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I blame Murdoch

You know, YHB is pretty cynical about business. I mean, my expectation is that businesses will cut corners to make money, and will tell only as much of the truth as they feel they need to, and largely consider both legal and ethical considerations as obsolete rituals to be nodded to rather than ruled by. I’m occasionally shocked but rarely surprised by routine misbehavior by businessmen in the course of their duties.

I do have to say, though, that this WSJ Europe stuff is a hoot. In essence, the WSJ European edition barely sells any copies, but claims a big circulation to advertisers and auditors. They do the trick of selling at a discount to university students, but with a special twist: they sell to corporate sponsors of future-leader seminars, then pay off the sponsors with (a) free advertising, and (2) favorable stories in the news section. This second one is causing the bulk of the scandal, of course, since it breaks the Chinese Wall between advertising and editorial, which nobody believes in except journalists, anyway. Oh, and then also paying off the sponsors with phony invoices through third parties, which is a whole different fraud. That’s three distinct kinds of fraud: the rigged news stories, the phony invoices, and the inflated circulation.

Here’s the thing that I love: Andrew Langhoff, who is head of WSJE, got himself into a position where not only were forty percent of his sales phony, but 16% of his sales were in the hands of one company. Who were paying him bupkes, by the way: forty grand a year. But that company could (and eventually did) say to him, we’re going to to cut your circulation by a sixth unless you make us happy. What was Mr. Langhoff going to do then? He was going to have positive stories planted in the paper—he did that. Then they still weren’t satisfied so he had to do the phony invoice stuff. I don’t know what the next step would have been—planting nasty stories about competitors? Maybe they already did that, too.

I know that sometimes a company can’t help but let another company take up a big chunk of its business (Wal-Mart couldn’t do what they do without it), but this is the Wall Street Journal, for crying out loud. How stupid are they? And for forty grand? I don’t know how much advertising money they stood to lose, but it must have been a bundle. Which of course means that the advertisers paying that bundle must be pretty pissed off around now. Of course, it’s possible that the total money was bupkes, too, and that it’s just that Mr. Langhoff felt that he would be far more likely to lose his job for a 16% circulation drop-off than for multiple frauds. He may have been right, at that. But what about next year? There is no possible way that anybody could have looked at any of this and thought it could last.

But the thing that is really beautiful about all of this is that the Wall Street Journal is the paper that reports on how business is done. Right? If anybody knows how business is done, it’s these guys, and this is how business is done. Not only dishonest but stupid, and doomed to failure and ignominy, and the only hope that somehow all the plates will keep spinning on the poles for long enough for the top guys to get out clean and let somebody else take the crash. That’s not the Wall Street players, that’s the Wall Street Journal.

Tolerabimus quod tolerare debemus,


I think you're confusing the model of creating a sustainable business with the model of conning a mark. WSJE got a lot of money illegally. As a con, it seems to have been eminently successful. You think they're returning the advertisers' money?

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