Tag Archives: Michael Lewis

The lost art of journalism

About a month ago, venture capitalist Chris Sacca wrote this on Twitter.

Journalism: The art of ignoring all the facts that don’t support the article you’ve already written.

I retweeted this and replied:

The same could be said for my blogging….

Sacca’s quote generated some discussion on Twitter and some email as well.  Some asked if I believed it, some just trashed it, while some wondered if he was right.

Here are my personal thoughts on the subject, something I have been thinking about for over 16 years.

Lawrence Phillips In 1995, a Nebraska football player named Lawrence Phillips violently beat his his ex-girlfriend, Kate McEwen.  He dragged her down a flight of stairs and it was a horrific scene.  A situation in any other university, the player would be expelled.  Instead of being kicked off the team, kicked out of school, he suspended from the Husker football team by coach Tom Osborne.  He sat out a game and then started to play again.  There was some national outrage but at the local Cornhusker press conference, the local media didn’t ask Osborne a thing about it.  The media was dependent on it’s access to Osbourne and wasn’t going to let a shameful decision by the coach affect that access and was silent when security kicked the network news crew out of there for asking hard questions. 

The same thing happened during the Rick Pitino debacle in Louisville, the Jim Tressel fiasco at THE Ohio State, and basically everywhere John Calipari that has coached.  Don’t even get started with Rogers Sportsnet brining in the compulsive rumor fabricator Eklund onto their trade deadline show.  He was proven to be a liar before they ever brought him on their air.  In many media markets the local sports coverage is so dependent on it’s access to the program that it has stopped covering the program and instead becomes beholden to it and transforms into it’s P.R. arm (it doesn’t have to be that way, New York Rangers coach John Tortorella and New York Post hockey writer Larry Brooks essentially hate each other)

During the same time of the Lawrence Phillips assault and whitewash, investigative journalist Gary Webb was writing a series of articles about the Dark Alliance which accused the CIA of drug smuggling.  The San Jose Mercury News stood by the story, backed away from the story and when things got tough for the paper, tossed Webb under a bus which ended his career as an investigative reporter.  After Webb committed suicide, other papers started to verify his stories but the Mercury News blinked in the face of opposition.

Probably the most famous case of mass newsroom and editorial failure was the lead up to the Iraq War.  The New York Times, Washington Post, USA Today, and most other papers were touting the American government line that there was weapons of mass destruction in Iraq.  At the same time some American and most of the world’s media outlets were saying that there was no weapons of mass destruction.  It was kind of surreal.  I would wake up every morning and read the New York Times, Washington Post and USA Today and see compelling (and competing) arguments for the invasion of Iraq while in the evening I would come home and watch Kudlow & Cramer which had a regular series of experts (including Scott Ritter, the former UN weapons inspector) on the show all stating that there was no WMD in Iraq.  I remember after the invasion of Iraq was complete and there was no WMDs thinking, “I got it right, CBC got it right, Kudlow & Cramer got it right, CBC got it right… why did almost everyone else get it wrong?”  The New York Times later talked about being caught up in the mood of the nation, believing Colin Powell, and their government sources.  So much for questioning everything.

We saw the same thing with the Irish media and their boosterism of the Irish economy the expansion of real estate values.  From Michael Lewis’ article in the New Yorker

The Irish IndependentKelly wrote his second newspaper article, more or less predicting the collapse of the Irish banks. He pointed out that in the last decade they and the economy had fundamentally changed. In 1997 the Irish banks were funded entirely by Irish deposits. By 2005 they were getting most of their money from abroad. The small German savers who ultimately supplied the Irish banks with deposits to re-lend in Ireland could take their money back with the click of a computer mouse. Since 2000, lending to construction and real estate had risen from 8 percent of Irish bank lending (the European norm) to 28 percent. One hundred billion euros—or basically the sum total of all Irish public bank deposits—had been handed over to Irish property developers and speculators. By 2007, Irish banks were lending 40 percent more to property developers than they had to the entire Irish population seven years earlier. “You probably think that the fact that Irish banks have given speculators €100 billion to gamble with, safe in the knowledge that taxpayers will cover most losses, is a cause of concern to the Irish Central Bank,” Kelly wrote, “but you would be quite wrong.”

This time Kelly sent his piece to a newspaper with a far bigger circulation, the Irish Independent. The Independent’s editor wrote back to say he found the article offensive and wouldn’t publish it. Kelly next turned to The Sunday Business Post, but the editor there just sat on the piece. The journalists were following the bankers’ lead and conflating a positive outlook on real-estate prices with a love of country and a commitment to Team Ireland. (“They’d all use this same phrase, ‘You’re either for us or against us,’ ” says a prominent bank analyst in Dublin.) Kelly finally went back to The Irish Times, which ran his article in September 2007.

So what causes entire newsrooms to get a big story wrong?  One local reporter suggested it was trusting different sources which kind of makes sense but it doesn’t explain why the CBC, CTV, and CNBC went a different direction than the New York Times and Washington Post.  This wasn’t the case of two reporters hearing two different stories about Jerome Igninla being traded, this was a story that sent a nation to war for years and the reporting was very one sided by the Times and Post.   Why did most of the American media buy the Pentagon sell job and most of the international media did not?

While it is popular to say that everyone got it wrong, a post by Arriana Huffington from 2004 that everyone did not.

Among them is Joe Lauria, a reporter who has covered the UN since 1990 for a variety of papers, including the London Daily Mail, the Daily Telegraph, and the Boston Globe. He bridles at Miller’s claim. "I didn’t get it wrong," he told me. "And a lot of others who covered the lead up to the war didn’t get it wrong. Mostly because we weren’t just cozying up to Washington sources but had widened our reporting to what we were hearing from people like Mohamed ElBaradei and Hans Blix, and from sources in other countries, like Germany, France, and Russia. Miller had access to these voices, too, but ignored them. Our chief job as journalists is to challenge authority. Because an official says something might make it ‘official,’ but it doesn’t necessarily make it true."

This is no time for rewriting history, or for allowing those who helped the Bush White House market the war to fall back on the comfort and safety of a collective "we all screwed up." After all, as Jack Shafer pointed out on Thursday, even in the New York Times there were "at least four non-Miller stories published during the war’s run-up that glower with skepticism about the administration’s case and methods."

So what went wrong at the Times?  Michael Massing’s essay in the New York Review of Books offers this up.

Why, I wondered, had it taken the Times so long to report this? Around the time that Jehl’s article appeared, I ran into a senior editor at the Times and asked him about it. Well, he said, some reporters at the paper had relied heavily on Chalabi as a source and so were not going to write too critically about him.

After looking at this, he concludes

This points to a larger problem. In the period before the war, US journalists were far too reliant on sources sympathetic to the administration. Those with dissenting views—and there were more than a few—were shut out. Reflecting this, the coverage was highly deferential to the White House. This was especially apparent on the issue of Iraq’s weapons of mass destruction—the heart of the President’s case for war. Despite abundant evidence of the administration’s brazen misuse of intelligence in this matter, the press repeatedly let officials get away with it. As journalists rush to chronicle the administration’s failings on Iraq, they should pay some attention to their own.

Judith Miller, who was responsible for much of the New York TImes reporting blamed her sources.  This confused Slate’s Jack Slater as Miller claimed her roll is to share the what people in official positions tell her rather than question and investigate what she is hearing.

My job was not to collect information and analyze it independently as an intelligence agency; my job was to tell readers of the New York Times as best as I could figure out, what people inside the governments who had very high security clearances, who were not supposed to talk to me, were saying to one another about what they thought Iraq had and did not have in the area of weapons of mass destruction. [Click here for Miller Clip 3.]

More disturbingly, a later investigation by Byron Calame, suggested there was a fair amount of editorial incompetence in the New York Times Newsrooms as well.

By the spring of 2003, the newsroom was overwhelmed by the Jayson Blair fiasco, and Mr. Raines and the managing editor, Gerald Boyd, left the paper. When Bill Keller became executive editor on July 30, 2003, he focused on dealing with the trauma of the Blair scandal. Nevertheless, with questions growing about weapons in Iraq, he told Ms. Miller she could no longer cover those issues. But it took until May 2004 – more than a year after the war started and about a year after it became clear that there were no weapons of mass destruction in Iraq – before The Times acknowledged in an editors’ note that the coverage was flawed. Mr. Keller then directed her to stay away from all national security issues.

The Times weren’t the only ones who had jumped on the WMD bandwagon.  The Washington Post was in there as well.

On December 12, for example, The Washington Post ran a front-page story by Barton Gellman contending that al-Qaeda had obtained a nerve agent from Iraq. Most of the evidence came from administration officials, and it was so shaky as to draw the attention of Michael Getler, the paper’s ombudsman. In his weekly column, Getler wrote that the article had so many qualifiers and caveats that

the effect on the complaining readers, and on me, is to ask what, after all, is the use of this story that practically begs you not to put much credence in it? Why was it so prominently displayed, and why not wait until there was more certainty about the intelligence?

The question is asked,

And why, he might have added, didn’t the Post and other papers devote more time to pursuing the claims about the administration’s manipulation of intelligence? Part of the explanation, no doubt, rests with the Bush administration’s skill at controlling the flow of news. “Their management of information is far greater than that of any administration I’ve seen,” Knight Ridder’s John Walcott observed. “They’ve made it extremely difficult to do this kind of [investigative] work.” That management could take both positive forms—rewarding sympathetic reporters with leaks, background interviews, and seats on official flights—and negative ones—freezing out reporters who didn’t play along. In a city where access is all, few wanted to risk losing it.

Which isn’t a lot different than what happened at the University of Nebraska with Tom Osbourne.  The other factor is the same that played into the Irish financial implosion (and the American housing boom), reporters were afraid of being on the wrong side of public opinion.

Such sanctions were reinforced by the national political climate. With a popular president promoting war, Democrats in Congress were reluctant to criticize him. This deprived reporters of opposition voices to quote, and of hearings to cover. Many readers, meanwhile, were intolerant of articles critical of the President. Whenever The Washington Post ran such pieces, reporter Dana Priest recalls, “We got tons of hate mail and threats, calling our patriotism into question.” Fox News, Rush Limbaugh, and The Weekly Standard, among others, all stood ready to pounce on journalists who strayed, branding them liberals or traitors—labels that could permanently damage a career. Gradually, journalists began to muzzle themselves.

Not everyone censored themselves.

In the weeks following the speech, one journalist—Walter Pincus of The Washington Post—developed strong reservations about it. A longtime investigative reporter, Pincus went back and read the UN inspectors’ reports of 1998 and 1999, and he was struck to learn from them how much weaponry had been destroyed in Iraq before 1998. He also tracked down General Anthony Zinni, the former head of the US Central Command, who described the hundreds of weapons sites the United States had destroyed in its 1998 bombing. All of this, Pincus recalled, “made me go back and read Powell’s speech closely. And you could see that it was all inferential. If you analyzed all the intercepted conversations he discussed, you could see that they really didn’t prove anything.”

By mid-March, Pincus felt he had enough material for an article questioning the administration’s claims on Iraq. His editors weren’t interested. It was only after the intervention of his colleague Bob Woodward, who was researching a book on the war and who had developed similar doubts, that the editors agreed to run the piece—on page A17. Despite the administration’s claims about Iraq’s WMD, it began, “US intelligence agencies have been unable to give Congress or the Pentagon specific information about the amounts of banned weapons or where they are hidden….” Noting the pressure intelligence analysts were feeling from the White House and Pentagon, Pincus wrote that senior officials, in making the case for war, “repeatedly have failed to mention the considerable amount of documented weapons destruction that took place in Iraq between 1991 and 1998.”

Two days later, Pincus, together with Dana Milbank, the Post‘s White House correspondent, was back with an even more critical story. “As the Bush administration prepares to attack Iraq this week,” it began, “it is doing so on the basis of a number of allegations against Iraqi President Saddam Hussein that have been challenged—and in some cases disproved—by the United Nations, European governments and even US intelligence reports.” That story appeared on page A13.

The placement of these stories was no accident, Pincus says. “The front pages ofThe New York Times, The Washington Post, and the Los Angeles Times are very important in shaping what other people think,” he told me. “They’re like writing a memo to the White House.” But the Post‘s editors, he said, “went through a whole phase in which they didn’t put things on the front page that would make a difference.”

John Walcott of Knight Ridder The McClatchy Company suggests it was partially due to some lazy reporting.

If nothing else, the Iraq saga should cause journalists to examine the breadth of their sources. “One question worth asking,” John Walcott of Knight Ridder says, “is whether we in journalism have become too reliant on high-level officials instead of cultivating less glamorous people in the bowels of the bureaucracy. “In the case of Iraq, he added, the political appointees “really closed ranks. So if you relied exclusively on traditional news sources—assistant secretaries and above—you would not have heard things we heard.” What Walcott calls “the blue collar” employees of the agencies—the working analysts or former analysts—were drawn on extensively by Knight Ridder, but by few others.

It paints a pretty ugly picture of journalism.  The part of it that gave me hope was what happened to Judith Miller.  First of all, Maureen Dowd went to town on Miller’s reporting 

Judy admitted in the story that she ‘got it totally wrong’ about W.M.D. ‘If your sources are wrong,’ she said, ‘you are wrong.’ But investigative reporting is not stenography. . .

The next day, public editor, Byron Calame wrote,

Ms. Miller may still be best known for her role in a series of Times articles in 2002 and 2003 that strongly suggested Saddam Hussein already had or was acquiring an arsenal of weapons of mass destruction… Many of those articles turned out to be inaccurate."

Barack Obama's birth certificate Have they changed?  Well today Fox News asked their viewers regarding Barack Obama’s long form birth certificate, "is it good enough for you?"

The Nation looks back at the reporting that defined the Mission Accomplished event.  A mission so accomplished that there was another 4,000 American and a couple hundred thousand Iraqi casualties.  Try to control the grimace as you read what Maureen Dowd wrote.

George Bush - Mission Accomplished Maureen Dowd in her column declared: “Out bounded the cocky, rule-breaking, daredevil flyboy, a man navigating the Highway to the Danger Zone, out along the edges where he was born to be, the further on the edge, the hotter the intensity.

“He flashed that famous all-American grin as he swaggered around the deck of the aircraft carrier in his olive flight suit, ejection harness between his legs, helmet tucked under his arm, awestruck crew crowding around. Maverick was back, cooler and hotter than ever, throttling to the max with joystick politics. Compared to Karl Rove’s ”revvin’ up your engine” myth-making cinematic style, Jerry Bruckheimer’s movies look like Lizzie McGuire.

“This time Maverick didn’t just nail a few bogeys and do a 4G inverted dive with a MiG-28 at a range of two meters. This time the Top Gun wasted a couple of nasty regimes, and promised this was just the beginning.”

So much for the paper of record.  It asks the question, if I can’t expect the New York Times, Washington Post, or the any newspaper in Ireland to stand up to popular opinion and keep digging for the truth, why expect more from The StarPhoenix or local television stations.  While they probably aren’t offered rides on Air Force One, how do I know that selections on The StarPhoenix’s 52 things to love about Saskatoon aren’t connected to advertising buys? (especially when reading this article) or electoral coverage is not influenced by the same access issues that sucked in Judith Miller and a lot of other respected journalists?  Who knows what information that James Wood has published after Premier Brad Wall offered to help him win the office football pool?

I almost everything before this paragraph last the day that Sacca’s tweet appeared.  Since then I have been wondering, do I trust journalism.

First of all, there is a difference between news entertainment and journalism.  What FOX News practices, what MSNBC does, and what SUN TV parades out isn’t journalism.  It’s driven by ratings and is all about profit.  Now I may find Keith Olbermann a lot more entertaining and less offensive then Glenn Beck, it’s still not journalism.  Does anyone even on the right think that Sarah Palin is on FOX News for any other reason than to further her own political aspirations (faltering as they are)?

I believe in it because as I have grown older and wiser, I know it when I see it.  This winter a reporter came in and did a story where she opened with the line, “I am just going through the motions on this story but at least I don’t have to endure another day of —-.”  Seriously.  Another local reporter assured me that I was off the record and direct quoted me.  I had read of stupid reporters in Warren Kinsella’s book Kicking Ass in Canadian Politics and The War Room but thought they were confined to covering politics (or Nebraska football).  Apparently it’s not and I learned it the hard way.  Even I have a blacklist of local reporters I will no longer talk to and sadly I keep a voice recorder in my office drawer after being misquoted.

Do I trust journalism?  I don’t know but I have grown to trust specific journalists and yes, I trust many outlets.  In addition to The StarPhoenix there are papers and magazines that are an important part of my daily life, including those that have screwed up big time in the past (I’m looking at you, The New York Times and the Washington Post).  They are the papers and magazines that I toss in front of Mark and later Oliver that will teach them a global worldview, the importance of figuring out both sides of a story, and in the case of some papers, how to handle a situation when you have screwed up.  Others will teach Mark what happens when you lose your intellectual integrity and only choose to see one side of an argument so I guess Fox News does have some value after all.

When Irish Eyes are Crying

Michael Lewis on how Merrill Lynch stuck the Irish people with 106 billion euros in debt.

Ireland’s financial disaster shared some things with Iceland’s. It was created by the sort of men who ignore their wives’ suggestions that maybe they should stop and ask for directions, for instance. But while Icelandic males used foreign money to conquer foreign places—trophy companies in Britain, chunks of Scandinavia—the Irish male used foreign money to conquer Ireland. Left alone in a dark room with a pile of money, the Irish decided what they really wanted to do with it was to buy Ireland. From one another. An Irish economist named Morgan Kelly, whose estimates of Irish bank losses have been the most prescient, made a back-of-the-envelope calculation that puts the losses of all Irish banks at roughly 106 billion euros. (Think $10 trillion.) At the rate money currently flows into the Irish treasury, Irish bank losses alone would absorb every penny of Irish taxes for at least the next three years.

In recognition of the spectacular losses, the entire Irish economy has almost dutifully collapsed. When you fly into Dublin you are traveling, for the first time in 15 years, against the traffic. The Irish are once again leaving Ireland, along with hordes of migrant workers. In late 2006, the unemployment rate stood at a bit more than 4 percent; now it’s 14 percent and climbing toward rates not experienced since the mid-1980s. Just a few years ago, Ireland was able to borrow money more cheaply than Germany; now, if it can borrow at all, it will be charged interest rates nearly 6 percent higher than Germany, another echo of a distant past. The Irish budget deficit—which three years ago was a surplus—is now 32 percent of its G.D.P., the highest by far in the history of the Eurozone. One credit-analysis firm has judged Ireland the third-most-likely country to default. Not quite as risky for the global investor as Venezuela, but riskier than Iraq. Distinctly Third World, in any case.

There is an interesting part in the article that shows the role the Irish papers had in not exposing the problems and had been duped into playing a role of being a booster of Team Ireland.

Kelly wrote his second newspaper article, more or less predicting the collapse of the Irish banks. He pointed out that in the last decade they and the economy had fundamentally changed. In 1997 the Irish banks were funded entirely by Irish deposits. By 2005 they were getting most of their money from abroad. The small German savers who ultimately supplied the Irish banks with deposits to re-lend in Ireland could take their money back with the click of a computer mouse. Since 2000, lending to construction and real estate had risen from 8 percent of Irish bank lending (the European norm) to 28 percent. One hundred billion euros—or basically the sum total of all Irish public bank deposits—had been handed over to Irish property developers and speculators. By 2007, Irish banks were lending 40 percent more to property developers than they had to the entire Irish population seven years earlier. “You probably think that the fact that Irish banks have given speculators €100 billion to gamble with, safe in the knowledge that taxpayers will cover most losses, is a cause of concern to the Irish Central Bank,” Kelly wrote, “but you would be quite wrong.”

This time Kelly sent his piece to a newspaper with a far bigger circulation, the Irish Independent. The Independent’s editor wrote back to say he found the article offensive and wouldn’t publish it. Kelly next turned to The Sunday Business Post, but the editor there just sat on the piece. The journalists were following the bankers’ lead and conflating a positive outlook on real-estate prices with a love of country and a commitment to Team Ireland. (“They’d all use this same phrase, ‘You’re either for us or against us,’ ” says a prominent bank analyst in Dublin.) Kelly finally went back to The Irish Times, which ran his article in September 2007.

A quick look back at the role of media in all of these failures (and also the WMD debacle) was that the media moved from a role of rigorous scrutiny and was co-opted by the need to be on board with the mood of the people.  We saw it before in other booms and in the United States with the WMDs.  This seems simplistic but with the cuts in newsrooms, does anyone expect anything differently.  When was the last time your local paper broke a really big or complex story open?  It does happen but when reporters are supposed to write more articles, more blog posts, and waste more time on Twitter, there isn’t a lot of time for the traditional three martini lunch or long form journalism.  Those that want to do investigative pieces aren’t likely to stick around at a paper when they are just a word mill which accelerates the trend towards one source stories. (for the record, we get two copies of The StarPhoenix at work and two editions of our Kindles at home)  I am biased towards the media (there goes my FOX News career).  We never had a lot of money growing up and corners had to be cut to make ends meet but from the first day in our new house in 1984, there was a StarPhoenix there and every page was read.  We grew up with my mom always lecturing us that “you can watch the news but you won’t understand the issue until you have read the paper.”  When I first started to travel by myself when I was 15, mom always lectured me to pick up a local paper from a news stand.  Even now when I am travelling, I find some time to pick up a cities flagship paper, whether in Chicago for work or Las Vegas for a vacation because I am supporting someone looking for the truth.  It scares me when the media abdicates that roll, whether it is the local media not wanting upset a powerful football coach and losing access, when it’s not wanting to run an article because it goes against popular (and flawed) economic ideas or doesn’t want to come across as unpatriotic in the aftermath of 9/11 (anyone found any WMD’s lately?)

The papers were right, “he was either for or against us”.  Except Kelly was the one that was for Ireland and the papers were against it.  They just didn’t realize it.

Bill Kinnon on writing

Bill has a wonderful post on writing.  The entire thing is worth reading but this one got me thinking

In 2004, Nielsen BookScan tracked the sales of 1.2 million books and found that nine hundred and fifty thousand of them sold fewer than ninety-nine copies.

So we are looking at author royalties of a couple hundred bucks and a couple of conference speaking gigs.  In the end is it worth the effort?

Bill’s prescription to the cure is to write better stories and he is dead on correct (although writing stories is harder than it sounds, check out this editorial review from Amazon.com) .  Like a lot of bloggers, I get a lot of books sent to me by almost every major publishing house.  In fact two came today and both of them look horrible.  In fact 99% of the books that I see coming my way, including many by friends are horrible.  They are poorly researched, not fact checked (if you are going to use history or science as an illustration, do your homework people!)  It’s one of the reasons why I no longer talk about theological titles here, so many of them aren’t worth my time to read and when I do read them, I am confronted by the fact that these are three hours I will never get back.  Do I keep wasting time on this or move on?  I generally find something by Michael Lewis or Steven Johnson and move on (which proves Bill’s point).

My suggestion for a lot of writers is not to bother writing a book period.  Forget the conferences, forget the interviews on Christian radio, forget the church basement book signings.  Instead throw your efforts into whatever it is that you are good at.  Chances are your ideas are intrinsically linked to your personality and your context and not as transferable as you would think.   That’s why even if I lost some weight and got a blond wig and a sailboat, I still couldn’t lead like Bill Hybels.  The reason isn’t that I didn’t mention his golf shirts (and let’s be honest, he has some nice golf shirts), it is that I am not Bill Hybels and I live in Saskatoon, not South Barrington.

Secondly, is the time away from doing what you do well or time away from learning something that you don’t do well, worth 1000 book sales and $5,000 in royalties?  Is the mini-book tour worth it?  Is the time spamming your friends worth it? What about moderating message boards on infrequentbooksales.com, and trying to get people to fan you on Facebook worth it? 

Thirdly, is giving the copyright of you idea to your publisher worth it?  Especially in the church I don’t know why we don’t see more writers open sourcing their content.  If you believe your idea came from the Holy Spirit, does turning that over to FOX (though Zondervan) seem to be the best course of action?  If you want to publish at least consider negotiating so your book is published under a Creative Commons license.

I have heard Michael Slaughter of Ginghamsburg talk about writing being the best way to influence people and in some ways he is right but as Bill Kinnon pointed out, is less then 100 copies influencing anyone other than your closest friends?

Would the time be better of spent writing a blog (and then doing what Guy Kawasaki did and put it out as a book), doing an excellent series of videos on YouTube which tell your story (great example of this here or here – what either of these stories be as compelling in book form?), or what about creating a world class webcast like what Spencer Burke did with TheOoze.tv or an excellent podcast?  If you are committed to writing, why not introduce your ideas to communities like TheOoze or Next-Wave

I like Rob Bell’s writing but if I was him and had to choose between writing and Nooma, I would choose Nooma. Also wouldn’t the time be better spent putting it into whatever made you think you should write about it.  I am not being flippant.  I remember the great line in Jim Collins’ book Built to Last where he talks about Lee Iacocca being distracted from running Chrysler because he was too busy being Lee Iacocca.

Finally, I know the church goes on and on about visionary leadership and visionary pastors and everyone including the pastors dog is a visionary (Maggi is visioning a piece of pizza as I type) but there have few game changing ideas that I have read in the last decade.  Most of it is regurgitated stuff and doesn’t need to see the light of day again.  Maybe the best use of our time would be coming up with some new ideas, instead of repackaging some old ones.

Liar’s Poker by Michael Lewis

Liar's Poker by Michael Lewis I picked up Liar’s Poker on Friday while wandering through Indigo.  I was wandering through another section of the store and something went off in my head which said, “I wonder if they have a paperback of Liar’s Poker in here”.  They did and I read it last night.

The story is of Michael Lewis’ career at Salomon Brothers as a bond trader in London but it is also a biography of Salomon Brothers during the 1980s.

Mike Todd left a comment telling me, “I must have read Liar’s Poker 10 times”.  No word on whether or not Mike was a Big Swinging Dick during his time on Bay Street though.  I am nine times behind Mike but I could see myself catching up.  Of course I have read another book by Michael lewis, Moneyball at least a dozen times in case the Blue Jays finally get tired of J.P. Ricciardi and need my help in the General Manager’s office.

The book is interesting as it documents the planting of the seeds which would over two decades later become the foundation of the sub-prime meltdown.  In March 2008, Nobel Prize laureate in Economics Robert Mundell named one of the major character in the book inserted Lewis Ranieri among the "Five Goats Who Contributed to the Financial Crisis" of 2008.

What struck me is how do companies get this large when they are managed so poorly.  The book kind of answers that.  They get lucky for a time in attracting brilliant managers and leaders but eventually the ineptitude of the upper managers overcomes the brilliance of those underneath them and they slide back to their state before the hot streak.  As Lewis points out, they got into trading mortgage bonds at the right time combined with the problems with the Savings and Loans crisis and they won big.  There was no corporate brilliance, only capitalizing on luck, timing, and some foresight by middle managers.  When the timing, circumstances, or luck changed, Salomon Brothers seemed unable to be able to cope with them and the firm suffered a slow demise until later bought, sold and bought and sold again.  Now it is a division of Citi Group and what was once the most powerful firm on Wall Street, doesn’t even have a logo to be found by Google Images.  It’s gone.

In the end it reinforces the idea that we need to pay a lot more to the context in which success happens; on Wall Street, in a fast growing church, a fast expanding franchise… before we hold them up as an example of what to do or decide to wait and see and take a longer term view on what is going on.

The book has been re-released by Penguin and if you want to see where the crisis of 2008 started, Liar’s Poker is a good place to start.

The Long Weekend

I hope everyone is having a great Victoria Day long weekend.  My original plans involved flying to Hamilton to take in Cultivate Gathering.  At the same time we are short staffed at work and the reality was there was a really good chance I was going to have to work this weekend and we were out of people to cover.  With great reluctance I cancelled my flight on the probability that I would have to work.

B.C. Legislative Building The good news is after several calls to the airline and Airmiles, we changed the ticket to take Wendy, Mark, and I to Victoria for our anniversary in October.  Mark hasn’t seen the ocean and Victoria is such a great city with some good friends in close proximity.

Since I was planning to be out of town, Wendy decided to take off to the cabin for the weekend with some friends and the kids.  When the tickets were cancelled, we decided I would chill out at home with the dog and catch up on some sleep unless I have to work.  It means that Maggi and I get to hold down the fort by ourselves and I get to do some reading.  I finally picked up Michael Lewis’s book, Liar’s Poker and Paul Krugman’s book, The Return of Depression Economics and the Crisis of 2008 and so by Monday I will hopefully have learned something that I didn’t know today.  I am not sure what Maggi will be reading.

I am also planning to do some biking this weekend.  I am already a couple hundred kilometers behind Dave King.

One Good Example, One Bad Example

There's no way like the American way

Newsweek is pointing to Canada as an example to follow in terms of banking regulation.

The legendary editor of The New Republic, Michael Kinsley, once held a "Boring Headline Contest" and decided that the winner was "Worthwhile Canadian Initiative." Twenty-two years later, the magazine was rescued from its economic troubles by a Canadian media company, which should have taught us Americans to be a bit more humble. Now there is even more striking evidence of Canada‘s virtues. Guess which country, alone in the industrialized world, has not faced a single bank failure, calls for bailouts or government intervention in the financial or mortgage sectors. Yup, it’s Canada. In 2008, the World Economic Forum ranked Canada’s banking system the healthiest in the world. America’s ranked 40th, Britain’s 44th.

The must read link however is Michael Lewis’ feature in Vanity Fair about how Iceland basically destroyed their economy beyond recognition for generations to come.

Iceland instantly became the only nation on earth that Americans could point to and say, “Well, at least we didn’t do that.” In the end, Icelanders amassed debts amounting to 850 percent of their G.D.P. (The debt-drowned United States has reached just 350 percent.) As absurdly big and important as Wall Street became in the U.S. economy, it never grew so large that the rest of the population could not, in a pinch, bail it out. Any one of the three Icelandic banks suffered losses too large for the nation to bear; taken together they were so ridiculously out of proportion that, within weeks of the collapse, a third of the population told pollsters that they were considering emigration.

The moral of the housing crisis

Michael Lewis on the sub-prime mortgage crisis

The real moral is that when a middle-class couple buys a house they can’t afford, defaults on their mortgage, and then sits down to explain it to a reporter from the New York Times, they can be confident that he will overlook the reason for their financial distress: the peculiar willingness of Americans to risk it all for a house above their station. People who buy something they cannot afford usually hear a little voice warning them away or prodding them to feel guilty. But when the item in question is a house, all the signals in American life conspire to drown out the little voice. The tax code tells people like the Garcias that while their interest payments are now gargantuan relative to their income, they’re deductible. Their friends tell them how impressed they are-and they mean it. Their family tells them that while theirs is indeed a big house, they have worked hard, and Americans who work hard deserve to own a dream house. Their kids love them for it.

Across America, some version of this drama has become a social norm. As of this spring, one in 11 mortgages was either past due—like Ed McMahon’s $4.8 million jumbo loan on his property—or in foreclosure, like Evander Holyfield’s $10 million Georgia estate. It’s no good pretending that Americans didn’t know they couldn’t afford such properties, or that they were seduced into believing they could afford them by mendacious mortgage brokers or Wall Street traders. If they hadn’t lusted after the bigger house, they never would have met the mortgage brokers in the first place. The money-lending business didn’t create the American desire for unaffordable housing. It simply facilitated it.

It’s this desire we must understand. More than any other possession, houses are what people use to say, “Look how well I’m doing!” Given the financial anxieties and indignities suffered by the American middle class, it’s hardly surprising that a lower-middle-class child who grows up in a small house feels a burning need to acquire a bigger one.

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Give Thanks?

Michael Lewis on five reasons we can give thanks for the financial meltdown of the decade

Our willingness to believe that we can hire some expert to tell us how to outperform markets is a big problem, with big consequences. It underpins Wall Street’s brokerage operations, for instance, and leads to a lot more people giving out financial advice than should be giving out financial advice.

Thanks to the current panic many Americans have learned that the experts who advise them what to do with their savings are, at best, fools. Merrill Lynch & Co., Morgan Stanley, Citigroup Inc. and all the rest persuaded their most valuable customers to buy auction-rate bonds, telling them the securities were as good as cash.