The Problem With Financial Journalism

The peculiar sport of fox hunting was described by Oscar Wilde as "the unspeakable in pursuit of the uneatable." I feel a similar aphorism can be applied to most financial journalism: "The unspeakable perusing the unreadable."

Okay, maybe it's a bit harsh to call my (former) readers the unspeakable, but as for most financial journalism, yeah, far too often it's unreadable.

Okay, I have kind of a limited perspective on this, having only worked where I worked and saw what I saw. I think the Wall Street Journal does a good job day in, day out, of reporting financial news, as do a few others.

But I also think that way, way too much of what I see in the financial media, specifically on TV, and glossy magazines has some extraordinarily serious flaws. Flaws that have helped make financial journalism either irrelevant to the larger world of business or, at worst, handmaidens to those who wield power in the financial world.

Here is my background. I worked in financial newsletters for two and a half years, was a reporter at a famed financial news mag for almost three years, was an editor at that same mag's corresponding website for another two years and got laid off from there in late 2009. Not long after that I took a job writing a newsletter under the aegis of an extremely smart and successful trader. And I can honestly say I learned more about how to analyze a company within the first ten days of that job than I had learned in all my prior posts combined.

Of course I wouldn't have had the opportunity to do that last job if I hadn't had my prior experiences, but within a few hours of starting there my new boss told me about five or six different ways to analyze a firm's financial statements that I hadn't considered. Because now the exercise wasn't merely academic, real money was at stake. And I learned more from simply being near a real trader than I had learned from other journalists in all those years.

And this is a lot of my problem with financial journalism. When I watch the TV money shows I know that most of the anchors on these programs really don't know what they're talking about. They feed easy answers to their guests, and then let these same guests lead them around by the nose. They discuss their agreed upon talking points in a kind of kabuki ritual, and that's that. Once you learn what to watch for you can see that so often they are doing little more than feeding the money beast.

Here's another secret, a huge percentage of the "financial" writers I know don't have all that much interest in business or finance. If they were really interested in business they would BE in business, making far more than the working-poverty wages at their high-profile, but largely underpaid, jobs. Many of us got into it because these were the places that needed people.

I did it this way. I came to NYC from Boulder, Colo. in 1999, with five years of journalistic experience under my belt, and couldn't get arrested. I saw an ad for a financial newsletter and applied for the job. After taking, and passing, a writing and reporting test I was hired, at the princely sum of $32,000 a year. I knew nothing about nothing, but I paid attention and learned. I did it because I could and it would get me out my mom's house. But it had never been my goal. Nonetheless I was decent enough at it to not get fired. In fact I soon learned, much to my shock, that I was actually pretty good!

Eventually I moved up and on until I made it to a well-known financial magazine, satisfying a longstanding goal: working at a magazine. Not necessarily a financial magazine, but a magazine. I had years of contact building and beat reporting under my belt by the time I was hired, but I felt, really, that I knew very little. I cared about my job and wanted to do great work, but felt I still had so much more I needed to understand. But what I was to find was that as little as I knew I knew far, far more than many of my new reporting peers.

Many were just like me, there to be journalists and they happened to become financial journalists. And I thought then, and think now, this is okay. Sometimes we find our work, and sometimes it finds us. But there was little in the way of the sort of intensive training that one would need in order to really start to understand how firms actually work. If you asked most reporters, or even senior writers, at most major financial news organizations to calculate a firm's free cash flow I would be shocked if 50% could. (Free cash flow, btw, is the actual hardcore cash a firm has on its books, and is considered by many a better indication of a firm's financial health than the more easily manipulated quarterly earnings. To calculate FCF you take net income, add in amortization/depreciation and subtract changes in working capital and capital expenditures. Voila! Free cash flow!)

I know this because I volunteered to organize a lecture on how to calculate FCF and was shocked by how many people, even senior people, at my old firm told me they were excited about it. I say this not to bag on them. I had been just like them not long before. For me I far too often felt that when it came time to interview truly sophisticated investors I was like the guy bringing a knife to a gun fight. As far as learning more I was largely on my own.

Another problem I see with today's financial media is that it often doesn't seem to know if it wants to celebrate the almost pornographic amassing of wealth or actually do some journalism to find what's awry in the world of business. Far too often, I feel, it's the former. We are told to "celebrate capitalism" like it actually is in any real danger, and needs us journalists to believe in it, like the Great Pumpkin. I'm sorry folks, but capitalism is the only game in town, it ain't going nowhere. It doesn't need us to clap for it so it so it doesn't die, like Tinkerbell. It needs financial journalists who know what they are talking about to start doing what they do best: holding the feet of those in power to the fire. Unfortunately the opposite often takes place.

How many fawning profiles have I read about hard-nosed, daredevil CEOs taking "gambles" and "risks" and "playing to win?" Folks, very few of these CEOs ever are at any personal risk. They are all part of the same club, all went to the same schools, all agree to bail each other out if they fail, many come from decently well-off families. They are never in any danger should they fail. They will simply get a job down the road as consultants, or lobbyists, provided their golden parachutes aren't adequate. No, we're the ones who are in danger, as the bailouts show. And while true risk taking and entrepreneurship is a nifty thing, let's face it, most of these folks ain't curing cancer.

Yet, this charged language is inserted into so many of these profiles that I think I've detected a pattern. It's as if wealthy execs aren't just happy having all the money and power, they want to be thought of as hip and a little bit alternative and dangerous. Well, they were dangerous alright, just not the way they advertised. And it seems that frequently journalists, or at least their editors, were happy to push the silly-ass plot line of CEO as gutsy folk hero. Of course now that our economy melted down there is some backlash to this, but it's a bit late.

On the flipside, I am equally suspicious of those profiles that allow the CEO to paint himself as a workaholic managerial drone who is only focused on what he does for the company. Beware the banal facade, it often hides something. By the way, this was the treatment just-ousted Hewlett-Packard CEO Mark Hurd typically received. Little did we know!

I think there are real consequences to getting snowed this way. Because, clearly, the mainstream financial media missed most of the big stories of the past decade. The housing collapse? The world of shadow banking? The way Wall Street cooked every book? By and large the ink only started to really spill on this stuff after the markets melted. Hindsight is great, but foresight saves you. Before then we were too busy praising Wall Street, or at least being clubby with it, to really investigate it.

The irony, of course, is the more we celebrate capitalism, and the less we point out its flaws, the more gross and exaggerated those flaws become until they bring down the entire economy. And then the same magazines and TV shows that celebrated capitalism with such vigor head for the ash heap along with everyone else. Indeed it takes a strong and independent press to guard America's business elite from its own worst impulses. The nice part is that when done right this also helps keep journalists employed.

This article was adapted from a post on my blog