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February, 2009

  1. General Motors, Wealth Destruction Machine

    February 26, 2009 by Matt Mireles

    There are those in this society that create wealth, that turn nothing into something, that turn $1million into $100million. The fact that this is possible and that it happens it all lies at the heart of capitalism and explains why the system works so well. 

    And then there are stories like this, from NYT:

    G.M. said it lost $30.9 billion, or $53.32 a share, in 2008 and spent $19.2 billion of its cash reserves. The company lost $9.6 billion in the fourth quarter, when its global sales fell 26 percent.


    In 2007, the company lost $43.3, a record, mostly due to a noncash accounting charge; it adjusted the figure higher by $4.6 billion Thursday.


    G.M. has borrowed $13.4 billion from the government since December.

    The system has a way to deal with firms like this: Death. Except now we the taxpayers are on board as investors. We the suckers. 

    The real danger our times is not the loss of jobs from dying industries, it's our willingness to flush our collective wealth down the toilet. It is, in short, crony capitalism.

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  2. Social Networking with Charlie Rose

    February 20, 2009 by Matt Mireles

    Marc Andreessen, Netscape and Ning Founder, LinkedIn Angel Investor, Facebook Investor and Board Member, talks with Charlie Rose.

    Very worthwhile to watch.

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  3. The Propeller Head’s Dilemna

    February 19, 2009 by Matt Mireles

    David BrooksImage via Wikipedia

    Sorry to focus so much attention on the Times, but NYT had a great conversation piece yesterday between David Brooks and Gail Collins dubbed "The Propeller Head's Dilemna." Apparently the big O has a special name for his economic advisers: “the propeller heads.” David Brooks:

    This is going to unleash the familiar debate on what should be the
    role of policy intellectuals in the White House. Some dumb Republicans
    are going to get some mileage by attacking the idea of a White House
    run by geeks. Some smug Democrats are going to claim that of course
    they have intellectuals since they are the party of reason and
    intellect.

    The correct position is the one held by self-loathing intellectuals,
    like Isaiah Berlin, Edmund Burke, James Madison, Michael Oakeshott and
    others. These were pointy heads who understood the limits of what
    pointy heads can know…

    The idea is that the world is too complex for us to know, and
    therefore policies should be designed that take account of our
    ignorance. Whether the Obama administration understands this is an open
    question.

    There’s nothing more dangerous than a propeller head who doesn’t know his limitations.

    And this, for as a much as you will hear me bitch and moan about NYT's poor business strategy and failure to adapt, this is why I love the institution and want to see it survive.

    We need a fundamental rethinking of our infrastructure policies, but
    instead we just throw fast money into obsolete and useless programs
    (see Popular Mechanics’ reporting on this). Instead of carefully
    planning a new Head Start, we’re going to try to throw together a bunch
    of programs in a rushed stimulus fashion. The evidence shows that good
    Head Start really works but bad Head Start is terrible. We’re going to
    get the latter.

    Hot!

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  4. Newsgathering in the Darwinian Environment, p2

    February 19, 2009 by Matt Mireles

    Politico
    Nytlogo153x23WaPo_logo_300
    Politico is a niche publication––as is this one, although their niche is probably a lot larger and more lucrative than mine. Nonetheless, the way Politico succeeds is that they focus on the niche market, the niche beat, and they report the hell out of it. Their stories have edge, they're sexy. Take a look:

    Ostensibly, the story is the same in all three, but which would you rather read?

    And that's the thing, the business model matters. Monetization matters. But clearly the problem goes deeper than that. It seems that they just don't get that they are now competing with the likes of Politico, HuffPo, etc. and that they need to change not just their business model but how they tell stories.

    Let's be honest here: the old guard is getting their asses kicked by a bunch of startups.

    Here's what Bill Keller, the NYT's top dog, said about the Most Emailed List:

    I admit that I started out somewhat prudish about the Most-E-Mailed
    list. I worried that important, original, in-depth work that happened
    not to be buzzy would become wallflowers at the prom, that popularity
    would become a substitute for quality. I've lightened up a little. The
    list is still not the ultimate measure of good journalism, but it's
    fun.     I think it sometimes directs people to great stories they might
    otherwise have missed. And — perhaps in a reflection of the seriously
    curious readers of this paper — a lot of important work, including
    long investigative projects, makes the list.

    Now let's compare this with what the head honchos at Politico wrote:

    Stories need to be both illuminating and interesting––we don't have the luxury of running stories folks won't click on or spend several minutes with in the paper.

    a)    Would this be a "most emailed" story?

    b)    Would I read this story if I hadn't written it?

    c)    Would my mother read this story?

    d)    Would a blogger be inspired to post on this story?
    …
    IN MOST CASES, THE ANSWER WILL BE "YES" TO SEVERAL OF THESE QUESTIONS IF THIS A STRONG POLITICO STORY.

    Hmm. If this was all you knew about these news organizations, whose news would you rather consume?

    Storytelling matters. Competition matters. Not convinced? See the New York Times Co.'s share price:

    As the folks at Politico so aptly put it:

    This is a Darwinian business. People are not looking for MORE to read. They need to NEED and WANT each individual story in Politico. If they don't, we will not capture the eyeballs and mindshare that we must have to thrive in this brutal environment.

    That, my friends, is the essence of what you call marketing. It's not a journalism precept or something they teach at Columbia, but perhaps the first principle of all business: The customer is always right.

    As my man Peter Drucker explained:

    The greatest danger of the new venture is to "know better" than the customer what the product is or should be, how it should be bought, or what it should be used for…

    Businesses are not paid to reform customers. They are paid to satisfy customers.

    Oh, how many newspapers, how many journos still need to learn this most basic of lessons! But at least one outfit seems to have taken it to heart.

    CrunchBase Information
    New York Times
    Information provided by CrunchBase
    CrunchBase Information
    The Washington Post Company
    Information provided by CrunchBase

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  5. NYT Share Price Costs Less Than the Sunday Paper

    February 19, 2009 by Matt Mireles

    From CrossingWallStreet….

    image770.png

    Shares of NYT (NYT) dropped 29 cents today to close at $3.77. The Sunday paper costs $4.

    Ouch!

    CrunchBase Information
    New York Times
    Information provided by CrunchBase
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  6. Japanese Finance Minister Gets Soused, Steals Show at G-7

    February 19, 2009 by Matt Mireles

    A Classic Episode from our Japanese brethren!

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  7. Newsgathering in the Darwinian Environment, p1

    February 18, 2009 by Matt Mireles

    Oftentimes, journos blame “the internet” for the newspaper industry’s demise. But in truth, it’s not the internet that’s killing newspapers, it is competition. For the first time in their storied history, newspapers must actually compete on a global playing field for readers’ attention. The internet is the playing field, but it is the competition, driven by low barriers to entry and many, many players, that has undone their monopoly on information and the business model that underlies it.

    It is in this brave new world that Politico was born. Yesterday, as I already detailed, the New Republic reported on their rise. Today emerged a very interesting internal memo (pdf):

    THE POLITICO FORMULA: We explain how Washington really works, pull back the curtain on the palace intrigue of official Washington, and document who is trying to get and keep power, and how. Our stories are NECESSARY for political and government players, and FASCINATING to outsiders.

    Wow! Now that’s what I call a clear statement of mission. How many news orgs can say they have a mission that is so clear and, moroever, compelling? But wait, there’s more…

    A Politico story works THE POWER EQUATION:

    -WHO is trying to GET or HOARD it?

    -WHAT MEANS are they using and what OBSTACLES are they encountering?

    -HOW are they doing, and how is this contest affecting, or reshaping the city, state, party, caucus, government body, industry, corporation or social set?
    …
    A Politico story pulls back the curtain and shows the reader something intriguing, surprising, and important BEHIND the straight news headline or data point.

    Let me ask you this: Does your newspaper do the same? Do newspapers get beyond the straight news headline, does it really show you what’s happening beneath the surface, or do it editors hold back their analysis for fear of injecting “opinion” into the story?

    Blandness is part of what newspapers are about. Printing and distribution costs associated with the physical newspaper served as pretty major barriers to entry. The result was the creation of monopolies and oligopolies in local communities across America and the globe. Straight news was both easier and less risky. Angry readers could scare off advertisers, and advertisers, then as now, were the lifeblood of the business

    To Be Continued…

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  8. Creative Destruction: Politico vs. WaPo

    February 17, 2009 by Matt Mireles

    The New Republic came out with a great piece on Politico and how it's made itself into a first-rate news org and profitable venture. From "The Scoop Factory" by TNR's Gabriel Sherman:

    From the start, their aim with Politico
    was to combine the Web's rapid-fire capacity with the legitimacy of
    traditional newspapering. Journalistically, their strategy was to
    out-report and outpace the newspapers that dominated election coverage,
    to get links up before readers reached their desks and BlackBerries in
    the morning, and to keep the news items going all afternoon for the
    prime-time cable pundits to digest at night.

    And it worked. Politico
    succeeded in muscling its way into the political journalism firmament
    by the sheer volume of reporting and a shrewd–some might say
    obsessive–focus on the gossipy Beltway scoops and gaffes that appeal
    to the tabloid sensibility of Drudge and cable news.\

    It's true. Politico rates above WaPo on my radar because not only do they seem todo better reporting but also they do better storytelling. They make the news sexier, more voice-y, more fun to read.

    What is comical, as Nicholas Carlson over at SAI points out, is how newspaper big wigs have been so quick to dismiss the site even as their own ships crash and flounder on the rocky shores of change:

    The Times' Bill Keller dismisses Politico's scooplets
    as an insubstantial foundation on which to build a sustainable news
    organization. "If you hadn't reminded me, I couldn't have told you who
    broke the seven houses and the six-figure wardrobe budget. … Politico
    has focused on an inside game. I'm not sure if it translates to an
    outside game. I'm not sure how they get scale, and, if they don't, I'm
    not sure what the business model is."

    I mean, seriously, the man can't be that dumb…Can he? He did, after all, refer to blogging as a "one man circle jerk" during a speech to the newspaper staff my alma mater back in 2005 (I was there, afterwards he did shots with us at the bar).

    Bet here's where we see just how serious the folks at Politico really are:

    For brand-name reporters, Politico was willing to pay
    stratospheric (by journalism standards) salaries. Top writers are
    rumored to make between $150,000 and $250,000.

    Damn. That's not chicken feed.

    The point here is that what we're seeing at work in the news industry is a process of creative destruction, not the end of the world. The local marketplace for information has been replaced by the global marketplace, and as Adam Smith explained way back when, the bigger the market, the more labor gets divided and the more work specialization occurs.

    It's just too bad that old institutions have proven themselves so unable and unwilling to evolve.

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  9. Hello, Nativism. Goodbye, Prosperity.

    February 14, 2009 by Matt Mireles

    Apparently the Obama administration, via DOJ, is cracking down on high tech workers and supposed H1-B visas abuse. From Silicon Alley Insider and Computer World:

    "Federal agents have arrested 11 people in a crackdown on H-1B visa fraud.
    We've written about abuses in the H-1B program before, but have never, ever seen law enforcement actually pay attention to H-1B issues…

    Federal authorities allege that in some cases, H-1B workers were paid
    the prevailing wages of low-cost regions and not necessarily the higher
    salaries paid in the locations where they worked. By doing this, the
    companies were "displacing qualified American workers and violating
    prevailing wage laws," said federal authorities in a statement
    announcing the indictments."

    Hmm. So let's think about this. Businesses worldwide are in dire straits and seeking to radically cut costs just to stay afloat. Because of capital now moves freely accross borders, this means they have two basic options: 1) export their operations to a cheaper, probably foreign, labor market, or 2) import cheap labor to run their operations here.

    If the feds crackdown and restrict the importation of labor, then it seems that firms will either a) have cut the wages they pay to local workers, which historically businesses have been very reluctant to do because it tends to destroy worker morale and kill productivity, or more likely b) pack up and move their operations oversees.

    Of course, the protectionists would say we should then make it illegal for firms to outsource/offshore their operations, which of course would encourage other countries (like China, India and the EU) to do the same. So start trade wars, which by their very nature raise the costs of doing business, dimish consumer buying power (ie stuff costs more so you get less for every $1 you spend), and depress global economic growth.

    Ok, so maybe a handful arrests do not the end of globalization make, but it's a sign and a cause for worry.

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  10. Labor Relations in the Digital Age: Speaking Geek

    February 5, 2009 by Matt Mireles

    I had a really interesting conversation last week with David Cohn, aka DigiDave, of the crowdfunded reporting experiment Spot.Us. Talking with David has been a really helpful for me as I've worked on my startup over the last couple of months.

    Reflecting on his experience as a non-techie managing web developers and building the site, David made the following observation: The key labor relations for news publishers of the 20th Century was the relationship they had with the ink printers and the delivery truck drivers. Managers of the newspaper era had to know their lingo, understand their needs and wants, and learn to manipulate them accordingly.

    In the 21st Century, as news has been unhinged from the printed page, the new key relationship, he postulates, is that between management and the software engineer. It is they whose ways and mores we must now learn.

    Now, I think David is really onto something here. Without software or web developers, us non-engineers are pretty much dead in the water if we want to leverage new web technologies or innovate with our storytelling. Learning how to speak Geek is a challenge. Do I need a software architect or a web developer? C++ or Java? PhP or MySQL? To the unitiated, it's a pretty daunting task to figure out the difference and the meaning of the lingo. Adding to the challenge is the fact that software engineers tend to be lacking in the communication skills dept.

    This might sound cheesy, but as I try to answer the challenge myself, I take inspiration from the Obama model: find smart people, grill them, suck up everything you can like a sponge, and don't be embarassed about not knowing things.

    I was reading some Peter Drucker today and he spoke to this very point. The startup founder, he said, needs to figure out the crossover between the growing startup's needs and what he/she can actually do well. The venture is going to have critical needs that need to be filled–sales, product dev, marketing, financial planning, etc–and it is unlikely that the founder will be strong at all of them. The key then is to build a management team that covers all the critical needs. Sometimes the founder is the right person to be CEO, sometimes not.
    But back to managing techies.

    My personal goal is to a) have the geeks educate me enough so that I can understand what needs to be done and hold them accountable for it, and b) always ask when I don't understand something.
    Suggestions, anyone?

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