Political forecaster Nate Silver’s excellent book The Signal and Noise explores living in an era of information abundance. Information is not in short supply, but how to interpret it accurately — as he shows us with examples including the lack of foresight about the global financial crisis — is another story. He refers to the “prediction paradox”; we have more information than ever before, but most of it is “noise” rather than “signal”.
In writing his book, Silver says he hoped we would be a little less likely to repeat our mistakes by paying attention to signals, which he calls the truth, rather than noise, which he says distracts us from the truth.
This got me thinking about newspapers and whether, in an era with so much public relations “noise”, the press fulfils its watchdog role as the fourth estate. Can newspapers learn from mistakes of the past?
The now-former Fairfax journalist Paddy Manning fears not, blowing the whistle last month on business reporting that in his view is too often “with fear and favour”. Writing for Crikey about the Australian Financial Review’s use of advertorials, he argued the reliance on information by public relations’ specialists has led to “PR-driven "churnalism” which shows up as “drops”. Rather than news, readers are getting “herograms for business leaders”, said Manning.
Business reporting is where journalism and capitalism meet. The media’s commercial interest masquerading as news is not new. Some of it we tolerate – such as when The Australian published a smiling Nicole Kidman adorning its front page in 2001 promoting her latest film, Moulin Rouge - a Twentieth Century Fox Film production and also a Rupert Murdoch-owned company. Or, the light-hearted stories such as Network Ten’s blatant news coverage of its Masterchef winner.
In the 1980s, the media celebrated entrepreneurs, turning them into stars. The Bulletin named Christopher Skase the “Man with the Midas Touch”. And up until when Skase lost $1 billion with the collapse of Quintex, the Australian Financial Review on one occasion praised him as having a “very cautious” approach to business.
Alan Bond was also revered — the now defunct Bulletin magazine saw him as a hero for winning the America’s Cup, a businessman who “is not about to tumble”. These entrepreneurs caused hard-working Australians to lose money, and largely with no warning from the media.
The pattern of missing the signals of businesses heading towards financial ruin was repeated in 1990 when the Farrow Group’s Pyramid Building Society collapsed. It devastated many regional Victorian towns and added three cents a litre to everyone’s fuel bill for five years so that the Government could recoup some of the losses.
The ABC’s Media Watch host Jonathan Holmes told me, “the big bank collapses that happened in Victoria and South Australia went largely unnoticed and were not exposed by anyone’s journalism as they should have been”.
Again, in the decade that followed, came the failure of investment firm Babcock & Brown, stockbrokers Opes Prime, and Townsville’s Storm Financial Services, to name but a few. As Paul Barry wrote in The Monthly in 2010 about the failure of B&B: “With one or two honourable exceptions, scarcely a whisper of warning disturbed the chorus of approval.”
My research on Australian investigative journalism found that while some important stories exposed abuses of power in the corporate sector, many did not until it was too late for thousands of small-time investors.
(One such exception was Mark Westfield, who as business editor for The Australian mapped events throughout 2000 before HIH Insurance collapsed with debts of $5 billion, becoming Australia’s largest corporate failure. The series won him a Walkley Award.)
The data showed there has been a conspicuous absence of corporate investigations from broadsheets in the past decade. More popular were crime stories and local investigations. Local stories are cheaper, there are no great travel costs, and crime stories are perennially popular.
US academic Michael Schudson sees the increase in crime stories as part of a general media trend toward tabloidisation or “dumbing down” of media content. In the meantime, weakened media companies, reliant on corporate advertising, are not adequately scrutinising powerful business interests.
Arguably, Manning should not have spoken publicly against his employer, but the rarity of a journalist speaking out in this way is cause for concern itself. Manning was protesting what he saw as a decline in business reporting that holds business to account. His critique was scathing, but passionate, and his words may be a signal that editors ignore at their peril.
Manning’s “insights” came at a high personal cost: his job. But they also generated noise in journalistic circles and the blogosphere. Like this from “I am not offended” on Mumbrella:
I don’t think there’s a journalist anywhere who isn’t deeply concerned about the state of the industry and the difficulty of producing quality when profits are shrinking. People like Paddy care about these things … And thank heavens for that.
Manning’s outburst was in reaction to the company announcing it would simplify its operations by merging business units. This restructure would see BusinessDay — the Age and SMH metro mastheads’ business daily — come under the new business media unit alongside the Australian Financial Review.
The AFR responded with indignation to Manning’s accusations, its editors calling his criticism of its restructure “unfounded” and “naïve”. In a leaked email to staff its editors emphasised the importance of independent journalism with a list of recent stories of which the masthead was proud. Perhaps a touchy response, but one that had a ripple effect at Fairfax’s rival News Limited, where business reporters were reassured they would not be pressured to write to a particular corporate agenda.
Privately, the restructure announcement upset more than just Manning. When approached, some Fairfax business journalists said that they thought it would result in readers having less story diversity, and fewer journalists’ voices writing across the three mastheads — although sharing of content has not been confirmed by Fairfax.
One business journalist, who asked not to be named, said he feared stories that champion big business and were non-threatening to advertising accounts would be favoured over more critical pieces. He said the rise of the PR state, expensive, frequent litigation, and too little time for research added pressure on financial journalists to write “polite” stories.
He told me that the “extreme pressure” on journalists arising out of litigation or threats to sue, made self-censorship attractive. Currently, the world’s richest woman and Fairfax’s largest single shareholder, Gina Rinehart, is using the courts to try and force one of the company’s business reporters Adele Ferguson and also the West Australian’s Steve Pennells to reveal confidential sources.
Economist and Nobel Prize winner Joseph Stiglitz says the US business media failed to adequately critique the sector leading up to the global financial crisis: “overall, the press acted more like a cheerleader as the bubble grew than like a check”. He also said: “So too, in the aftermath of the [GFC], it has provided both less analysis and less investigative reporting than one might have hoped.”
During the 1980s and 1990s, Jennifer Kitchener, Brian Toohey, Trevor Sykes and Graeme Turner were among commentators who critiqued Australia’s business press and found it generally oiled the wheels of capitalism more than it served to expose abuses of power. Kitchener wrote “Business reporting in Australia has always lacked a critical edge… but during the 1980s stories were particularly upbeat.”
If, in deciding what has news value, our financial press pander to the powerful, what we are really getting is a distraction from truth. Or, as Nate Silver would say, more noise and less signal.