Friends, lovers, investors and the messy world of disclosure

By Anthony De Rosa
May 17, 2011

Michael Arrington, the bull in the china shop that is the tech industry, recently revised his 2009 proclamation that he would divest himself from the companies he was covering and stop investing in startups to avoid a conflict of interest. In his revision, he announced he has begun investing in startups again and rationalizes it by making the investments public record. This has led to cackles from his peers, most notably from Kara Swisher who pointed out the hypocrisy of his boss Arianna Huffington to allow Arrington to be the sole exception to her policy of not allowing her employees to invest in the companies they cover.

Investments, however, are just one component of what can lead to a conflict of interest. I would submit that a far bigger conflict that goes unspoken and leads to much worse journalism are the relationships writers have with the people they cover. Friends, lovers and acquaintances muddle who gets covered and how they are treated by the people covering them. I can speak with some degree of seeing this with my own eyes when it comes to the New York tech startup beat and the founders they cover. Many of the same people writing about these startups are good friends with the principals, and the nearly flawless fawning coverage reads more like an extended arm of their public relations group than anything resembling real journalism.

On top of that you have people who hop between being journalists and working as either advisers or evangelists who participate in promotional events for products. The conflict of being an adviser or an evangelist is obvious, diluting the person’s journalistic ethics and their ability to be impartial.

The participation at various events can be harmless in some cases if it’s simply to cover the event and gain information about a product. Too often, though, the participants wind up becoming a shill for the very product and, in fact, in some cases, are even used in the promotional material. They also make their affinity for the product or service known through social media. These folks can no longer be taken seriously on any journalistic level.

Would disclosure help fix this problem? If there was better transparency of the investors, would the relationship the writer has with their subjects lead to a more informed reader who could take those biases into account when reading an article? In a study I was directed to by Boston.com’s Courtney Humphries, the answer is that disclosure may actually make writers less ethical.

The study (PDF) found the participants felt that if journalists disclosed their conflicts they would have carte-blance to lay their biases on thick. Assistant professor of organizational behavior at the Yale School of Management Daylian Cain along with with Don Moore at the Haas School of Business at the University of California Berkeley and Professor of Economics and Psychology George Loewenstein at Carnegie Mellon University conducted the study.

In the end the only basis for our ability to weed out good information from bad, propaganda from well balanced editorial or commentary, is our own motivation to seek out alternate sources. Al Gore once changed the famous Thomas Jefferson quote: “A well informed citizenry is the only true repository of the public will” to “The well-informed citizenry is in danger of becoming the ‘well-amused audience’“.

Given the rapt attention toward the political aspirations of a certain New York City real-estate mogul in recent months, it’s not difficult to see which of the two quotes applies more accurately to our modern culture. We’re all too eager to reinforce that which we already believe rather than look for proof to the contrary.

One comment

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Nice blog. I’m a blogger and write on finance and I mention peer to peer lending and make it clear that I have invested in it – full disclosure. I don’t mention any other investments; I wouldn’t promote anything without being totally honesty. I think promoting companies you have invested in is a little dishonest anyway and so it’s better most of the time not to mention them. I also try to stay away from companies that I have had bad experiences with and try not to mention them. I make an exception for Microsoft though! My blog (I write some satire) – http://mike10613.Wordpress.com

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