armchair pundit

There’s no shortage of ideas for how the newspaper industry might save itself – by adopting new business models, distribution strategies, etc. The other day, my friend Ben suggested a new twist on subscriptions that would work something like cable television. Others hint that newspapers should push for mass adoption of the Kindle. Still others believe it might make sense to run newspapers as charitable trusts, and organize periodic pledge drives – like NPR.

In these strange and stressful times, people across the political spectrum seem resigned to the likely demise of some major banks and possibly the whole U.S. auto industry. Even my most liberal friends seem almost eager to see GM and Chrysler bite the big one. Yet they’re unwilling to accept a similar fate for the New York Times.

They may not have a choice of course. Michael Hirschorn suggested in the Atlantic Monthly that the Times could disappear by this summer (prompting this response from the Times).

I more or less share my friends’ sentiment. I’m an avid reader of the New York Times (online edition), and I’d miss it. On the other hand, I’ve never owned an American car, so I feel somewhat indifferent to the possibility of their extinction. In my mind, American car companies have made one bad business decision after another, failing to adequately respond to major shifts in the market. On top of that, their product actually harms the planet.

But is the newspaper industry really so different? Newspapers have made plenty of bad business decisions, and they haven’t adequately responded to major shifts in the market. Plus, ink, paper and all the driving involved in distribution take their own toll on the planet.

But the bigger question is, why do we need newspapers? And I’m not just talking about the physical offline versions. I mean why do we need the New York Times at all? Who needs their classifieds when you have Craigslist, Ebay, Amazon, Facebook, etc.? And there are plenty of other – and better – places to keep up on sports, finance, travel, food and entertainment.

That leaves general news of the nation and the world. Again though, would we really miss what the major newspapers provide? We shouldn’t equate newspapers with journalism.

After all, the major newspapers dropped the ball with respect to the current financial crisis. In hindsight, there are all kinds of questions they should have been asking. The alternative press and bloggers were arguably doing better at what the fourth estate is supposed to do, but the very existence of the newspapers casts a pretty long shadow over these guys.

The major newspapers failed during the Vietnam War to report on things like illegal bombing campaigns and widespread atrocities committed by U.S. soldiers, although there was ample evidence and no shortage of credible sources willing to come forward without anonymity. Again, the alternative press were the only ones willing to write about these things until the war was basically over and the tide of public opinion had completely shifted.

The major newspapers failed during the run-up to the Iraq war to question the motives or tactics of the Bush administration. And they neglected through the first four or five years of his presidency to adequately scrutinize anything his administration did – from suspensions of civil liberties and habeas corpus to rampant corruption and deceit.

The major newspapers failed for many years to lay out the straightforward scoop on climate change, opting instead for a misguided even-handedness. The perception of impartiality was more important to them than the truth.

In so many important cases, the major newspapers put their bottom line ahead of journalistic principles, unwilling to report anything that ran against the public opinion of the moment. This is why nine out of the ten most emailed New York Times articles on any given day are op-ed pieces. This is the most trustworthy section of the Times because it’s the most uncorruptable, the least subject to compromise.

In my view, the only newspapers that don’t have an obvious replacement are the small-town ones. Without small-town papers, where will people find out about the latest zoning ordinances and high-school wrestling results? But the potential demise of local news sources isn’t a tragedy. It’s a business opportunity. The Internet still needs to get a lot more local. And it will.

It’s OK to let the newspapers die.

In the tradition of The Giant Pool of Money, its spinoff Planet Money and this fine piece of writing by Henry Blodget in the Atlantic Monthly, here’s a nice piece of animation that explains how we blew up the economy:

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

There are a lot of people lining up for stimulus dollars, a lot of ambitious and long-dormant projects being dusted off by governors and mayors across the country.

But there’s another group of opportunists taking advantage of the debate. I’m talking about the G.O.P. who are stonewalling and stalling in the name of prudent spending. At least that’s what they’d like us to think. They’re going through the proposed bill line by line and collectively decrying as wasteful almost everything in it.

I suspect something else is behind the political theater.

It’s possible the Republicans think they have nothing to lose by delaying or even derailing the President’s plan. It’s reasonable for them to believe they won’t be blamed if the final plan they approve ultimately fails to fix the economy. If it fails, the Republicans can be pretty sure that the president and not congress will bear the blame. Likewise if it succeeds, he will get most of the credit. Congress will share very little of either.

I’m not sure I’m so cynical as to suspect the Republicans of trying to engineer a failure, but looking at it as a purely political opportunity, they have much more to gain from failure than they do from success.

Here’s a remarkably simple formula for personal finance. It’s genius, and I wish someone had told us this sooner.

Well, the Eagles lost the NFC championship game… again. This is what Philadelphia teams do. Instead of outright sucking like you can always count on, say, Detroit doing, the Philly teams like to take their fans to the absolute brink of triumph before they break your heart.

I was a little bummed when the Eagles lost to the Cardinals last weekend, but at least they beat the Giants, and therefore I will always have this…

As I wandered through the crowded mall in Washington D.C. on Inauguration Day, chatting with people and overhearing many other conversations, a theme emerged.

Or rather, two themes.

Folks of older generations as well as the African-Americans on the scene seemed to see the day in largely symbolic terms. Obama is our first black president, sworn in the day after the Martin Luther King Jr. holiday. Obama represents a significant step toward realizing Dr. King’s dream of a just world and one in which men are judged by the quality of their character and not the color of their skin.

This symbolism was not completely lost on the younger folks on the mall, but people too young to have personally witnessed (or participated in) the civil rights movement seemed to see the day more pragmatically. To them, the election of Obama represents a shift back to a government that values competence and toward a post-partisan one that welcomes debate, seeks consensus and eschews ideology.

I think the big deal about Obama is that both perspectives are true, although I count myself mostly as one of the latter group.

In politics, superficial things matter, and if dark skin isn’t enough to kill a person’s chances of becoming president, then a funny name often is. I remember people saying in 1988 that “Michael Dukakis” was too ethnic-sounding a name for the White House. If that’s the case, then “Barack Hussein Obama” should have been catastrophic – especially in these Islamophobic times. Obama, however, transcended his name and his race (not to mention his exotic upbringing and his lack of experience) almost at the outset of his campaign. He transcended it and brought enough of us along with him to get elected president.

At a cocktail party before the inaugural ball, a question was circulating: “When did you decide you were going to vote for Obama – instead of Clinton, or McCain, or someone else, or no one at all?” One person said it was when her 10-year-old daughter told her she thought Obama would be the best president “for the future.” Another person said he refrained from choosing until Obama seemed like the candidate who had the best chance of defeating McCain.

As for me, Obama had me at “no red states or blue states, but only the United States.”

Who killed the economy? Hint: call your lawyer.

The witch hunt to expose the people responsible for the current financial crisis has been underway for several months, and there is no shortage of suspects. This week, however, I read a couple of articles that together lay out the best case so far.

Why Wall Street Always Blows It by Henry Blodget in the current Atlantic Monthly puts the reader in the shoes of someone sitting on a bad mortgage and at risk of being laid off. He surveys the list of candidates to blame for the mess we’re in.

• There were the predatory lenders of course. Mortgage brokers sold millions of “ticking time bombs” known as ARMs, and they encouraged people to lie about their incomes. But this was fine because a) home prices were going to go up forever, b) the buyers were probably going to sell before the mortgage rate adjusted anyway and c) they got fat commissions and bore none of the risk.
• There were the sleazy real-estate agents. Many probably knew it was a bubble but wanted to close as many sales as they could before it popped. On the other hand, real estate agents are always trying to close as many sales as possible, and most were probably as deluded and blind as everyone else.
• What about home buyers? If a mortgage broker encourages you to lie about your income, does that make it OK? A lot of people who knew it was a bubble expected it to burst five years ago and stayed out of the housing market only to see a gazillion idiots get crazy rich. Only then did they finally decide to jump in – right at the peak. The bottom line is that too many people forgot a home is a home first and an investment second.
• There’s Wall Street of course. ‘Nuff said.
• On the other hand, Investors demanded that their banks and brokers deliver higher returns than all the other banks and brokers, and if they failed, then the investors simply moved their money to one of those other ones. When this happened, bankers and brokers got fired. So, the career incentive (to not get fired) ended up outweighing the incentive to invest prudently, and bankers and brokers made more and more risky bets in a race to outdo each other.
• There’s the SEC, whose leaders seemed to be mostly concerned with positioning themselves for future jobs in the Wall Street firms they were supposed to regulate.
• And there’s Alan Greenspan, who most people now agree kept interest rates too low for too long.

The second article was a two-part Op-Ed piece in the New York Times by Michael Lewis and David Einhorn:

1. The End of the Financial World As We Know It
2. How To Repair a Broken Financial World

Lewis and Einhorn look at many of the same players, but they focus more on the SEC and the ratings agencies:

It’s almost as if the higher the rating of a financial institution, the more likely it was to contribute to financial catastrophe. But of course all these big financial companies fueled the creation of the credit products that in turn fueled the revenues of Moody’s and Standard & Poor’s.

These oligopolies, which are actually sanctioned by the S.E.C., didn’t merely do their jobs badly. They didn’t simply miss a few calls here and there. In pursuit of their own short-term earnings, they did exactly the opposite of what they were meant to do: rather than expose financial risk they systematically disguised it.

A big theme across these three articles is incentives. No one had any reason to care about the larger and long term consequences of what was happening. The short term – in some cases just the next commision – was all that mattered. Everone was making money, so everyone just assumed the system was working. The few naysayers who insisted it shouldn’t be working – or, preciently, that it would soon stop working – weren’t taken seriously.

Bernie Madoff’s victims are a case in point. They were happy enough not to ask any questions about where the exceptional returns were coming from, as long as there were returns. That Madoff, like most scammers, was unwilling to disclose anything about his investment strategies didn’t stop them from handing their money over.

Investors’ enthusiasm for complex and inscrutable investment vehicles like CDO’s and credit default swaps was not that different. People didn’t care to know what was happening inside the black box, as long as money was coming out of it.

Americans accept the reality of a broken and corrupt system – even take pains to preserve it – as long as enough people think they can personally profit from it. Most people may over-estimate their ability to predict the collapse of the system in the hope of timing their exit. They lose money and eagerly join the witch hunt.

Nonetheless, Americans still prefer this corrupt system for the same reasons people play the lottery. The lottery has a few winners and a multitude of losers, but the people who spend loads of money playing it no doubt imagine they will win someday. A corrupt system by its very nature offers opportunities for crafty and motivated people to “win,” and the possibility of tremendous wealth for a few is more enticing to too many Americans than guaranteed prosperity for all.

And this is why it will never be fixed.

The other day on my bus into downtown SF, a down-and-out looking guy stepped on and asked if anyone could give him the dollar he was short on bus fare. Amazingly, five or six people stepped up to oblige, and it got me thinking about the economy. I’ve seen people ask for money on the bus before, but I’ve never seen five people leap to lend a hand.

Hard times can create a kind of brotherhood. The word compassion literally means to suffer together, and when we don’t have to work too hard to put ourselves in another man’s shoes, then maybe we’re more inclined to help each other out.

Economic growth is not something that can go on forever. The last hundred years of exponential growth and unrestrained consumption has taken a serious toll on the earth and left entire cultures wrecked in its wake. For our own survival on this planet, we need to curb our appetites, but the dilemma has been how to slow down consumption without throwing the economy into turmoil.

Well our hand has been forced, and maybe we have the answer: You can’t slow down consumption without hurting the economy. The economy is in turmoil and consumption is way down. Each exacerbating the other. But maybe nothing good comes without some hard work and sacrifice – concepts that are antithetical to American existence. We have indigestion, and maybe this is just the medicine we need.

We can look forward to tough times, that’s certain. The last eight years have left some fresh scabs, but it’s the last hundred years that did the real damage. Tougher times are still ahead, but maybe there’s an upside. Maybe this is a blessing in disguise.

As we endure this downturn and after we come out the other side, maybe we’ll do a better job of taking care of each other, and the planet we share.

Yesterday, NPR’s On The Media aired an interesting segment about Bush and language. It wasn’t another jab at his butchering of English; it was a look at his administration’s creative branding of its policies, programs and  initiatives:

Gladstone’s guest, “Republican wordsmith” Frank Luntz, doesn’t anticipate that much of Bush’s lexicon will stick, but he seems to be referring to Bush’s oratory, rather than the Administration’s knack for naming. Regretfully, I think we’ll have to live with some of these names for a while (not to mention the damage they’ve done). In no particular order…

• Operation Enduring Freedom. I think you have to establish freedom before it can endure. As I read on a bumper sticker once: “We’ll Liberate the Shit Out of You.” Remember when this one was…
• Operation Infinite Justice. Because Bush’s top adviser is… The Lord, and The Lord apparently likes Tom Clancy novels. Either way, this war introduced us to…
• Unlawful enemy combatants. Not just enemy combatants, but unlawful ones. In any case, this means that even though we’re in the middle of a “war” on terror, the people we’re fighting are not “prisoners” of said war once we capture them. They’re “detainees.” And they’re unlawful. How convenient for us. Or maybe not, since the government can decide that any one of us is an unlawful enemy combatant pretty much whenever it wants to and with no explanation whatsoever. Think about this before you chuck your shoes at the president smart guy, or you might be subjected to…
• Enhanced Interrogation Techniques. Don’t worry though, it’s not torture. Sigh.
• The Axis of Evil. We have to trust him on this. He talks to The Lord, remember?
• Homeland Security. They tell us what color we are – red, orange, yellow (like Lifesavers… literally), and they keep American cities from being destroyed (except by hurricanes). We all feel much more secure with them around.
• Patriot Act. It tells us how to act patriotic.
• No Child Left Behind. And seven years later, no children are behind! Right?
• The Clear Skies Initiative. Because who’s not for clear skies? Wait, Bush? Really? But what about the name? I don’t get it.
• The Healthy Forests Initiative. Because who’s not for healthy forests? Wait, Bush? Really? But what… oh, I think I’m starting to understand.
• Compassionate Conservatism. Ahhh, this is where it all began.

For a final word on Bush’s knack for naming, I leave you with Jon Stewart.

Aspirational Time Horizon

Re-distributing the wealth? Turning the other cheek? Someone has to stop this guy…