International Law

The End of Newspapers - Hard to Predict?

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There has been a great deal of discussion about whether the financial crisis was foreseeable or not,how probable or not.

This strikes me as the wrong question.

The right point of view, prior to say the subprime crash, would be to start from the fact that the subprime mortgage market had crashed and then ask what must have been the case for this to have happened.

Charlie Munger refers to this technique as working backwards, something mathematicians do all the time when trying to find a new proof of a theorem.

Here is an example of the type of thinking I have in mind, from Michael Hishorn's piece in the Atlantic on rapid death of the old media.

"All the predictions about the death of old media have assumed a comfortingly long time frame for the end of print--the moment when, amid a panoply of flashing lights, press conferences, and elegiac reminiscences, the newspaper presses stop rolling and news goes entirely digital.

Most of these scenarios assume a gradual crossing-over, almost like the migration of dunes, as behaviors change, paradigms shift, and the digital future heaves fully into view. The thinking goes that the existing brands--The New York Times, The Washington Post, The Wall Street Journal--will be the ones making that transition, challenged but still dominant as sources of original reporting.

But what if the old media dies much more quickly? What if a hurricane comes along and obliterates the dunes entirely? Specifically, what if The New York Times goes out of business--like, this May? It's certainly plausible.

Earnings reports by the New York Times Company in October indicate that drastic measures will have to be taken over the next five months or the paper will default on some $400million in debt.

With more than $1billion in debt already on the books, only $46million in cash reserves as of October, and no clear way to tap into the capital markets (the company's debt was recently reduced to junk status), the paper's future doesn't look good."

You could argue about is likely to happen, what is probable and so forth. But, you would simply be fooling yourself about the relative merits of your imagination to pick a future that looked enough like the past, when you aren't even sure about what happened in the past.

Why not assume, for the sake of your imagination, that the New York Times ran out of money on May 9th, 2009. Looking at that event, what we would expect to see?

Presumably, there was a failed bailout, an attempt to get TARP money, possibly a share-offering. What else might we expect? Would there have been a shrinkage in the online advertising market? Would have the bold holders have been forced to liquidate to meet their own credit calls?

When you don't expect the future to be much like the past, then picking out probably futures from where we are in the past is not good planning. The great thing about the human mind is it ability to reason counter-factually and with some realism.

Full post as published by Misleading Advertising Law on January 07, 2009 (boomark / email).