness and the tarring the ratings agencies have taken in the recent recession. The recently passed financial reform could cut its margins and expose it to more lawsuits, as S&P president Deven Sharma himself has recently warned (and S&P also warned about rival Moody’s in cutting the rating on the other rating agency giant, a peculiar irony). Prospects are also questionable for MHP’s storied textbook operation, given hard-pressed state education budgets and the march of the Net in the text realm. Flat stock prices? Who should be surprised?

The big question, of course, is whether Pearson or someone else would see as much value in McGraw-Hill as Bloomberg did in BW. The jury is out on whether Bloomberg’s move was a smart one – so far, its main value seem to be putting the Bloomberg name regularly in front of 4.5 million sets of eyeballs at a bargain price. Pearson could likely eliminate a lot of duplication by folding MHP’s textbook operation into its line. As for S&P, that odd beast could be of use to Pearson (which owns the Financial Times along with the world’s biggest textbook publishing operation) or, perhaps, to a Reuters or other financial information service. Certainly, rating agencies are needed and, even without the crazy-days growth of the past and the threat of a litigious future, S&P seems valuable. Slicing and dicing MHP among a few acquirers might make sense.

The atmosphere also seems right. Conditions are much different than 1979, when then-CEO Harold McGraw Jr. repelled a takeover bid by American Express. The popular CEO could rally his family and other loyalists and beat back the challenge. Given the recent anemic stock performance and dubious prospects at the company, current CEO Harold W. (Terry) McGraw III, son of the now-deceased Harold, might find fewer sentimental supporters nowadays. What’s more, the current CEO might do his family and friends a huge favor by putting his company into a global powerhouse that can do something with is still-valuable assets.

Business has precious little room for sentiment, of course. McGraw-Hill taught that lesson to former BW lifers in painful fashion. If a smart acquirer could do more with the bits and pieces of McGraw-Hill, so be it. Certainly, that would be a better fate than watching the company wither into irrelevance. And for stockholders, the premium should at least take the price close to its long-gone high. A deal might be the business world’s version of justice.

A mentor’s passing

Posted on by
Reply

Chris Welles, a longtime editor at BUSINESS WEEK and former teacher of mine, died the other day. Chris Roush, who edits the blog Talking Biz News, ran the piece below.

I suspect it is one of many tributes to come about Welles, a major figure in business journalism.  I had occasion to write about Welles myself a few weeks ago. He and another former BW editor, Ron Krieger, introduced me to the foreign world of business journalism in 1980 at the Columbia J School. It’s not too great a stretch to say the pair changed my life.

Welles asked tough questions of business people, making for penetrating journalism. He had a hand in much of the best work BW published. Only time will tell, but I believe that BW peaked during Welles’ time there.

Some profound thoughts here by a former editor for us all at BW:

Ex-BusinessWeek editor Shepard fondly remembers Welles  — 2010.06.21

Talking Biz News asked Steve Shepard, the editor of BusinessWeek from 1985 to 2005, for some thoughts about business journalist Chris Welles, who worked at BusinessWeek for 13 years and died this weekend.

Here is what Shepard, now the dean at the CUNY Graduate School of Journalism, had to say:

“Chris Welles was a genuinely good guy with a journalistic soul. He very much believed that it was the job of the press to hold people in power accountable for their actions and to ferret out wrongdoing. He spent his career doing that, first as a writer, then as a senior editor at Business Week. From the late 1960s to the early 1980s, Chris was probably the premier business writer around, the guy who did the tough stories.

“In his early years, Chris was one of the regulator writers for Institutional Investor, an innovative magazine about Wall Street in the 1970s. He specialized in narrative accounts of shennaigans, abuses, and downfalls. He was also a very successful freelancer, contributing to New York magazine, among others. From 1977 to 1985, he headed the Walter Bagehot Fellowship Program in Business and Economics Journalism at Columbia University. I had served as the first director (1975-76) and Soma Golden the second (1976-77). The program ran into financial difficulties during Chris’s tenure, but he fought to continue it and eventually weathered the storm. Now called the Knight-Bagehot Fellowship Program in Business and Economics Journalism, it has just finished its 35th year as a mid-career opportunity for business journalists.

“When I was editor-in-chief of Business Week, I jumped at the chance to hire Chris in the mid 1980s as a senior writer specializing in investigative and narrative pieces. Though he was soft-spoken and always polite, he was a tenacious reporter with a passion to get the bad guys. I eventually promoted him to senior editor in the finance department because I figured his impact would be felt more by having him work with writers every week rather than write a piece himself every couple of months. And I wanted him to teach the next generation of upcoming reporters. Chris took to editing like a fish to water, passing along a lot of knowledge about finance, a lot of wisdom about reporting complex stories. He was respected and liked by his colleagues.

“Like Lou Gehrig in 1939, Chris started losing some of his skills, and nobody knew why. He was eventually diagnosed with early onset Alzheimer’s disease and retired from Business Week. It was a tragedy for him and his wife Nancy, and a terrible loss for all of us. He took business journalism to a new level, setting the bar ever higher for the rest of us. He has left a legacy for all of us to honor.”

Quotron, E.F. Hutton and the Future of Newsweek

Posted on by
Reply


[another piece from the Tabb Forum series:]

For folks in finance, change is nothing new. They’ve long watched technology race ahead and markets shift, long been subject to tectonic changes that left stock exchanges and investment banks to adjust or die. Their world is littered with such relics as stock-quote tapes and Quotron devices, along with fading memories of once-titanic names (remember E.F. Hutton and Paine Webber). Wall Streeters have learned to roll with the punches.

But for those in the media business, change is surprisingly difficult. Newspapers, magazines and even TV networks become “venerable” after a few decades, and they are thought to be immortal, at least by others in the biz. Most of the scribblers who people the offices of the leading media outfits believed – until recently at least – that their institutions would far outlast them. Storied names, such as Newsweek or BusinessWeek, would never go away.

As the Washington Post Co.’s move to put Newsweek on the block shows, however, nothing in any business really lasts forever. Creative destruction is the way of capitalism, whether on the floor of the New York Stock Exchange or in the offices of a weekly news magazine. Newsweek has been eclipsed by the Net, just as the historic role of specialists has been made all but irrelevant by electronic trading. The weekly could easily go the way of Life and Look magazines, pubs done in by TV and the popularization of cameras.

Will Newsweek survive under a new owner? Maybe. Surely, some wealthy character eager to burnish his or her global rep will snap it up for the power and influence it still commands – at least for now. It will likely become a plaything for some mogul, perhaps a Chinese or Middle Eastern potentate, who wants the access to political leaders the media still brings. Almost surely, it will have to be someone who doesn’t mind losing a lot of money on the mag as a tradeoff for the benefits that come along with a big media property.

But will the product be the same? And will it endure? Certainly, a new owner would make a mark on the magazine, for good or ill. In Newsweek’s case I fear that it will be for ill, since the folks there now have a pretty good idea of how to produce a quality newsweekly. Adding to what they already do well – or, more likely, cutting – could be problematic. The people there now are pros and tinkering with their approaches seems doomed to come to grief.

Of course, it all depends on the owner. Bloomberg bought BusinessWeek last fall and, so far, has managed to make some notable improvements. The editors, by reaching into BW’s past and adding some nifty contemporary touches, are turning out a product that boasts of lots of promise again. It’s a far better book than the thin glossies that have marked the last few years. Editorially, Bloomberg’s market-savvy journalists add value, and the parent’s financial backing may just see the pub through until advertisers want in again. However, it’s an open question whether BW’s cachet and exposure to 4.5 million readers – taking the Bloomberg name to more places than the outfit reaches through its 300,000 terminals – will need to be underwritten forever.

Newsweek is a tougher case. So many news organizations are so hard-pressed that it’s tough to see which could be a natural buyer. The synergy issue is crucial. And non-news owners – the moguls – may tire of their toy quickly, especially if they add no real value. Worse, its readership could fast erode, as the Net’s inexorable march proceeds. Yes, the staff will produce versions for the iPad, Kindle or Nook that readers can buy. But will the public want the book even then? While BW does add value for a specialized audience – folks in the capital markets can attest to that – Newsweek by definition serves a broad audience. The mass market seems far less interested in its kind of journalism anymore. Instead, it prizes immediacy and multi-media approaches.

In the end, imagination and technology will dictate the future for people in finance and media alike. The adjustment can be brutal – just ask the scores of talented people BW and Newsweek have lost in the last couple years. Or ask all those bright folks who once populated the mighty investment banks that no longer stride the earth, gone the way of the dinosaurs. Standing outside the process, it becomes clear that the public is better served after the system’s creative destruction has reshaped things. But, now, in the middle of it, it’s hard to see little but rough road ahead for a while. To the good folks of Newsweek, godspeed.

The New BW: Something Old, Something New, Something Borrowed …

Posted on by
3

The new BusinessWeek, rechristened Bloomberg Businessweek, surged into mailboxes and onto newsstands in the last few days. Months in the making, the newest version of the magazine reflects the strengths of both the pub’s 80-year history and its new 1,700-journalist supporting staff. It also boasts a knockout layout, in some ways a return to the substance and elegance of the mag’s heyday of the 1990s with a contemporary gloss.

Indeed, the book overall is a refreshing mix of what made BW a winner in the past and some nice new touches. The Back to the Future treatment includes savvy analysis, depth and graceful writing, combined with a renewed focus on corporations, the finance world and politics. It’s a must-read once again! After too many years of thin books with too little to dine on, this new offering is a full-course meal again – complete with dessert (read on for that).

The new BW isn’t perfect. The Global Economics pages are a confusing jumble, the small-biz section needs work and at least one columnist is off the mark. But the mag overall is sleek and smart and gives readers some insights they won’t get elsewhere – which in the end has always been BW’s drawing card. After all, if the fish isn’t fresh, the wrapper hardly matters, no?

For a page-turning look, check here.

Overall, give this effort a B+, with expectations that As are on the way in future issues. Here are some specifics from a close review by an admittedly biased veteran:

COVER – Clean, dramatic, inviting. Love the powerful photo of Blankfein looking at once like he has only contempt for his critics even as he sorely needs a shot of Pepto-Bismol. “Hard Target” is a great Cover Line. All the white in the boxes and flag at the top seems a bit busy, though. Giving “Bloomberg” equal play with “Businessweek” in the flag is understandable politically, but it makes for a lot of crowded type in the top half of the cover. Grade: B+

CONTENTS PAGE – Knockout presentation. Well-arted and conveys substance.Grade: A

MASTHEAD – Nice to see it back after too long of an absence. The editor’s letter should appear regularly to draw attention to stories behind the stories. It lets readers connect with the writers and editors. Sadly, the staff is a shadow of the force it once was, but the Bloomberg global correspondent system is already bringing some depth not apparent from the masthead. Grade: B

INDEX – what is the point of the Robot Bully? Cartoon is a great idea. This execution is pointless. Find something original. Grade: C

OPENING REMARKS – Well done. This Economist takeoff, an editorial commentary on a story developed later in the book, brings to bear one of the key strengths of magazines: a clear point of view. The pieces here take readers beyond the daily paper – further beyond even than the stories — giving them a reason to read yet another piece about the big news of the day. Props, too, on the future spin in the Weil piece. Love both the Weil and Lewis treatments. Grade: A

GLOBAL ECONOMICS – Disappointing. It seems like a catch-all, a section in newspapers we used to call the “slop page.” Yes, variety can be intriguing. But the Iraq piece is flat and the timeline ridiculously thin and pointless, though nicely colorful. Loved the volcano and Greek crisis pieces, which had the virtue of timeliness. Seems like a more coherent focus on the economically oriented news of the week would work. But it’s hard to see any focus in the section – certainly economics is not what it’s about. And just why is a tractor cruising at the top of page 19? Seems to invite you to look ahead if you are bored with this page. Grade: D

COMPANIES & INDUSTRIES – Heart of the book. BW’s core franchise has been corporate coverage, though it got short shrift in recent years. It’s what employees, managers, shareholders and business partners of companies care about; a natural reader base. You’ve given the section its due here. Intriguing pieces about brand-name companies, with lots of variety, makes this a winning area. BW’s dismantled bureau network – a sad loss — would have been a key asset in putting this section together, and the job now falls to Bloomberg folks and skilled editors in NYC. Grade: A

POLITICS & POLICY – Smart and lively. Again, a core strength of the old BW given its due anew. Love the Emanuel Q&A and the Reshuffle in Obama Land. Why, though, is Zynga overlooking page 38? And James Warren’s column seems to come out of nowhere. Grade: A

TECHNOLOGY – A core franchise of the old BW, reborn. Yes, yes, yes, give us more, since this is the engine of the American economy. Traditionally, BW led the pack in tech and it would be nice to see it do so again. Grade: A

MARKETS & FINANCE – Another franchise area. Top-flight coverage of this crucial sector of the economy is central. Should be mandatory every week, along with Tech and Corp. Smart takes on Goldman here. Would have been nice to have a takeout on the new regulatory bill, however, since it looms large and scary on the horizon. Maybe next week. Grade: A-

ENTERPRISE – Winning idea. But the focus on the lede story is problematic. Is this about B&J or principles or payouts or what? Seems to stray. Whole section does, in fact. Small-biz is often a mixed-bag. Seems like a good idea, but it will be tough to execute well. Don’t get the point of Wadhwa’s column at all: does it just celebrate Boulder or offer a skimpy roadmap on how to duplicate it? Topic deserves a whole section, not just the once-over-lightly here. Grade: B-

FEATURE WELL – Whitman piece is interesting but could have been twice as good at half the length. Apple piece by Burrows, a pro, is superb and takes us well beyond the news – a classic BW treatment. And The City That Got Swapped is excellent, top-drawer psychedelic, as we once said. Love the Cooking with Gas piece, too. Grade: A

ETC – Wonderful, fresh stories, well-executed, well-arted. Not so sure about the Office Sneaker, but the rest hits the target. Nice break from the seriousness that went before. The Mulcahy piece is uneven, with a bit too much cliché for my taste. Hard to avoid pabulum in such pieces, even while you like hearing the voice of the subject. Every good meal needs dessert and this section is savory indeed. Grade: A

Can’t wait to see next week’s book.

Quick Study — Charms of Kazakhstan

Posted on by
2

Well, it won’t be Kyrgyzstan after all.

The State Department took the difficult decision out of our hands and slapped a travel warning on the country. University of Nebraska policy dictates that we don’t go somewhere with a warning label on it. So Bruce Thorson and I will take our eight journalism students next door to Kazakhstan.

We’ve got two weeks to figure out an itinerary, a list of story ideas to pursue, and all the logistics that go with it. Plus, we’ve got to educate ourselves on the place, coming up to speed fast. We’ve got to learn about things like Navruz, a spring equinox celebration depicted in the wonderful Reuters photo above.

You’d think we were in the news business!

This is, of course, a good thing in many respects. Something happens and your editor says, “get on a plane and get the story.” You rarely have time to do more than a quick Google search, make a few calls and pack your luggage. That’s the way it can be in the biz.

So our students are getting a taste of the chaos that is life in journalism. News happens and you have to be there, ready or not. And, of course, you’ve got to produce well-informed, lively and – most of all – accurate work.

On the other hand, rarely do journalists have to worry about shipping over teams of 10. Everything from accommodations to parceling out story assignments gets far more complicated this way.

Where will we go? Who will go where? Who will Bruce take? Who do I take? While we’ll be hashing out a lot of this in coming days, before our May 9 departure, I suspect we’ll be still hashing on the long plane flight.

Happily, we’re getting some sophisticated help. We’ve been in touch with news folks from organizations as diverse as Reuters, the New York Times and AP about Kyrgyzstan, and folks there have a sense of what’s newsworthy about Kazakhstan, too. So they’ll help.

Sheri Prasso, a former colleague at BUSINESS WEEK, also may know just about everything about most of the world’s interesting places. One of the more well-traveled journalists I know, Sheri kindly talked over some story ideas with me a few days ago. She also gave me the lay of the land about what sounds like a fascinating place.

Yes, we won’t have a post-revolution tale to tell, as we would have with the Kyrgyz. But we still have a post-Soviet “stan” tale to tell.

This will be complete with the remnants of gulags, a dried-up Aral Sea that features stranded boats and an oil-rich country that must steer a tough course between China’s economic prowess and Russia’s ingrained cultural and political influence. The place also produces uranium for the world but – given an awful legacy as the site of Cold War Soviet bomb tests – abhors nuclear weapons. It’s been a favorite of the non-proliferating Obama Administration lately as a result.

We’re told, too, that the cities there are fascinating. Almaty, the business center, is as pricey as NYC and perhaps even more cosmopolitan. Astana, the centrally located capital, is Central Asia’s Brasilia, a town designed by top global architects and built in the middle of nowhere to serve beautifully as the seat of government.

Indeed, in many respects Kazakhstan sounds like the Singapore of the region, a place that shuns some western-style freedoms but where prosperity makes people comfortable. It’s a place, too, that carries its Islamic history lightly though Saudi-funded mosques may make for fascinating visits. And it’s a place where one of the tastiest national dishes includes horsemeat as its main ingredient – this will be a different experience.

We’ll be learning a lot in coming days about the place. The crash course will be fascinating and the trip even more so.

Business Journalism: Is There a Tomorrow?

Posted on by
Reply

A cynic might say that Steve Shepard, my old boss at BUSINESS WEEK, has to believe there is a future for the scribbler’s art. He runs the graduate school of journalism at City University of New York after all.

But it’s more than just where he sits that determines where he stands. Steve is a star in the field. The inveterate New Yorker — betrayed by both his accent and his misguided love of the Yankees — has collected just about every award available to magazine journalists. He knows what readers need.

The best proof of that is how he resuscitated the BW franchise. He turned the magazine into a growth vehicle, in the ’80s, after long-time parent McGraw-Hill had begun treating it as a cash cow, an aging brand that had plateaued in the market. In fact, Shepard later saw the book grow so fat that we had to turn away ads because the page count was busting the staples. That happy time was less than a decade ago. Sadly, of course, it is far thinner today.

Steve offered his views on the future of business journalism in this intriguing interview. He’s upbeat about BW’s future under Bloomberg. He’s convinced, too, that there is a future for business news reporting, though it will have to adapt to new formats. Take a gander:

The Future of Business Journalism from CUNY Grad School of Journalism on Vimeo.

Steve, I believe, is spot on that business journalism will endure. The information that business journalists report — whether up-to-the-minute on the wires or in more long-form settings — is too important for people who have money on the line. Can you imagine if Wall Street ran only on rumors (something that sometimes happens already)?

Of course, the issue is how business journalism will support itself. Bloomberg is an intriguing model, since the biggest consumers of its news service pay a lot for it, something on the order of $20,000 a year for access to the famed Bloomberg terminal. Problem is, that’s a limited market, chiefly serious traders on Wall Street.

Bloomberg’s purchase of BW last fall was designed, in part, to expose the outfit’s news and information to a broader audience. BW brought it some 4.5 million readers in print and even more users of the BW Web site. The pub, with its 80-year-old brand name, is quite a crowd-broadener.

But plenty of questions loom. Steve argues, for instance, that there’s room for one long-form business mag. So, does that mean that Forbes and Fortune disappear? And will Bloomberg subsidize BW if it can’t grow fat again with ads? Is it sufficient that it be a marketing vehicle for the name and terminals or other outlets Bloomberg may develop for its products? Can the product succeed as a loss-leader?

Some folks argue that the general news service at Bloomberg is a big loss-leader already. Former colleagues of mine, such as Steve Baker, contend that traders pay for relatively narrow slices of information relevant to their work and ignore the bulk of the news on the machine. Of course, since Bloomberg is private, outsiders can’t know for sure how the news service fares financially.

For fans of long-form business journalism, the question is whether the format can survive only if it has a Big Daddy like Bloomberg. Will analytic and insightful work, the kind that made BW great, pay its own way? Will consumers pay anywhere near what it costs, now that so many advertisers have found other more cost-effective vehicles? Is the current slump more a reflection of economic stress or something deeper? Will business pubs prove to be niche operations serving elite audiences, much in the way that Harper’s or The Atlantic do?

At the end of the day, it seems clear that people who need financial and economic news will be served. They may be served over cell phones, iPads, the Net or someday by brain implants — who knows? — but their demand for information will be met. The challenge for business journalists is to figure out how to make sure these folks pay the freight so they can keep churning out top-quality work. And, for budding journalists, the challenge is to make sure that they can serve up the goods in whatever form the market requires.

Making the Grade

Posted on by
10

It ain’t rocket science.

But a few friends — BUSINESS WEEK veterans Rob Hof, Rick Melcher, Bill Symonds and Lauren Young — graciously helped to keep me and my students flying this past semester. They provided reality-checks on one of the toughest chores a journalism teacher faces — grading.

Grading is a knotty affair. What’s the difference between an A- and a B+ piece of work? More to the point, does anybody give a C in these painfully grade-inflated days? One student came to me all wide-eyed and indignant saying she had never gotten a B+ before, wondering why I would do such a terrible thing to her (turned out she was not telling the truth, as another prof advised me).

The problem is that judging journalistic work, like any piece of writing or creative effort, is subjective. A friend used to say there are three things no man can to do to another’s satisfaction: poke a fire, make love to a woman, and edit a newspaper. With rockets, they go up or they don’t. With journalism, the measures are less tangible.

So, we at Nebraska ask outside colleagues to evaluate samples of student work. Sometimes, the real-world folks agree with our judgments. Often, they don’t. In either case, it’s good for us and the students. For me, the outside comments have been a bracing slap in the face, a helpful sense of how smart readers and editors will treat the student work. (The outsiders review the work samples after we have graded the papers, after the course is over and the student grades are in. The reviews serve chiefly to keep my perspective straight.)

A few pieces I graded highly came in for some helpful heat. One, about the rise of homelessness among families in Lincoln, Neb., buried the nut graf atop page four, Rick Melcher said. And he complained that the story “loses focus” despite the “great, moving examples.” He rated it only satisfactory in reflecting news judgment and use of interviewing skills and said the
writing needed improvement.

Interestingly, Bill Symonds agreed that the piece would “benefit from a good editor.” He said the writing “needs to be cleaned up.” But Bill rated the news judgment as outstanding and gave satisfactory ratings on interviewing and writing. His summary: “I liked this story a lot.” He said it was “well-researched and generally well-written.”

So, even the outsiders will often view things differently. Smartly, it turns out, but differently.

Like the others, Rob Hof warned that he was using BUSINESS WEEK standards to judge the undergrad work, fretting that he may have been overly critical. But high standards — real-world standards — are just what I wanted. One of the problems in academics is we lose touch with what the field demands. Euphoric at what seems like good work compared to some really poor stuff, we give A grades to pieces that in the outside world may be mediocre.

Rob was tough on a piece that compared recruitment of athletes with recruitment of grad students. He said it needed improvement in news judgment and focus, as well as writing. He rated it satisfactory on interviewing and research skills. “Overall, the issue of academics vs. sports in universities seems a little tired, and the arguments presented by the academics seemed especially old and not very sophisticated.” Ouch!

Lauren Young, too, took a strict line on a news story about a controversial downtown development effort. She gave satisfactory ratings on news judgment and interviewing skills, but said the writing needed improvement. “Everything is in the piece, but the articles needs stronger, more active language to sing,” she said.

A couple other colleagues are still mulling the student work. I’m eager to see what they have to say.

These outside judgments, which at first struck me as a strange and repetitive thing to pursue, are hugely helpful. If nothing else, they’ll stiffen my spine to give out more Cs when appropriate. It’s better that students know what the world would really think, even if that means awkward conversation with those who’ve never earned anything less than an A.

My thanks to those who helped out, and I hope I can call on you again.

JW

Ethics and the Net

Posted on by
3


A friend, Steve Wildstrom, raises some important questions. Do the Net and the creative destruction under way in journalism change our traditional journalistic ethics? Are new business arrangements journalists are making with sponsors crushing the tenet of independence that reporters have long lived by? At times we have taken up this question in classes and I suspect we’ll do so far more.

Steve, a former BUSINESS WEEK columnist who wrote expertly about new technology each week for many years, will be writing about emerging technology again next week at the Consumer Electronics Show. Instead of doing so for BW or another pub, however, he’ll write for a blog run by Nvidia, a big chipmaker.

Steve says the company is putting no constraints on him but requiring only that he keep the posts relevant to Nvidia’s areas of interest. He’s comfortable with the arrangement, he says, but adds that “it sure is different.”

Further, Steve writes:

“I do have one suggestion for journalism schools as a consequence of my ongoing career exploration. The old rules of journalism have to change if anyone is going to make a living in this business. We’re all turning into entrepreneurs of one sort or another. What are the ethical rules for this new world? No one seems to know. They sure can’t be the old world, where we lived off advertising support and pretended that it had no relationship to what we did. Now we have to get up close and personal with the people who pay the bills. The old rules don’t work and it’s everyone for [himself] figuring out the new ones.”

Other friends, such as Howard Wolinsky, a long-time veteran of the Chicago Sun-Times, have similarly struck out on their own now and are writing for various outlets. Howard is doing some interesting work for Ancestry magazine, for instance.

For those of us who long labored at arm’s length from the advertisers, getting so “up close and personal” with sponsors is a challenging idea. On its face, it seems the “church and state” separation that governed at such mags as BW is eroded by personal sponsorship arrangements. Do we censor ourselves in such deals? Do we not write critically, for instance, about the sponsor? Or, do we not write at all about the sponsor’s competitors (or do so only damningly)? Just how long is the leash the sponsor puts us on, and that we put ourselves?

It would be naive to think that a writer’s independence is not curtailed by such arrangements. To a larger degree than was the case at a place such as BW, it seems the one who pays the piper will call the tune. Certainly, a sponsor might deem some topics inappropriate, such as glowing references to competitors. So, too, will writers deem topics inappropriate or too risky to address in such columns. No one will want to bite the hand that feeds them.

But the new one-on-one sponsorship arrangements need not be corrupting or unethical. So long as the work that does appear is untainted by the sponsor and reflects a writer’s best reporting and judgment, how is that any different from work we would have done for the old pubs? Certain topics or organizations may be taboo, but if the writer remains free to praise or damn those he writes about, is he not serving readers well?

At big pubs such as BW, such concerns were rarely an issue. For most of the time I was there, the magazine had so many advertisers that if one pulled its pages in a huff over a critical piece, the magazine could rely on others to fill the space. Reporters were told simply to do their best work, without fear or favor. In fact, some reporters would joke that they were members of a “million-dollar club,” a club filled by those whose critical reporting had cost the magazine a million dollars in ad revenues.

Over 22 years, I was involved in only two incidents where deference to advertisers affected our coverage. Many years ago, soon after I joined BW, we ran a critical story about an advertiser and used its logo to make a point — instead of a healthy tree, the company’s symbol, we ran an image of one that was half-shriveled. The advertiser’s execs said they could live with the story, but they were so furious about the logo-tampering that they pulled their ads. We also had a high-level lunch at which they made their case to me and my editors about why they were not doing as poorly as we suggested in the text. (Such meetings were not unusual and in fact helped our coverage). My editor ruled that in the future we would not satirize or otherwise demean company logos, arguing that the companies had invested too much in them for us to take cheap shots. (Struck me as arguable at the time, but so long as the words were untainted, that was fine).

In the second case, during the hard-pressed last couple years, an advertiser had signed on as a sponsor for a recurring feature. When I alluded to one of the sponsor’s rivals in a piece for that space, an editor quashed the piece. We were free to write about competitors in other parts of the magazine, she said, but not in that recurring feature. This struck me as tolerable, since it is akin to the issue of “adjacencies,” where we wouldn’t want to write about an advertiser in a space next to the ad (something that raises obvious questions).

I am sure that Steve’s work for the Nvidia blog, or wherever else it appears, will be straightforward, ethical and useful to his readers. That’s the sort of guy he is. I don’t believe he would tolerate meddling, and he’s talented enough that he’ll find another outlet if it occurs. Readers will learn a lot by checking his work out. Same goes for Howard, who did some remarkable investigative work for the Sun-Times.

Still, the new one-on-one sponsorship arrangements do put new demands on readers and writers alike. Readers, for instance, need to be aware of who is paying the freight and stay alert for bias. And writers, of course, need to be cautious about muzzling themselves to the readers’ detriment. The Net is forcing us into a brave new world, but the deal we make with readers still must hold true — we will tell the truth as we see it. If that changes, we’re lost.

The Debut

Posted on by
Reply

This blogging business is all new to me. But then so much in my life now is all new, as well. New house, new town, new job. That’s why this effort at an Internet journal could be intriguing. Certainly, it will be novel.

In August, I left the world of working journalism for the world of the academy. After 22 years at BUSINESS WEEK and 13 years at other pubs, I put in my last day as a paid reporter — as chief of correspondents for that wonderful pub in the end — and joined the University of Nebraska as an associate professor. As I left Chicago for Lincoln, I took up the art of teaching journalism to fresh-faced undergrads. I did so all too well aware that my field is undergoing some of its most wrenching change ever.

I’ve learned a lot in just one semester already. For one thing, I’ve come to take a longer view, as academics are supposed to. That means seeing that change is actually the norm in journalism. All the Internet-driven and recession-pained ferment of late seems to many to be something terribly new (and terrible, in fact). And yet, newspapers and magazines have been rising and falling for decades, if one takes in the long sweep.

Evidence of that? Time was, not so long ago, when cities such as NYC and Chicago had a half-dozen dailies ferociously competing for readers. Along came radio and TV, and the numbers shrank. As for magazines, remember Look and Life? They soared and flamed out, like so many other pubs. Journalism, in fact, has been a field in tumult ever since print was put on paper and sounds and pictures thrust into the air.

Now, does the Internet change things even more? Well, it certainly accelerates change. I can’t recall a more unsettling year in the history of newspapers as this past one, for instance. So many gone. The change is certainly horrendous for people thrown out of work, as over 100 of my colleagues at BW were when Bloomberg bought the magazine a few weeks ago.

But, taking the long view, what the Net has wrought is not unprecedented. To cast things in a personal light, of the four media organizations I worked for since my college days, two were sold and continue to publish — The Home News in New Brunswick, N.J., now a Gannett newspaper, and BW. Two others died — Dun’s Business Month, which perished years ago, long before the Net, and, as of this year, the Rocky Mountain News. I personally have seen both Net-induced ruin and change that has nothing to do with the medium.

The Net seems to be doing for media (and information generally) what the printing press did when it debuted. Does the term “sea-change” get at it a bit? And yet, Gutenberg opened vast new opportunities. So, too, will the Net.

Over their careers, my students will be writing for both new and old media. My job now is to prepare them for that world, an already-fascinating realm and one that is rich in creativity. Over time, I believe, this world will prove at least as lucrative as print journalism was (never so much as other fields, but not bad. The compensation has always been such intangibles as access to all tiers of society and a heck of a lot of fun, adventure and, for some, even danger. The latter prospect is the kind of thing that gets a young person’s juices going; strange thing, isn’t it?)

So my purpose in this blog is to chart the changes I see. Along the way, I will share stories from my new life as an academic. For an ink-stained wretch, the world of leather elbow pads and chalkboards is wholly new and intriguing. (Actually, it’s more like a realm of rumpled sweaters, computer-aided visual displays with overhead projectors, and whiteboards). I aim to share this new world with whoever out there may stumble upon this space.

I hope this effort proves as entertaining and informative to readers as I expect it will prove to me.

JW