Book Review: Words and Money by Andre Schiffrin

Somewhere on my Top 5 thematic topics on Bankers Anonymous is a hard-core media critique – which I refer to in kinda-joking-kinda-not joking shorthand as the “Financial Infotainment Industrial Complex.”

When I read the Wall Street Journal or listen to financial news on the radio I find myself talking back – usually although not always silently – to the journalists, complaining about the coverage.  The more I know about the financial topic, the more I complain.

My complaints tend toward several common themes:

  1. The coverage relies on a specific anecdote, or a journalist reporting that ‘some people feel that’, without any big-picture or data-rich context around that anecdote or that ‘some people feel’ story.
  2. The expert opinions come from people with a vested (financial) interest.  On Wall Street this is known as ‘talking your book,’ in which a trader consistently offers a view of the world to others that most supports his trading position. I am never surprised to learn that someone in the insurance industry, for example, can speak eloquently about the benefits of an insurance product.
  3. Negative stories about financial and economic news dominate positive stories 10 to 1, leaving the unsophisticated individual investor constantly battered by (mostly) unwarranted fears that in a purely rational sense should have zero affect on their personal financial attitudes and actions.
  4. The topic du jour usually has absolutely zero relevance to a rational individual investor as well as to the vast majority of institutional investors.  Gold! Bitcoin! Twitter IPO! Herbalife!
  5. Simplistic, moralistic, cartoonish coverage by journalists of different roles in the economy.  (Banker = Greedy.  Home loan borrower = victim and moral paragon.  Small Business = Plucky.  Big Business = Soulless.)

Typically I complain silently to myself, shake a metaphorical fist at the newspaper or radio, and then I occasionally vent my frustrations by typing out a Bankers Anonymous post blasting the Financial Infotainment Industrial Complex. That can sometimes calm my nerves.

I have not tended to dwell on the profit-motive of media companies themselves and the swiftly-shifting economics of media companies.

I usually do not get upset about the profit-seeking of media companies because

a) I’m a red-blooded American capitalist (Amurica! Heck Yeah!) so I don’t want to begrudge any designated for-profit company’s attempt at wealth creation; and

b) I don’t know any better

I usually do not get upset about the swiftly shifting economics of media companies because

a) I don’t get a paycheck from any media companies, and

b) I have an optimistic (possibly simplistic) view that what we are in the process of losing in traditional print and analog forms we are more than gaining through the newly unleashed forces of digital media.

André Schiffrin, the author of Words and Money, has spent a lifetime firmly in the traditional print media camp as a publisher (Pantheon Books), founder of a publisher (New Press), and author. He is also a Frenchman in America. And he is deeply concerned about these latter problems that I haven’t considered much – the for-profit model that appears to be serving us badly, and the shifting economics of the media business.  His book has given me food for thought.

A few of his bigger ideas, which I’m still mulling over, deserve attention.

How much profit is appropriate for book publishers?

I learned from Schiffrin that up until the last decade or two, the publishing industry worldwide generally contented itself with a very modest profit margin, on the order of 2-3% profit per year. Picture here the independent gentleman publisher, concerned with the ideas as much as the business. With the recent consolidation of global media conglomerates, however, stodgy book publishing became the low-profit step-child of higher-growth, higher-profit media ventures like television, cable, and newspapers.

Media executives and media investors – seeking to maximize their own opportunities – shoe-horned low-profit book publishing into the demands of higher-profit companies.  The result, according to Schiffrin, is a highly risk-averse publishing climate, in which independent publishers wither and die, and only blockbuster authors and titles get promoted.

In addition, as Schiffrin describes it, book-publishing houses got the Bain Capital treatment: buy the company, add a ton of debt financing, fire the expensive and experienced talent, extract maximum financial value – and then sell.  In the widget-production business, we can (sort-of) objectively admire this move to greater efficiency, but in the book-publishing business, even a capitalist like me can see that the world of ideas is hollowed out and made poorer by this kind of profit-first approach.

At a Barnes and Noble big box store you can see that the offerings reflect the priorities of for-profit book publishing, rather than the priorities of a thoughtful reader. Schiffrin cites numerous statistics from the US and Europe about the increasingly endangered species known as the independent bookstore.

Is book publishing and book selling different from widget-making?

In the context of ideas and culture, I’d say yes.

I don’t have enough knowledge of that world to have any solutions, but Schiffrin makes a compelling case about the problem.

Schiffrin’s solutions come from Europe, in which a combination of governmental and non-governmental (University, or non-profit) institutions fill in the gaps and keep independent book publishing alive, essentially through non-market subsidies.

Movies as an important cultural media, deserving of protection

This seems strange to say, but I never consider the movie industry as a serious part of the cultural ecosystem of my country, but I realized from this book that my American bias has blinded me somewhat. I always think of Hollywood as a purely profit-driven mega-business, so I forget that movies meaningfully contribute to the culture.

I mean, Transformers and X-men, right? I never give it much thought.

Schiffrin, who hails from the European context, does give it a lot of thought. He cites the Norwegian film industry, French Cinema, or the Korean film industry as successful examples of government-subsidized media with a big contribution to make to the cultural milieu.

Why don’t I think of movies a serious cultural contributor? Schiffrin’s book has helped me see now that it’s because independent movies are nearly impossible to find in this country.  Independent movie theaters are even rarer than independent bookstores, and movie chains simply will not leave money on the table to show limited-audience or challenging films.

Unless you’re a serious movie nerd living in Cambridge, MA you can’t find independent films in the US.

Did you know Norwegian theatres are 90% municipally owned, and that allows them to maintain a substantial outlet for Norwegian films?

I know some clever reader will point out that all sort of independent films from the US could probably be downloaded if I looked into it.

Two problems with that response:

  1. I’m not a movie nerd, so I would not know where to start.
  2. Watching a movie in a theater is not the same as streaming it on my laptop.
  3. I would prefer a shared cultural experience, brought about by an independent theater owner with a vision, rather than me engaging in a deep-dive into a singular, unshared project.

I wonder what our world would be like if independent film production and screening actually happened in the US.

Changing economics and functions of digital media

I am less concerned about this than Schiffrin, again possibly because of my ignorance. He suggests a variety of non-market subsidies for journalism, such as foundation support or government support for the cost of producing news. Like most of Schiffrin’s ideas, I have a hard time imagining that catching on broadly, at least in the US context.

I am reminded of Warren Buffet’s prediction a few years ago that newspaper ownership would become appropriate only for philanthropists, seeking out a combination of prestige and good will, but certainly not profits. Even as newspapers have struggled to remain profitable, Buffett himself acquired many newspapers last year as investment propositions, not philanthropy.

Meanwhile, digital news aggregation sites such as Drudge Report, Gawker, Huffington Post and Business Insider offer a new model for news consumption, if not for producing original journalism, as previously understood.
I’ve enjoyed Henry Blodget’s periodic updates on The New York Times’ struggle –to adapt to the changes underway in the shift from print to digital. As a proxy for the business challenges, as well as the cultural shifts at stake, the Times both explains and illustrates the debate for me

Schiffrin’s Words and Money does not explain everything that’s wrong with book publishing, the soullessness of Hollywood, or the impending death of journalism.  His outlook is possibly too distrusting of profit-seeking by media companies, and possibly too hopeful for the meliorating influence of government subsidies for my taste.

On the other hand, when we wonder why independent bookstores die, newspapers slash reporting budgets, and big-budget movies provide as much food for thought as a marshmallow – he’s got a point. The completely free market in these areas leads to some grim results.  Follow the money.



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Follow the Money, then Act with Love

lawrence-lessig-at-ted2013Such an important and powerful Ted talk by Lawrence Lessig.

Lessig rightly points out the perfectly legal, sanctioned, and structural corruption at the heart of American Democracy.  Only 0.05% of us really fund elections, which really means its only 0.05% of us who select and vet candidates and have access to them once they’re in office.  If you’re wondering why YOUR particular big issue isn’t getting solved, he argues that the structural problem of political funding needs to be solved first, and the rest will follow.  I agree.

Lessig then challenges us to respond to this situation with love, which I didn’t expect to hear but I do endorse.

I highly recommend investing the 18 minutes to watch this.

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Guest Post: Sheldon Adelson’s Israel Gamble

sheldon adelson in sun glasses

[ED: If Adelson represents in 2012 the new face of unlimited political ‘speech’ in US Politics following the Citizens United ruling, he’s even further along in influencing Israeli politics.  My friend The Professor presents a fuller picture of Adelson than I had painted earlier with his rational bet on the Romney campaign]

By: “The Professor”

In a post earlier this month, The Banker analyzed the personal financial math behind Sheldon Adelson’s vow to double down on his (losing) bets on Republican political candidates in the next round of elections, presenting a convincing case that any monetary investment Adelson might make in candidates who support his views on tax policy would be amply rewarded were enough of those candidates to win to make those policies a reality.

However, The Banker ignored Adelson’s stated primary reason for supporting Republican candidates, which has nothing at all to do with tax policy.  In an op-ed in the Wall Street Journal published days before the presidential election, Adelson dismissed the claim that his support for Republicans was the result of the “conservative caricature” of him as a tax-evading oligarch and insisted that it stemmed from the fact that “the Democratic Party has changed in ways that no longer fit with someone of my upbringing.”  His primary evidence of this change?  His claim that more Republicans than Democrats “sympathize with Israel” (for which he provides an uncited statistic), which he calls the “sole liberal democracy in the region.”

It seems to me that The Banker’s account of Adelson’s rationality in betting on Republican candidates is undercut by Adelson’s wholly financially irrational commitment to influencing both the American-Israeli relationship and, more importantly, domestic Israeli politics.  Setting aside the question of whether a country that arrests women for praying openly in public places and allows religious authorities to control questions of citizenship and marriage can be considered a liberal democracy, Adelson’s involvement in Israeli politics and his unqualified support for Benjamin Netanyahu (hereafter known as Bibi, which is how he’s pretty much exclusively referred to in Israel) defies both financial logic and his supposed commitment to Israel as a “liberal democracy.”

In July 2007, a new daily newspaper debuted in Israel.  Called Yisrael Hayom, or “Israel Today,” it was (and is) bankrolled by Sheldon Adelson and distributed for free around the country.  By 2010, only three years after its inception, it had a circulation of over 350,000 and by 2011 had surpassed all other daily newspapers in Israel in its share of readership.

According to the Israeli business site Globes, Adelson lost 250 million NIS (about $70 million) on the paper from 2007-2010.  While this amount is considerably less than what Adelson spent in just the current election cycle in the United States, it nonetheless represents a significant chunk of change.  More importantly, what Adelson bought with his investment is somewhat more significant than what he got out of the last U.S. election cycle.[1]

With a 40% share of the Israeli newspaper market, Adelson now has the ear of the Israeli public, and has caused a crisis in Israeli journalism, with the third and fourth most popular papers in Israel, Ma’ariv and Ha’aretz, facing serious questions about their futures.[2]

Yisrael Hayom’s dominance of the Israeli newspaper market has raised two serious questions in Israeli politics, both of which impinge on the liberal democratic character of Israel that Adelson himself extols: first, whether Yisrael Hayom, which has a clear ideological bent (Americans need only know that the day after the most recent presidential election the headline on the front page read, “The U.S. chose socialism” to know what that ideological bent is, at least with regard to American politics), is constraining public political discourse with its dominance of the newspaper market, a dominance won through free distribution and lower advertising rates.  Second, whether the money Adelson has poured into Yisrael Hayom essentially amounts to a shadow contribution to Bibi’s campaign coffers, since the paper offers propagandistic and one-sided support to Netanyahu and his policies.

Ehud Olmert, then still the prime minister of Israel, accused Adelson of political purposes in starting the paper and of supporting Netanyahu when he was still the opposition leader.  In Israel, Yisrael Hayom is commonly referred to as “Bibiton,” a portmanteau word that basically means “Bibi’s paper,” and writers and editors at the paper have strong ties to (and have sometimes been simultaneously employed by) the prime minister’s office under Netanyahu.[3]

There’s no question that Adelson is losing considerable amounts of money on Yisrael Hayom, and that his goal is to advance (perhaps to the exclusion of all others) the political viewpoints of Bibi Netanyahu and his government.

The political positions with which Bibi is now synonymous have two components: international and domestic.

Internationally, Bibi is a hawk who has advanced policies that have solidified the continued Israeli occupation of Palestinian territories, despite voicing his ostensible support for a two-state solution.  His government’s recent declaration of their intention to begin building in the disputed territory around Jerusalem known as E1, presumably in retaliation for the successful Palestinian bid for upgraded status at the U.N., is recent evidence of this policy.

Domestically, since his first stint as prime minister in the 1990s and his later turn as Finance Minister in the early 2000s (a post from which he resigned in protest against the unilateral Israeli withdrawal from Gaza overseen by Ariel Sharon), Bibi has been in favor of a variety of “pro-market” financial reforms that have been largely credited with strong Israeli growth even at times of international financial crisis but have also been largely reviled by the general Israeli public.  These include the reduction of income-tax rates, particularly for corporations and high earners, and the privatization of state-owned corporations.  Public opposition to these reforms (and other domestic policies supported by Netanyahu and his right-wing coalition partners, like continued government subsidies and military exemptions for the ultra-Orthodox) culminated in a series of protests in the summer of 2011 over the rising cost of living, housing and food prices, and the aforementioned subsidies.

Since Adelson doesn’t pay taxes in Israel, Bibi’s market and tax reforms do not affect him personally, and so unlike his contributions to Republican candidates in the U.S., who might be able to affect tax policy (if they were to actually achieve office) that would benefit him, his investment in Bibi via Yisrael Hayom cannot be similarly justified.  Clearly, Adelson’s ideological commitment to either Israeli military and political dominance in the Middle East and with relation to the Palestinians or to pro-capitalist market and tax reform (regardless of its personal effect for him) has been sufficient to justify his commitment of more than $70 million to the cause.

Paradoxically, however, since he has justified his commitment to Israel on the basis of its ostensible status as the only “liberal democracy” in the Middle East, Adelson’s meddling in the Israeli newspaper market, and in its politics, seems rather to have contributed to the illiberalization of Israel’s democracy.  If one agrees that a democracy cannot survive without a strong and diverse free press, then Adelson’s Yisrael Hayom, with its infiltration of the Israeli newspaper market and one-sided cheerleading for Bibi’s administration, has only contributed to the weakening of one of the pillars of Israeli democracy.  In addition, the right-wing parties with which Bibi has maintained a governing coalition (and which promise to move further to the right after the January elections) have continued the government’s strong support for the religious stranglehold on certain aspects of Israeli law governing marriage, divorce, and the right to worship freely, among other things, which have caused many people inside and outside Israel to question whether Israel is indeed a liberal democracy at all, or rather a democratic theocracy.

In this respect, then, Sheldon Adelson’s financial support for what he calls “the sole liberal democracy in the region” seems highly suspect, and his gamble on Israeli politics less like a gamble than a stake in a style and type of governance in accordance with a personal ideology that values a capitalist, theocratic, militarist Jewish state.  And unlike his commitment to Republican candidates in the U.S. in the last election cycle, Adelson’s investment in Israeli politics is likely to offer him highly favorable returns come January 22.


[1] breaks out the roughly $93 million Adelson made in PAC donations during the 2012 US election cycle.  The PAC names indicate that he dedicated at least some of his investment to Congressional campaigns, even if he unsuccessfully burned the majority on the presidential campaigns of Gingrich and Romney.

[2] In September Ma’ariv had to sell its printing equipment to make its payroll and was sold the same month.  Ha’aretz, Israel’s oldest daily, sold a 20% stake in the Haaretz Group to the Russian-Israeli businessman Leonid Nevzlin and in October, as a result of a strike protesting layoffs, the paper did not go to press one day, marking the first time since 1965 that they had missed an issue.

[3] NPR reports, “According to a report in Haaretz, Dror Eydar, a senior columnist at Israel Hayom, receives an additional salary from the prime minister’s office. And Netanyahu adviser Nathan Eshel left his job in the prime minister’s office to work at Israel Hayom during its launch, only to rejoin Netanyahu’s staff last year.”

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