Jan 26, 2009

Fixing a hole before it forms

Former Washington Post editor Marsha Hamilton offers an instructive analysis of the news media's failure to adequately signal the severity of the coming economic crisis (it's certainly more informative than the hyperventilation found here).

Hamilton writes:

But even in hindsight, I think it would have taken a miracle for business journalists to have foreseen the current crisis in its magnitude and depth. Beat reporters saw the pieces of it, and columnists who took a broader view warned about the buildup of risk. But even those who predicted disaster, I think it’s fair to say, didn’t know how widespread it would become or how unprecedented the government’s reaction would be...

Nonetheless, there are certainly lessons to be learned about how to change some structural and cultural biases that might have gotten in the way—including the segregated silos we sometimes fall into in our beats, and a bias against speculative “this trend could be dangerous” stories. It’s not as sexy to prevent disasters as it is to cover them, but maybe we should rethink that, and learn to view warnings and prevention as one of the most important parts of our jobs.

One of the biggest obstacles to understanding, however, was out of our control: it was the decision to let major financial markets full of new types of housing-related investments expand with little or no federal oversight. No regulation means no transparency. Reporters and investors alike were kept from seeing what was going on behind the curtain.
The article, which Hamilton wrote for Columbia Journalism Review, contains this wise observation:
...there isn’t much appetite for speculative stories about complicated issues in most newsrooms. Once the crisis occurs, once you can quote government officials referring to credit-derivative obligations and credit-default swaps as “toxic assets,” it gets easier.
The truth is, there isn't much appetite for these kinds of stories outside the newsroom either. It makes me think of the film "Jaws" and the difficulty Roy Scheider's character had convincing people to get out of the water before they saw the shark fin for themselves.

Also, speculation can be dangerous. Just ask Judy Miller. In hindsight, we often assume that the newspaper warnings would have pointed to the danger that came to pass - but speculation can just as often warn of false dangers, and in the process embolden bad decision-making.

(CJR vis LA Biz Observed)

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