The Dorfman Affair isn’t only about journalistic ethics. It’s also about the way business publications get a lot of their scoops. The way business journalism has gotten gossiped-up. And the way that publications, including on occasion my employer NEWSWEEK, pander to readers by offering simplistic moneymaking formulas that my colleague Jane Bryant Quinn quite rightly calls financial soft porn.
Before we proceed, a few disclosures. Dorfman befriended me more than 20 years ago, when he was a star columnist at New York magazine and I was a Detroit-based business writer whom no one else in New York City financial journalism would take seriously. I worked at Money for two years in the 1980s. I also wrote a freelance column there for about a year before I joined NEWSWEEK in March 1995. I was wooed by Money last year, and seriously considered taking the offer so I could work with Dorfman and his boss, Money managing editor Frank Lalli. Lalli is also a friend of mine. You should also know that we couldn’t reach any of the players since the Business-Week story broke on Friday.
Back to the main event. The reason Dorfman rose so rapidly in recent years to become the highest-paid and most influential business reporter in the United States isn’t because he’s a market genius. He’ll be the first to tell you that he’s a reporter, not an analyst. Think of him as a high-grade business-gossip writer. Dorfman goes on TV and mentions a stock that someone told him may be a takeover target. The stock moves up, if only briefly. Everyone’s happy, at least for a while.
The Dorfman phenomenon is part of the mania that has swept business journalism in recent years. It’s the hunger for the simple idea, the quick hit, 7 stocks to buy now, 10 mutual funds for the ’90s, a 12-step computer program that will guarantee you won’t have to live on cat food when you retire. You make money by doing simple things anyone can do, not by doing difficult things like digging into financial statements or thinking or swimming against the tide. Nonsense. If making money in the market is so easy, why has only Warren Buffett made $14 billion picking stocks?
Dorfman would tell you, as he often told me, that he offers no guarantee on his items. You can see why. Even forgetting his Money column, which I’m sure is gone for good, Dorfman needs at least 10 good new ideas a week to fill his CNBC spots. No one on Wall Street has 10 good new investment ideas every week. No one in the world does. So Dorfman has become increasingly dependent on sources who can give him one-stop stories. Like anyone’s sources, Dorfman’s are a mixed bag. They include stock touts, money managers, short sellers, analysts, investment bankers, financial flacks, chairmen of big companies, all with axes to grind.
People are always trying to manipulate business writers. How do you think takeover stories get written? Investment bankers, arbitrageurs, corporate raiders, financial racks all leak stuff to us, trying to spin the story their way. I write no more than once a week, so I can do independent research and paper over the cracks. Dorfman has so much space and air time to fill that he can’t begin to paper over the cracks. People told Dorfman for years that he was overextended, but he just kept on doing what he was doing. Why not? The more he kept doing the same old stuff, the more famous he became, the more money he made. Money and CNBC hired Dorfman knowing exactly what he is and what he does.
One reason I don’t pick stocks at NEWSWEEK is that I constantly suspect that people who recommend a stock to me really want to unload it onto my readers, and that people who bad-mouth a stock really want to buy it cheap. Dorfman, a reporter for 40 years, is suspicious, too. But he’s gotten much too sloppy. He’s not the only one. Do you think that every time Barron’s does Q&As with money managers, it first checks to see if they have talked up stocks they were selling or talked down stocks they were buying? Do you think NEWSWEEK and Fortune check every time? Do you think The Wall Street Journal puts every tipster arbitrageur or investment banker through the third degree? Or that I do? Forgeddaboudit. Then there’s Smart-Money. It let James J. Cramer, its star columnist at the time, write about thinly traded stocks his investment firm owned. These were sure to surge in price if one Smart-Money reader in 1,000 tried to buy them.
So let’s forget about the Dorfman uproar, and learn something from this. Remember that there’s no quick and simple way to get rich in the market. And that you should take what you read, see and hear not with a grain of salt, but with a entire shaker full. If we business journalists were such geniuses, we would all be out making money for ourselves playing the market, not digging up information for you.
