The Deal Economy 2013

Home | Event | Blog | Awards

Print | Share | Discuss | Reprint

The life and death of the company story

by Robert Teitelman | Published June 30, 2011 at 12:03 PM

Deep within Gretchen Morgenson and Joshua Rosner's book on the mortgage crisis, "Reckless Endangerment," which I reviewed earlier this week, comes a line to ponder. The year seems to be around 2004, although that's a little vague. Home prices are rising quickly, and the pair note that "talk of rising real estate prices was ubiquitous. Everyone had a story, or had heard one, about fistfights breaking out at open houses and bidding wars ramping up prices of singularly unremarkable homes. Late-night cable television shows featured pitchmen advising how to get rich by putting no money down on properties." Then comes the sentence that piqued my interest: "The press picked up on the craze, publishing thousands of stories about a potential bubble in the real estate market."
Morgenson should know: Her columns in the Sunday New York Times were some of the more prominent examples of such stories. Rosner, more an analyst than a journalist, was pumping out warnings, some of which found their way into the media. Why is this so interesting? Because it provides further confirmation that the prevalent meme that the press, like the public at large, ignored, indeed, blinded by conflict and self-interest, missed the real estate bubble, is simply wrong. In fact, Morgenson and Rosner pithily offer what really occurred in the very next sentence: "While many talked of bubbles, few were genuinely disturbed by the rising tide of home prices." The press was not guilty of missing the rise of real estate prices, and warning of bubbles, but of not doing so in a way that truly alarmed a population that was basking in the wealth effect of steadily inflating assets.

OK, it's true: I have been arguing that very point for well on three years now. Some of this debate over the press' role, I have to admit, turns on rhetorical fine points. Many stories pointed to unsustainably rising home prices, and warned of problems--some even used that infinitely tricky, overused and imprecise term "bubble"--although elucidating all the linkages in the system, from a new home to a securitized vehicle floating off a big bank balance sheet to pathways of risk and leverage deep within the global financial system, did not occur. No one saw it all; I'm still not convinced that anyone could. That speaks to the realities of the current financial system: its profound interconnectedness, complexity and ambiguity. Regulators and bankers themselves had hardly a clue. And, pray tell, what if someone did work for a publication that gave the time and resources to investigate all this, and then the space to lay it all out. Would Aunt Mary, about to sign up for a subprime ARM, or Uncle Joe using his home equity to buy a boat, have cared?

Still, even if they couldn't stop the juggernaut, Morgenson and Rosner's book, while flawed, does demonstrate the merits of serious, long-term financial reporting. In fact, another chapter in their book, on the transgressions of mortgage originator NovaStar, reminded me of one thing that has changed in the business over the past few decades. Morgenson and I both spent time in our salad days working for Jim Michaels at the old Forbes magazine (I preceded her by a few years, but we have never met). She acknowledges Michaels in the book--he died in 2007, but stopped editing the magazine in 1999--and he was, as anyone who spent a day there knows, a tough, sometimes ferocious, taskmaster with lofty standards. But this isn't about Michaels, of whom there are many tales well worth telling; this is about the approach Michaels demanded, a kind of story that was far more ubiquitous two or three decades ago than today, when it has almost disappeared. This was familiarly known as the "company story," which was to business magazines what the case study was to business schools. Forbes in those days was stuffed with company stories; the golden road to promotion (or survival) came by tackling--and occasionally bringing down, like World War I aces--companies. This was a hard road. It presupposed a deep understanding of business, particularly accounting. The best of the Forbes stable of senior writers in my early '80s years--Allan Sloan, Howard Rudnitsky, Dick Stern, Subrata Chakravarty, Jim Cook, and others--all knew accounting (or could find someone who did) at a level that was rare in journalism then and certainly today. And they were edited by a group, including Michaels who seemingly saw and edited everything, who knew it just as well or better.

Forbes wasn't alone of course. Businessweek and Fortune had long written company stories; and there was the often-brilliant Wall Street Journal. But at Forbes throughout the '80s, Michaels made it a kind of single-minded focus. The magazine seemed to be always on the hunt; and as a result, the big-name writers (of which I was not one) seemed to regularly receive tips from whistleblowers, defrocked accountants, and analysts with theories. The kind of collaboration that Morgenson clearly forged with Rosner was commonplace at Forbes. The tradition of the negative company story was a legitimate check on corporate excess, along with the shorts, shareholder suits and, occasionally, the analyst community. And by the way, Forbes under Michaels, particularly when Malcolm Forbes was alive, made an outrageous amount of money. Somebody was reading that stuff.

Today, you have to hunt long and hard to find serious company stories, and most of them are the kind of bland stock market stories, often positive, that Michaels used to throw hissy fits about, or CEO hagiographies. As a genre, it feels almost as dead as the long-form profile (or, for that matter, as moribund as the analyst community, which first sold out to banking, then got eviscerated by Eliot Spitzer and shredded by lousy economics: the parallelism with journalism here is striking). And, one does wonder if some of those truly fly-by-night mortgage operations like NovaStar, Fremont, New Century, Countrywide Financial--even Citigroup, with all its complexities--might have been taken apart more effectively if the financial media cared a little bit more about businesses as operations. And this raises the question: What happened? Why did the company story cease to be a staple of business reporting?

A warning: What follows is sheer speculation, which I invite readers to supplement and revise. Michaels retired as the dot-com bubble was growing; but the age of the company story was already passing. Perhaps it took a powerful and obsessive personality like Michaels to drive that machine. But it was bigger than a single editor or magazine. Michaels was a sensitive commercial editor and the magazine environment had been rapidly changing. There wasn't yet real competition from the Internet in the '90s; but it was the allure, commercially and aspirationally, of high technology that wrought fundamental changes. Most of the business magazines fell hard for the glories of technology in the '90s; and the money and euphoria of tech reporting (remember Industry Standard, Red Herring and Upside, not to say Business 2.0, Wired and Fast Company) swept away some of the skills and genres of the past, including the deeply reported company story. Reporting and writing a company story--understanding the machinery of a business and locating its flaws--seemed increasingly stodgy, not to say cranky, in an age of indexing, day trading, derivatives and transformational technologies. The demise of the company story also reflected the decline of the old-fashioned, value-oriented stock picker. At Forbes at least, conservative politics increasingly filled the bare patches left by the retreat of company stories. Forbes in particular embraced the confluence of technology and conservative politics, embodied in the figure of tech prophet George Gilder. It still does.

Company stories in the tech boom began to look a little old-fashioned, requiring skills that took years to develop and writing about companies that, many preached, would be swept away in the next wave of change. And many of them, of course, were negative. Given a choice between the revolutionary future and the retrograde past, corporate advertisers tended to vote for the former, true or not. Company stories were certainly the province of an older demographic, and they clearly lost out to tech stars or star CEOs (Buffett, Gates, Welch, Jobs) on the cover of magazines that increasingly defined performance as their ability to attract grazing readers to newsstand copies. And while they represented truly hardcore personal finance, they were slowly supplanted by the more bullish, if glib, "buy these stocks now" mentality, which sold well in supermarket checkout lines.

Times change, it is true. By the time the tech boom had imploded, the magazines found themselves in trouble. The tech business magazines nearly all blew away. The Internet survived and the mania for young readers accustomed to the Web remained; indeed, the newsstand skills of big heads and big type fit well with this surfing Webcentric demographic. And the truth is, once certain skills were lost--the ability to write long narratives, a facility with accounting and taxes, sectoral expertise--they couldn't easily be revived, particularly when the economics are difficult. Even when publishing economics improved, it was harder to find reporters who would dig into balance sheets and understand what they read, just as it's increasingly difficult to find long-form profile writers who know anything. The failure to penetrate the forbiddingly complex Enron was one warning sign; the challenge of tackling complex banks or wayward mortgage peddlers was another. It wasn't that anyone or any publication necessarily sold out. It was that for editors and reporters the cost-benefit equation didn't work out.

Today the thrust of business and financial journalism has shifted, like trading, toward high-frequency reporting: the quick blog, the news story, the broad view, the rapid response. We live more in real time; deciphering old accounts seems slow and boring. There are strengths to this kind of journalism, just as there were weaknesses of the previous age, which is why journalists have less power than folks think--certainly when it comes to prediction or reshaping a mass consciousness. Still, while it's truly questionable whether the crisis could have been foreseen, not to say avoided, by that eternal panacea, investigative reporting, it is possible that events, driven by companies, would not have moved quite so fast and quite so dangerously if more reporters and analysts routinely dug into their affairs. I'll grant that aspect of the blame-the-journalist meme. More importantly, however, it does make you wonder what we're missing right now while we sit here chewing the cud. - Robert Teitelman

Share:

blog comments powered by Disqus

Free preview

This is only a preview of The Deal's sophisticated coverage. Explore the real-time intelligence as researched and reported on by our team of financial journalists with a license to The Deal Pipeline. Click here for more information.

Meet the journalists

Robert Teitelman

Editor in chief

Bob Teitelman, editor in chief and a member of the company’s executive committee, is responsible for editorial operations of print and electronic products. Contact

Movers & Shakers

Goldman, Sachs & Co. veteran Tracy Caliendo will join Bank of America Merrill Lynch in September as a managing director and head of Americas equity hedge fund services. For other updates launch today's Movers & shakers slideshow.

Video

Fewer deals despite discount debt

When will companies stop refinancing and jump back into M&A? More video

Free preview

Editor in chief

Movers & Shakers

Sectors