Jon Stewart tore CNBC a new one this week, sending ripples throughout mainstream media and blogosphere. “CNBC hating is mainstream!” Screams one headline. Then came the slew of media pundits, rushing to defend CNBC and by proxy, itself. This one in particular is especially lengthy and defensive. Below are some of the author’s grievances in face of much critique of financial reporting, and my thoughts on them.
We were ignored, then we were cut
It’s been a lousy decade or so for print publishing, and it’s getting worse. Budgets have been cut, newsrooms slashed. Business reporting in most cities is pretty bad, often an adjunct of local chambers of commerce. In other media, there’s been a turmoil of business models, as the Web crowded in, bringing with it a different style and lots of new bodies. Roles have changed. Anyone with a clue (many without) now writes a column or a blog. The business seems full of younger folks (a function of advancing age perhaps); the era when every newsroom had a cranky wise man with a cigar that had seen it all is sadly over. This is particularly a problem in financial journalism, which demands historical perspective and expertise. To make matters worse, finance has grown dramatically more complex, opaque, global over the past few decades. And despite that complexity, the rise of financial television and financial blogging has simplified coverage to an equity horse race, with an omnipresent pressure to predict. Besides, since when has most journalism at any given time been all that stellar? Who correctly called the Great Depression anyway?
Whoa, easy there with the gripings! The newspaper industry did suffer from a drop in readership (some were made up on the web), and a significant drop in advertising revenue from some of its now-bankrupt clients. But the article failed to mention that the largest contributor newspaper failures are the massive debts incurred between 2006 and 2007. For example, had the Tribune Company not triple its debt in one single transaction in a deal to take LA Times and Chicago Tribune private, they would still be able to report earnings in the 10-20% range of their revenues. But the burden of debt changed all that.
As for the complaint that the web “crawled” in and somehow stole mainstream media’s spotlight and authority? Thank you and oh please. Anyone who has followed both streams of reporting can attest that first, mainstream reporting is far from disappearing; and two, the blogosphere supplies and supplements what most media outlets cannot provide: on-time, succinct, cut-to-the-chase reports and commentaries. Some are highly opinionated, even agenda-driven. But at least they do not hide behind the pretense of “objectivity”.
Pickled over the dominance of young bucks in the newsroom? Ha, ha, and ha. What a way to confuse effect for cause! In their own self-serving attempt to attract a more lucrative demographic, the networks brought in attractive anchors to sex up financial reporting. So when the reporting goes south, should these vapid, arrogant, and obviously not wise young studs masquerading as journalists be left holding the bag, alone? Are we meant to believe that the stuffy, stale, and cranky wise men in the control rooms are rendered powerless by the decisions made by the very same stuffy, stale, and cranky wise man with a cigar that had seen it all? They could’ve easily replaced those young cubs with cranky wise men, but what difference would it make? The anchors are beholden to the same corporate interests. So you end up with an older, crankier, and most likely more cynical anchor that spews out, more or less, the same garbage. But with less sex appeal. You lose viewers.
The last point is almost too irksome to address. So a more complex financial environment is too much to handle for financial television (the point about financial blogging is just plain wrong: there’s an abundance of highly involved analysis out there). The implication here is that the public is too stupid to comprehend the in-depth analysis that reporters have thus far failed to deliver. So as a profession, the financial reporting community should not be put on the pedestal as some kind of sage with a crystal ball?
But nobody expects financial journalists to even attempt to predict the future, never mind getting it right 100% of the time. But the public does expect the reporters to ask questions, to investigate, and to report in an unbiased and objective manner. Extricating itself from missing fraudulent activities and irresponsible corporate practices by citing inadequate resources, while having plenty of reporting power dispatched to cheer on the ramp-up to the good times, is sorely dishonest and self-forgiving. This stuff is complex. But that’s why we need those specialists to dig into financial statements, be alert and on the lookout for potential fouls and misadventures, to truly investigate when leads arise, and not become a corporate mouthpiece that merely parrots statements released by the companies themselves. Not aspiring to higher standards, but instead asking the public to expect less of the profession, is just plain sad.
Lowest denominator rules
There’s a chicken-and-egg problem here that’s very difficult to resolve: If you write stories predicting the apocalypse, your apocalypse better happen on time, and your readers better care, or you’ll be covering the garden club next week. Hell, many newspapers around the country have killed off business coverage entirely because they felt no one cared. Boring. Too complicated. And look at the pathetic way network TV news covers business and finance. If they thought the audience cared as much about subprime as about Madonna, they’d trouble themselves to go beyond the Dow. But they didn’t. And at the time they weren’t wrong.
Now he’s blaming the audience for twisting the network’s hands in serving the dumb-down news that it does. Because instead of seeking to educate, inform, and maybe (I’m over-reaching here), inspire its viewers, the author concurs with the networks’ decisions to sink to the lowest denominator. It’s not a game of chicken-and-egg; it’s a game of chicken! What if a network is daring enough to take itself out of the race to the bottom, stop infantilizing its audience, and reports on news that is in fact newsworthy? Then instead of changing itself to suit what it believed to be the audience, why not try to turn it around?
Who’s policing whom?
Finance is a complex, nonlinear system, full of noise, chaos, complexity and ambiguity. It’s defined by all the waywardness of human psychology. That’s what makes it such a fascinating phenomenon to observe and to write about (and also why risk management may be an oxymoron). But if investment professionals and regulators fail again and again to master its perturbations, as academic studies have always shown, then why on this green earth would a financial journalist succeed at predicting the future?
Another feeble outcry: if government regulators failed to see the warning signs, how could we have? Yes, because the complexity, noise and chaos are precisely the reason why the system went bust. Greed and corruption had nothing to do with it.
Just like the US is governed by three independent branches that checks and balances each other, the business environment is supposed to work with the same level of regulatory oversight. To simplify corporate governance, a business is run by the management team, which is supervised by the CEO. The CEO reports to the board of directors (BOD), and the BOD answers to the shareholders. On top of that, regulators are charged with responsibilities to monitor the businesses; and the financial reporters are supposed to watch over, well, all of them.
Overtime, lured by money and power, the various supposedly independent parties got a little too cozy. Here are just some examples. 1) In some cases, the CEOs double as the board’s Chairman, which then set board directors’ pays and perks – whose jobs are to assess the performance of the CEO. 2) The SEC was captive to the industry it sought to regulate: a good relationship with the very investment banks or funds they were ordained to monitor could lead to a high-paying job down the road. Needless to say, this further weakened its will to impose standards and investigate wrongdoings. 3) Business news networks get their largest advertising revenues from those very banks and corporations that they should scrutinize. Across the board, the media has yet to fess up to the fact that they missed the cross-examination of a rotting system, because they were in effect, bribed. As I said in an earlier post:
Next time you see Maria Bartiromo, Erin Bennett or Becky Quick, you need to realize who’s paying their bills. It’s the advertisers, usually financial service companies that fill up these 10-20 second slots right after they tell you they’ll be “right back”. And who do they return with after the commercial breaks? Oh don’t you know it, it’s the in-house economist/strategist/analyst from those very firms.
It’s difficult to say who snoozed off first. But in the aftermaths of such wreckage, is it not fair to say that all share some responsibility, including the business reporters? It should not come as a surprise that nowadays, some of the most vigilant and trusted watchdogs of the financial and political worlds are no longer professional journalists. Instead of rejecting its share of faults, perhaps the business reporting community should take this chance to reflect on that loss of trust and prestige.
Since posting, here’s another instance of financial reporters refusing to own up to their failures.
picture source: ~TomasAIRA