Felix Salmon

Link-phobia and plagiarism

Felix Salmon
Oct 17, 2011 05:17 UTC

Jack Shafer has an unforgiving take on l’affaire Kendra Marr:

The plagiarist defrauds readers by leading them to believe that he has come by the facts of his story first-hand–that he vouches for the accuracy of the facts and interpretations under his byline. But this is not the case. Generally, the plagiarist doesn’t know whether the copy he’s lifted has gotten the story right because he hasn’t really investigated the topic. (If he had, he could write the story himself.) In such cases he must attribute the material he borrows so that at the very least the reader can hold somebody accountable for the facts in a story.

Or to put it another way, a journalist who does original work essentially claims, this is true, according to me. The conscientious journalist who cites the work of others essentially makes the claim that this is true, according to somebody else. The plagiarist makes no such claims in his work. By having no sources of his own and failing to point to the source he stole from, he breaks the “chain of evidence” that allows readers to contest or verify facts. By doing so, he produces worthless copy that wastes the time of his readers. And that’s the crime.

This is all true. But Marr reminds me of Zack Kouwe more than anything else. And if Marr pulled a Kouwe, she isn’t guilty of the crime that Shafer is accusing her of.

Kouwe was never cut out to be a blogger. When he saw a good story on some other site, he would re-report it, rather than just link to it. And I suspect that what happened with Marr was similar.

Let’s say that Marr saw a NYT story about Senator X. She thinks it’s an important story, she phones up Senator X’s office, asks them if the story is true, and they say yes. The right thing to do, in that case, is to link to the NYT story, and say that you’ve confirmed it with your own sources. The wrong thing to do is to try to rewrite the story yourself, since you haven’t really reported it, and you don’t really know what you’re talking about. And the way you get caught doing the wrong thing is by using NYT copy wholesale, without attribution. Then you can get done for plagiarism.

But still, you did confirm the facts in the story; you can, with honesty, say this is true, according to me.

What we saw with Kouwe, and what I think we’re seeing with Marr, is a peculiar new form of plagiarism — one that exists only in a world of continuous news. In the olden days, if you saw a story in the NYT and wanted to copy it, you would have to wait a whole day until your own paper came out, and that would give you lots of time to do your own reporting and write your own story. These days, there’s a lot of pressure, at places like Dealbook and Politico, to match stories quickly — so quickly that it’s significantly easier to just copy-and-paste your rival’s material than it is to craft your own story when you’re not much of an expert on it in the first place.

In the age of the link, such activity should never need to happen. But there’s a reason that the plagiarist copies rather than linking. And the reason is that linking and aggregation is still not remotely as respected, in newsrooms, as reporting is. So some young reporters, wanting to make a name for themselves, plagiarize instead of linking, in an attempt to take credit for the work of others. It’s still — quite rightly — a firing offense. But it’s not quite — or not necessarily — the crime that Shafer hates so much. It can just be a horrible side-effect of link-phobia, which exists even at web-native publications like Politico.


Late to comment but I think that over at ZeroHedge there is an interesting and very successful approach to blogging. It begins with Tyler Durden using the innocuous byline “Submitted by Tyler Durden” at the lead of every main page article, which provides continuity (almost like a brand or seal of approval). In some cases the article that follows is by another author whose identity is presented in a secondary byline or within the text. In other articles ZeroHedge will from time to time make extensive use of research and analysis ironically from the banks that he/they are so critical of. In every case they are careful to provide attribution of the research though perhaps not strictly according to the Chicago Style.

A case in point is this recently published and excellent article based in part on analysis from Morgan Stanley and featuring graphics prepared by Morgan Stanley.

The Truth Behind Europe’s (€1.7 Trillion) “Triangle Of Terror”
Submitted by Tyler Durden on 10/21/2011

http://www.zerohedge.com/news/truth-behi nd-europes-%E2%82%AC17-trillion-triangle -terror

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How the tech boom is bad for innovation

Felix Salmon
Oct 14, 2011 22:34 UTC

Jon Stokes has a fascinating column making a credible case that the VC and tech bubble is hampering development of the cloud.

I recently had a sit-down chat with Ping Li, a venture capitalist at Accel Partners who does investments across the layers of the cloud stack… he explained that the talent shortage is stifling fundamental innovation in the cloud space.

To do really fundamental engineering innovation of the kind that was done, say, in the early days of Google and VMware, you need to hire and retain teams of talented engineers. But in today’s go-go funding environment, top engineers are being enticed with truckloads of money to break off and form two- and three-person startups. This phenomenon, explains Li, is why “many of the really big innovations happen in less frothy times.” He did go on to clarify that “some great companies do get created in these times (like Amazon in the last bubble). It’s just harder given talent shortage.”

I asked Jon if this meant that real innovation in the cloud requires pretty big teams, and can’t be done by smaller startups. And the answer there is absolutely yes — if you’re looking for something huge like Amazon’s AWS, which required the full focus of Amazon’s large technical staff over a multi-year timeframe. Scalable websites can, thanks to Amazon’s cloud, now be launched with a handful of employees. But to develop the cloud itself takes serious resources — to the point at which it’s now conventional wisdom that you need to be Amazon, Apple, Google, or Microsoft to even play in that game. And even they’re starving for talent.

There’s the email I got a few months ago from a friend of mine and product manager at Apple, who was wondering if I knew any cloud computing hackers that they could hire. When we get to the point where Apple product managers on the client side are reaching out to their personal networks in search of cloud coding talent for the world’s largest tech company, you know it’s bad out there.

Jon frames the problem as one of supply and demand:

The current crisis in the cloud is the product of too many dollars and transistors chasing too few coders and sysadmins. It will take a while for the latter to catch up with the former… unless, of course, another major downturn strikes. It seems ironic that less money could equal more innovation, but it wouldn’t be the first time that a wave of downsizing and tight money boosted productivity.

I asked him whether looser skilled-immigration policies might help, and he said probably not:

I think that the root problem isn’t one of geography–it’s that this stuff is happening so fast (i.e. Moore’s Law and my cheap transistors argument) that the hardware build-out is outstripping programmer education. And by “programmer education” I mean not only the number of programmers being trained in aggregate across the world, but also programming as a discipline’s ability to empower ordinary mortal to develop and deploy software on these massively parallel systems. The cloud has to be “de-ninjafied”, so to speak. Getting max productivity out of the cloud has to be brought within the grasp of non-ninjas, the way that, say, VisualBasic from MSFT brought building a relatively complex custom relational database application within the grasp of the average local technical college graduate.

This rings true to me. The cloud is not located in any particular country, and if there were great engineers who could be hired to work on it from Beijing or Bangalore, I’m sure that Apple and Amazon are more than capable of doing that. What needs to be done here is basically cloud-development grunt work: taking a young and complex technology, and building the tools which can bring it to the masses. There’s not a lot of glory in that — while companies which live in the cloud, like Airbnb, can find themselves worth billions, the engineers who work on the cloud are more like the utility workers of the internet. And it’s easy to see why they might be finding more attractive opportunities, right now, elsewhere.

Here’s how Jon puts it:

In order to move the cloud itself forward in a major way by solving large batches of related fundamental technical problems you need longer timeframes. You can fiddle around in the guts of the cloud, smoothing out this and optimizing that, and adding features and bells and whistles. But to do the big projects, you need time.

Now, there are shorter-term innovations that can and will get done in the cloud, so VCs have plenty to fund. But to shift the tectonic plates, you need time and resources.

This isn’t like sustainable energy — it’s not something that the government can or should be stepping in to fund. More money pouring into the tech space would only exacerbate the current problems.

There’s a case to be made that AWS is the result of what happened when Amazon, after the dot-com bust, found itself with an unusual degree of access to the time and talent of a large number of engineers. The cloud is young; it could do with a lot more development along those lines. But as Jon says, we’re unlikely to see such fundamental evolution in cloud architecture for a while. Because for the time being, smaller, lighter, and riskier projects look much more attractive.


guys cloud is just mainframe on someone elses network connected to the internet. That may be oversimplified but that’s the basic idea. Not a lot different than computing before personal computers. Just bigger.

But you want to know why you can’t find people. Look at the tech industry.

1. Older tech employees are considered dried up and beyond innovation.

2. Entry to Mid level jobs are drying up. Most are being outsourced. Programmers are treated like chained dogs. If they complain it is pointed out that 100 people in India want thier job.

3. Tech jobs require more knowledge, a far bigger part of your income training and keeping up as your career progresses and you will forever be working in “Cost” center instead of a “Profit” center and be treated as a second class citizen as a result.

For 20 years now I’ve been listening to my fellow Techies tell high school students to RUN RUN RUN to anything else but technology.

Also IT is becoming more and more like the construction industry. You have to pack up and move on every few years to stay employeed. In a world where husband and wife need to work to have a decent standard of living that’s a problem.

Look at the Wall street salaries up till the bust and the fact that an MBA is still a more reliable degree to stay employeed than a programming degree and it’s easy to understand why you can’t find enough IT guys.

Lack of people willing to get technical degrees is a problem that’s been build for years and it’ll take many years to fix it.

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Nick Rizzo
Oct 14, 2011 22:23 UTC

A few links from Counterparties.com:

Greece’s bondholders are preparing for some pain — Bloomberg

The S&P cut Spain’s credit rating — Reuters

Credit Suisse will reportedly close its commercial-mortgage-backed securities desk — WSJ

The US labor market is becoming less dynamic — FT Alphaville

America might not enter a recession, because the economy’s already so weak — Washington Post

State and local pension shortfalls total $4.4 trillion — State Budget Solutions

Pepsico has dreams of becoming a “global dairy powerhouse” — WSJ

Spotify already has more than 250,000 US users – Reuters


“America might not enter a recession, because the economy’s already so weak”

Reminds me of the lyrics, “Freedom’s just another word for nothing left to lose…”. There is some truth to that.

Another perspective to consider: True wealth lies in a frugal lifestyle. If you habitually spend a lot of money, then you need to MAKE a lot of money to balance the budget. That is a chancy proposition, even at the best of times. But if you live cheaply, saving/investing the rest, then you are far less likely to come up short.

Would be interested to see Felix’ perspective on Herman Cain’s 9-9-9 tax plan. Supposedly that would replace the personal income tax, corporate income tax, and FICA tax? (Do the numbers actually work for that?)

This would definitely be less progressive than our current system, since lower-income families are effectively exempt from the federal income tax. Yet they still pay 7.65% FICA tax — so this would add roughly 10% to their tax burden. Might be ways to ameliorate that impact?

I’ve seen suggestions that it would create a disincentive for businesses hiring, since the 9% corporate tax would be assessed on labor costs as well as profits, however that would more or less replace the existing FICA tax. Not much change there? Moreover, the exemption for capital expenditures would presumably be limited to goods purchased from American companies or subsidiaries (thus ensuring that the tax is collected from somebody). That would go a long way towards putting American business on a more even footing with imports.

The effect on the ultra-wealthy would be minimal. Buffett’s tax bill would actually rise. I’m sure he’s not alone in that.

Truly, the primary selling point for this plan (or something similar) is that it would dramatically expand the tax base and thus reduce the marginal tax rates required to raise the same revenue.

* A national sales tax tags imports and domestically produced goods equally. No more advantage to off-shoring production and profits.

* A 9% corporate tax rate would be far less of a deterrent to repatriating foreign profits than the present 35% corporate tax rate. I suspect most companies would happily bring the profits home at even a 15% rate. The money is more useful in the US than when it is stuck overseas.

* Eliminating the morass of deductions, credits, exemptions, and special rules that presently confuse the income tax system would be a huge accounting savings for individuals and corporations alike. You earn money, you pay 9%. And yes, I would lose the deductions I take for mortgage interest, charitable deductions, and state taxes. But at a 9% marginal rate, I’ll end up paying roughly the same amount that I do today and with MUCH less bookkeeping.

Would be interested to hear criticisms, hear ways that this might be improved without a dramatic increase in the marginal tax rates at any level of the system. My sense is that a 15% tax doesn’t much affect behavior, but a 35% tax rate obviously does.

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Two mortgage plans

Felix Salmon
Oct 14, 2011 14:51 UTC

With the enormity of the jobs crisis looming over the 2012 presidential election, it’s worth being reminded every so often that there’s a huge housing crisis in this country as well. And so it’s worth keeping an eye on new ideas there.

Martin Feldstein has one, which I don’t much like. He gets one thing right: we need massive principal reductions. But the way he’d like to do them is very flawed.

For one thing, he’s very keen on converting non-recourse mortgages to recourse mortgages: “in exchange for reduction in principal, the borrower would have to accept that the new mortgage had full recourse — in other words, the government could go after the borrower’s other assets if he defaulted on the home”.

In theory, I’m a fan of recourse mortgages, if they’re taken out voluntarily in a healthy housing market, and so long as they can be written down in bankruptcy proceedings. But I don’t like Feldstein’s idea here. It’s a bit like the Brady Plan: in exchange for a reduction of debts, the debtor is forced to switch from an easy-to-default-on instrument (a bank loan, or a non-recourse mortgage) to a harder-to-default-on instrument (a sovereign bond, or a recourse mortgage). That’s the kind of thing which should be done only when (a) the debtor has a seat at the negotiating table; and (b) when the debt reduction is a one-and-done deal which undoubtedly reduces the debt burden to a manageable, sustainable level.

In this case, however, the homeowner is just being given a take-it-or-leave-it choice; and the principal reduction only reduces the value of the mortgage to 110% of the value of the home, even as house prices continue to decline. The homeowner is still underwater — and, of course, is living in a very tough economy. Here’s Dean Baker:

There will be more questionable loans that will go into the program. Some of these people may be able to make their payments after the principle write-down. They will then get to live in their home until they move and in all probability never accumulate a dime in equity (but the bank got half of its loss picked up by the government).

Others will take the deal and then find themselves still unable to pay their mortgage — remember we still have 9.1 percent unemployment and most people in Washington don’t seem to give a damn. Under the Feldstein plan the debt will now become a recourse loan, which means that the bank can hound foreclosed homeowners until the day they die for any portion of the mortgage that is not repaid by the sale of the house.

The other big problem with the Feldstein plan is that if it works, it will involve the government writing hundreds of billions of dollars in checks to the banks. This is dreadful politics, and it’s not much better as policy. If there’s going to be a huge subsidy being paid into the housing market, better it go to homeowners — who can then use the money to pay down their mortgage — than that it go to the banks.

How about this, then: if the bank does a principal reduction so as to increase its chances of being repaid, the government will pay the homeowner 25% of that principal reduction, on condition that the money is used to pay down the new mortgage.

That would be cheaper for the government (depending on how transfers to Frannie are counted), and would also bring a significant number of homeowners back into positive-equity territory, which has to be a good thing.

Meanwhile, Alan Zibel has a trial balloon from the Obama administration which is reasonably smart but which is unlikely to make much substantive difference. Basically, Frannie should sell off an equity tranche of its mortgages, which is explicitly and credibly not guaranteed by the government.

Investors in this “first loss” position would take on an additional risk of absorbing losses, but would receive a higher interest rate. While investors would be taking on some risks because home prices are still falling in many areas, mortgage lenders have significantly tightened their standards in the aftermath of the housing bust.

Andrew Davidson, a mortgage-industry consultant in New York, said there is likely to be enough interest from investors to buy around $10 billion in securities issued as part of a pilot program.

The idea here is to bring private money back into the MBS market slowly — by having Frannie sell off more and more of its bonds in the form of these first-loss bonds. They would reduce the amount that the government is on the hook for housing-market losses, and they would also insulate the government from some of those losses.

But the market in these new securities would only evolve slowly, and it would have very little effect on the housing market.

If Feldstein’s plan is too generous to banks, then, the Obama administration’s plan is just too ineffective. But maybe something small and ineffective is the best we can hope for right now, given political realities. Certainly Feldstein’s plan, even if it were any good, is a political non-starter.

Housing debt is going to come down, somehow, over time. That can happen with government help, or it can happen messily, through continued foreclosures for years to come. The former would be better. But the latter is what we’re going to get.


“How would you describe the current situation”

Also with inhibited economic mobility, but at least that will repair itself within 10-25 years. I expect that most of the loans will have either defaulted or will be above water a decade from now. In 25 years, they will ALL have either defaulted or been paid off. Under your proposal, the mobility would be inhibited indefinitely.

“People who own their homes outright sell them often”

There is a huge difference you are failing to recognize. If you own the equity in your home, then you get a large check when you sell. This check can be used to purchase another home of comparable value. You can afford to move. If the Fed owns the equity in your home, then you get NO check when you sell. You either have to rent (in which case your expenses go up) or take out a mortgage on a new home (in which case your expenses go up). You are granting people the right to use the Fed’s capital — interest free — as long as they stay put.

You are right that it isn’t exactly rent control, but it is a very strong incentive to stay put, worth easily a thousand dollars a month on an average home.

“allowing homeowners to give up an equity stake in housing”

It isn’t truly an “equity stake” if they have negative equity in the home. And that is the rub.

Run the calculations some time (I presume you are familiar with the discounting of cash flows)? A homeowner with 20% equity in their home might gladly trade that for the right to stay in the home mortgage-free for as long as they wish. It would be the difference between paying that monthly mortgage and not. Sure, they “lose” that 20% equity, but that only represents ~2 years of fair rent anyways. They might then stay in the home for decades. A homeowner with negative equity would be getting an even greater gift.

Seriously, try running the numbers. Or give me specifics and I’ll do it for you. I’m not opposed to a solution, I simply don’t think you’ve hit on the right one.

(1) Mobility would be inhibited for decades, not merely 5-10 years. If it doesn’t cost you anything to “own” the property, there is no reason to ever sell. Even if you move out, you would rent rather than giving up that free capital.

(2) There would be no possibility of reversing the money-drop until people tire of using the Fed’s free capital. (Unless you permit the Fed to dictate when the house is sold?)

(3) Assuming it costs you $300,000 per mortgage, the $3T of new money that you seem to be talking would cover just 10 million households. Nice for them, but what about the other 90% of the country? The solution to existing inequities is not to perpetuate new ones.

One of the basic principles of capitalism is that capital has value. If you give people the free use of capital, it is a perpetual gift. Why would anybody ever give that up?

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Nick Rizzo
Oct 13, 2011 22:54 UTC

More than two-thirds of big EU banks would fail revised stress tests — Bloomberg

The Euro voting process explained — The Reformed Broker

Loan sharking in China amounts to 10% of its GDP — NYT

What high-yield bond spreads are telling us — Credit Writedowns

Another explanation for late-day market volatility: FT articles — FT Alphaville

Dimon: “All things considered” our Q3 earnings were “reasonable” — Reuters

Let’s revisit the perverse accounting where banks record bond losses as gains — Bloomberg

Economists predict US median incomes won’t bounce back until 2021 — WSJ

Raj will be spending up to the next eleven years in the pokey — Dealbook

Have start-ups seen funding dry up? — TechCrunch

This is a small sample of the full smorgasbord of links available on Countparties.com

On George Soros, Occupy Wall Street, and Reuters

Felix Salmon
Oct 13, 2011 20:44 UTC

Wouldn’t it be ironic if Occupy Wall Street — the soi-disant “99%” — were being secretly funded by billionaire Davos Man George Soros, exemplar of the 1%? Well, no, it wouldn’t, actually. As Noreen Malone points out, lots of the 1% have, like Soros, expressed sympathy with OWS, including Bill Clinton, Ben Bernanke, and at least one member of the Buffett family. And when you’re sympathetic to a cause, and have lots of money, often you donate money to that cause.

But in this case it looks very much as though there’s no connection at all between Soros and OWS. That makes sense: for one thing, Soros is a creature of Wall Street himself, and for another, he tends to fund well-organized groups with specific goals. Which, clearly, OWS isn’t.

Which is why today’s Reuters story about the connection between Soros and OWS has elicited so much derision around the blogosphere. Beyond allowing us to shoehorn the #ows and #soros hashtags into a single tweet, there’s no real substance to it at all:

There has been much speculation over who is financing the disparate protest, which has spread to cities across America and lasted nearly four weeks. One name that keeps coming up is investor George Soros, who in September debuted in the top 10 list of wealthiest Americans. Conservative critics contend the movement is a Trojan horse for a secret Soros agenda.

Soros and the protesters deny any connection. But Reuters did find indirect financial links between Soros and Adbusters, an anti-capitalist group in Canada which started the protests with an inventive marketing campaign aimed at sparking an Arab Spring type uprising against Wall Street. Moreover, Soros and the protesters share some ideological ground.

Yes, there are people — led, it would seem, by Rush Limbaugh — who are loudly speculating that Soros is funding OWS. There might conceivably be a story in their rabble-rousing, which could point out that Soros’s agenda is hardly secret — it’s right there on his website for all to see.

Alternatively, as John Carney points out, there’s an interesting story in the way that OWS has raised money, through crowdsourced means like Kickstarter.

But the angle we went with is not a story, especially since Soros says he’s never even heard of Adbusters.

According to disclosure documents from 2007-2009, Soros’ Open Society gave grants of $3.5 million to the Tides Center, a San Francisco-based group that acts almost like a clearing house for other donors, directing their contributions to liberal non-profit groups. Among others the Tides Center has partnered with are the Ford Foundation and the Gates Foundation.

Disclosure documents also show Tides, which declined comment, gave Adbusters grants of $185,000 from 2001-2010, including nearly $26,000 between 2007-2009.

The Tides Center is not some great sloshing pool of money which takes in money and hands it out. Yes, one of the many things that it offers foundations is the opportunity to create collective action funds, enabling a group of donors to channel their money in a collaborative manner. The fact that Soros gave money to Tides and that Tides gave money to Adbusters in no way means that there’s an “indirect financial link” between the two. That’s like saying that there’s an “indirect financial link” between me and Mitt Romney, because I lend money to Citigroup (I’m a depositor at Citibank), and Citigroup has given money to Romney.

Besides, OWS wasn’t even dreamed of back in 2009. If somehow some Soros money did make it to Adbusters between 2007 and 2009 — despite Adbusters co-founder Kalle Lasn’s clear statement that “he’s never given us a penny” — then that’s still a good two years away from any connection to OWS.

The article is particularly problematic from my perspective because I’m incredibly proud of Reuters’s long tradition of impartial journalism. I’m on the opinion side, not bound by such things, and if you think I’m biased you’re right. (I should mention here explicitly that this post, just like everything else on this blog, is my personal opinion. It may or may not be shared by others within the organization. But it should emphatically not be taken as representing the views of Thomson Reuters.)

Reuters news stories like the one about OWS are held to a very high standard of integrity, independence, and freedom from bias. And there’s lots in this article which tilts hard to the right.

There’s the idea that Rush Limbaugh is a good place to look if you want someone to “sum up the speculation” and provide the news hook for the entire story. The idea that the Council on Foreign Relations is a “liberal cause”. The idea that the protests were “triggered” by a campaign poster featuring a “battle-ready mob” of people “dressed in anarchist black”. The description of OWS as “the so-called occupation”. And then there’s this:

Since its obscure beginnings, the campaign has drawn global media attention in places as far-flung as Iran and China. The Times of London, however, was not alone when it called the protests “Passionate but Pointless.”

Reuters cannot — must not — get a reputation as a right-wing media outlet. We have to report the news as impartially as we can. In this case, there was no story, and nothing to report. Inventing a tenuous and intellectually-dishonest link between Soros and OWS might get us traffic from Matt Drudge — but that’s traffic which, frankly, we don’t particularly value or care for. Much more importantly, it serves to undermine the heart of what Reuters stands for. And we can never afford to do that.

Update: After a rather confusing series of events, the old version of the story is still online, while a recast version is here. Both of them now carry the headline “Soros: not a funder of Wall Street protests”. Which is an improvement.


Just as I thought — FELIX has no response and can’t admit he’s been had.

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FT Tilt, RIP

Felix Salmon
Oct 13, 2011 15:32 UTC

It never even made it to its first birthday. FT Tilt, the high-priced emerging-markets blog launched with some fanfare in January, has now quietly died.

This is a sad day: Tilt was run by the FT’s two most innovative journalists, Paul Murphy and Stacy-Marie Ishmael, and was a bold attempt to view the developing world from a novel perspective. The FT could and should learn a lot from Tilt’s innovations, not least the rich and various forms of engagement it had with its readers.

The FT should also learn from Tilt’s failures, which are to be found in the business model rather than in the journalism. Tilt was a blog run by a small team of smart young journalists — but it was priced at thousands of dollars a year, and I could never understand where the value was meant to lie. Those journalists had amazing sources and language skills in countries around the world, but they were ring-fenced from the FT itself, and didn’t really contribute noticeably to the newspaper. Ironically, they might actually contribute more now, going forwards, in the wake of Tilt’s execution: FT spokeswoman Darcy Keller tells me that the newspaper is trying to find jobs for them. I hope it does; as Stacy says, they have done tremendous work, and deserve to be rewarded for it.

The model of charging very large amounts of money for information about global markets which is relatively cheap to collate just doesn’t seem to work — Tilt is now dead, and Roubini.com is up for sale. The fact is that smart, economically-literate people are never going to be that cheap — so you need to have some kind of decently-sized market for what they do. And both Tilt and Roubini.com have been priced way too high to reach even a four-digit subscriber base. What’s more, these kind of services get better as their audience grows — they learn from their audience. Keeping the audience artificially tiny by implementing a massive paywall is self-defeating.

No startup ever achieves success in less than one year, so the FT’s decision with respect to Tilt does seem hasty. What they should have done is make Tilt free to all FT subscribers, and see if it took off that way. FT Alphaville has proved that bloggy brand extensions can be extremely successful, if done right, and Tilt’s material was certainly of great interest to a very important part of the FT’s global audience.

It’s good for media companies to experiment, and it’s necessary that some of those experiments fail. But I don’t think that FT Tilt failed, in terms of its core journalistic output. I think that the FT got greedy for subscription revenues from day one, and never let Tilt grow and thrive as it could and should have done. I absolutely blame the overlords for this one, not the people who did the real work.

Update: Richard Desai-Green, Roubini’s CFO, responds:

We have 1,000 clients.

You seem to be treating info published in the media as fact but in fact the CNBC journalist had his numbers wrong.

We are cash flow positive.

We’re well capitalized.

We are continuing to hire people.

We just opened an office in India and hired 9 people.

We’re continuing to grow our business.

We can never say we won’t sell the company but I can say at this time we don’t have any offers and the executive team of our company is as committed as ever.

September was a record sales month for us and we’ve started October really well and expect our growth to continue.


Felix, your post has sparked off some thoughts. I’ve quoted you in a blog on the closure of Tilt ‘a cautionary tale of product development’ just published bit.ly/rWRUef

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The Obama administration’s biggest macroeconomic mistake

Felix Salmon
Oct 13, 2011 14:05 UTC

I’m late to Ezra Klein’s big article about whether the Obama administration could have avoided our current economic woes, because I was having dinner last night with the head of the Bureau of Economic Analysis, and I wanted to see what he had to say first. And I’m glad I did!

In any case, here’s Ezra, who looks at the famous chart projecting falling unemployment with the stimulus plan — something which, obviously, never happened.


To understand how the administration got it so wrong, we need to look at the data it was looking at.

The Bureau of Economic Analysis, the agency charged with measuring the size and growth of the U.S. economy, initially projected that the economy shrank at an annual rate of 3.8 percent in the last quarter of 2008. Months later, the bureau almost doubled that estimate, saying the number was 6.2 percent. Then it was revised to 6.3 percent. But it wasn’t until this year that the actual number was revealed: 8.9 percent. That makes it one of the worst quarters in American history. Bernstein and Romer knew in 2008 that the economy had sustained a tough blow; they didn’t know that it had been run over by a truck.

This is an argument I’m very sympathetic to. There’s a counter-argument, which Ezra goes into at some length, which says that even if we’d known how bad the economy was at the end of 2008, it simply wasn’t politically possible to get a bigger stimulus than the one we got. But how far off were we, really? I talked to the director of the BEA, Steve Landefeld, last night, and he made the case that we weren’t all that far off. If he’s right, the Romer and Bernstein projections wouldn’t have been all that different even if we’d known the exact figure.

One thing it’s important to remember, here, is that the numbers Ezra’s quoting are quarterly figures which are then annualized by raising them to the fourth power. So what we’re actually talking about, for the fourth quarter of 2008, was en estimate that the economy had shrunk by 0.9% that quarter, which was ultimately revised to say that the economy had in fact shrunk by 2.2%. That’s a big difference, of 1.3% of GDP in one quarter alone. So how come, if you look at the size of the recession as a whole, the revision actually seems to shrink, to just 1%?

The revised estimates show that for the period of contraction from 2007:Q4 to 2009:Q2, real GDP decreased at an average annual rate of 3.5 percent; in the previously published estimates, it had decreased at a rate of 2.8 percent. The cumulative decrease over the six quarters of contraction is now estimated as 5.1 percent, compared with 4.1 percent in the previously published estimates.

The problem here is that the “previously published estimates” were the ones which came out a few months after the Romer-Bernstein graph, showing the economy shrinking by 6.3% in the fourth quarter of 2008. Here’s the BEA’s chart; note that it simply doesn’t show the 3.8% estimate.


But what this chart does show is that the really big miss, as far as GDP statistics are concerned, was in the fourth quarter; the other quarters weren’t nearly as bad. And I just don’t believe that a single datapoint for advance GDP would have thrown off the unemployment estimates of some of the world’s smartest economists by that much. Would Romer and Bernstein have projected slightly higher unemployment numbers if they’d known the truth about GDP? Probably. But I doubt they’d have been substantially higher. And there’s no way that their “with stimulus plan” estimates would have gotten anywhere near 10%.

Ezra does a very good job of explaining why that is. Romer and Bernstein were basically treating the recession as though it were a common-or-garden cyclical downturn. Which was a big mistake, and one which was pointed out in March 2009 by Carmen Reinhart and Ken Rogoff. “The recessions that follow in the wake of big financial crises tend to last far longer than normal downturns, and to cause considerably more damage,” they wrote, adding that “so far the U.S. experience has mirrored past deep banking crises around the world to a remarkable extent”. And economies simply do not recover quickly from deep banking crises — financial crises, as a rule, cause L-shaped recessions rather than V-shaped ones.

The fiscal prescription for an L-shaped recession is very different from the fiscal prescription for a V-shaped recession. And what we got was a prescription for something which would accelerate the pace at which we recovered. It was not something which would try to fix the fundamental problem of overleverage, which both caused the crisis and which now threatens to hold back the economy for a decade or more.

Here’s Ezra:

In late 2008, when the economy was cratering, Holtz-Eakin convinced McCain that the way out of a housing crisis was to tackle housing debt directly. “What we proposed at the time was to buy up the troubled mortgages, pay them off and let people refinance at the lower rates,” he recalls. “That would have filled up the negative equity and healed bank balance sheets.”

To this day, Holtz-Eakin thinks the proposal made sense. There was one problem. “No one liked that plan,” he says. “In fact, they hated it. The politics on housing are hideous.”

The Obama administration, perhaps cognizant of the politics, was not nearly so bold. It focused on stimulus rather than housing debt. The idea was that if people could keep their jobs and pay their bills, they could pay their mortgages. But today, few on the Obama team will mount much of a defense of its housing policy.

Overall, I’m still unhappy with the state of macroeconomic statistics. I’m not necessarily unhappy with the BEA itself, which basically just has the job of cobbling together GDP data from a very disparate set of inputs, many of which — especially when it comes to the financial sector — are of surprisingly low quality. But I do think that we’d be much better off with a coherent, unified, and well-funded system of data-gathering, rather than outsourcing it to dozens of different public and private sources.

And I’m definitely (albeit with hindsight) unhappy with the way in which the Obama administration hasn’t even tried to fundamentally tackle the enormous amount of debt in the US economy, and the way in which that debt overhang is likely to hold back economic growth for the foreseeable future. We’re turning Japanese, here, and we’re not doing a damn thing about it.


1. If to dig deeper into BEA’s publiations one can find an unofficial estimate of the uncertainty in the GDP growth rate of 1% per year or annualized 4% per quarter. Thusall revision you have mentioned are within the limits and 8.9 not worse, actually, than 6.3%. Both values inside 4%.
2. Okun’s law is very relibale for the US(http://mechonomic.blogspot.com/2011/1 0/some-corrections-to-david-altigs-job.h tml) but BEA statistics makes a big difference when used as it is – dhttp://mechonomic.blogspot.com/2011/10/ beware-of-bea.html
3. real proble is that there is no comparability of GDP estimates over time – http://mechonomic.blogspot.com/2011/10/b eware-of-bea.html

Posted by ikitov | Report as abusive

News Corp’s ethics cancer grows

Felix Salmon
Oct 13, 2011 06:39 UTC

The latest shenanigans at News Corp are particularly shocking because they took place at the Wall Street Journal — the flagship publication which was meant to be insulated, at least in part, from Murdoch sleaziness. But this is really bad: the WSJ Europe was telling its advertisers that it had a circulation of 75,000 — but in fact fully 31,000 of those copies were bought for as little as 1 cent apiece by companies which never saw them, and pawned them off onto random students.

And when one of those companies decided that even 1 cent per copy was too much to pay, the WSJ decided to simply buy up the papers itself, with its own money.

Oh, and the WSJ also demolished the wall between editorial and advertising, promising — and delivering — editorial coverage to the companies it was doing business with.

There was a whistleblower, too, who wound up with the sack:

European human resources executive Carol Bosack emailed the whistleblower: “You are expected to keep details and your reaction or beliefs about the recent events confidential and not shared with anyone external or internal to the business. This matter is to be kept between us, Andrew [Langhoff], Internal Audit and Corporate Legal.” No action was apparently taken at that time on the whistleblower’s allegations. The whistleblower, who had worked for Dow Jones for 9 years, was made redundant in January.

Only after the Guardian started asking questions was Langhoff finally forced to resign.

Jack Shafer makes some very good points about all this — among them, that the suspect news stories were in “special sections” which nobody reads, and that the real scandal about the WSJE’s circulation was that even padded it only managed to reach 75,000. Rupert Murdoch is probably dying to kill off this paper as he did the News of the World; it surely loses him a fortune.

But the thing which jumps out at me is that News Corp is still keeping true to its strategy of covering up anything embarrassing until Nick Davies uncovers it, at which point an executive or two is thrown under the bus. As crisis management goes, it’s a disaster — and now it’s claimed the scalp of senior Dow Jones employee number two. (The first, of course, was Les Hinton.)

As a result, the rest of the world is simply going to assume the worst — that anything rumored or imagined is probably true and has just been successfully covered up for the time being. That’s really bad for News Corp. The only silver lining is that for the time being, all of the wrongdoing has been confined to the newspaper businesses. If anything gets uncovered at Fox or Sky or HarperCollins, it’s surely all over for Rupert — the culture of corruption will have been shown to have infected the entire organization. News Corp has kept things quiet until now, in those organizations. But how long can it continue to do so?


I think it’s fairly obvious to those who want to see it that Murdoch’s news empire is corrupt, and those who don’t want to see it will manage, once again, not to.

Posted by JayCM | Report as abusive