Chris Carey, left, took advantage of that great fellowship for journalists (The Knight-Wallace Fellowship at the University of Michigan) and he emerged from the academic year wiser if not wealthier.
But, truth be told, the wealth is coming.
Putting together a business plan, Carey found a rich backer and he started an online publication called Sharesleuth.
He recently gave the Graham Hovey lecture to alumni of the Knight-Wallace Fellowship, and recounted the story of Sharesleuth.
(The speech was printed in the Knight Wallace Foundation Journal, Spring 2010, and we reprint it here with their permission.)
The Accidental Entrepreneur
by Christopher Carey ‘06
I view myself as an accidental entrepreneur. I wasn’t born with whatever gene compels people like Steve Jobs, Bill Gates and Mark Cuban to create and build, to risk and conquer. In my 20-plus years as a business reporter, I was content to be a mere observer of that realm, coolly detached in my reporting and analysis, squarely in keeping with journalistic tradition.
But necessity, as they say, is the mother of invention.
By the midpoint of my ’05-06 Knight-Wallace Fellowship, it was clear that my employer – the St. Louis Post-Dispatch – couldn’t support my ambition to become a full-time investigative business reporter when I returned.
It also became clear through my Fellowship research that the SEC and the FBI were hopelessly outmatched in their fight against securities fraud and other white-collar crime.
Because of dire downsizing of investigative reporting at my newspaper and others around the country, it was clear that if I wanted a job that would let me follow my passion and expose the frauds and felons of the investment world, I’d have to create it myself.
I decided the Internet was the best home for that work, because of the unlimited real estate, the permanence of the postings, and the ability to link to documents and other supporting material.
I knew the Internet also could provide national and even international reach, and enable us to deliver stories through any number of channels, including email blasts, RSS feeds and, ultimately, Facebook and Twitter.
When I decided to set off on my own, my first instinct was to create a nonprofit investigative journalism organization. It seemed nobler than a for-profit enterprise that would rely on advertising and raise questions about conflicts of interest.
But journalists I talked to convinced me that a for-profit model was equally valid, and perhaps preferable, given the limited funds available to nonprofits and the time needed to seek donations.
And so it was that one afternoon in February 2006, my research led me to Blogmaverick.com, the personal Website of billionaire Mark Cuban. I was already a fan of the site, and knew Cuban and I shared certain sentiments, including a healthy skepticism of Wall Street.
Cuban’s an entrepreneur who made the bulk of his fortune as the co-founder of Broadcast.com, one of the pioneers of streaming audio and video. You may also have seen him yelling at refs as the Dallas Mavericks’ owner, or as a contestant on TV’s “Dancing With the Stars.’
I took the kind of shot that the Fellowship year emboldens us to do: I emailed Cuban and told him I wanted to start an independent journalism organization and asked if he’d be willing to back me. He replied within an hour. The answer was yes.
We finalized the details over the next few months, almost entirely by email. In June ‘06, I made it official, resigning from the Post-Dispatch and signing on as editor, president and chief executive of Sharesleuth.com.
Then all hell broke loose. Overnight, I went from mild-mannered reporter to journalistic bad boy. Before Sharesleuth had published a single article, critics blasted the business model Cuban had chosen – and I had agreed to – calling it unethical and possibly illegal.
To recoup the money he puts into Sharesleuth, Cuban occasionally “shorts’’ the stock of publicly traded companies we have suspicions about. Shorting a stock means borrowing shares from a brokerage and selling them on the open market, with the expectation of replacing them later at a lower price. It’s a legitimate way to bet that a company’s stock will go down rather than up, and it’s an important component of a free and unfettered market.
Sharesleuth’s critics contended our stories would drive down shares of companies we wrote about, and that by taking a position in advance of our postings, Cuban would profit at the expense of other investors. That might be true – if we hadn’t built safeguards into the process.
First and foremost, Cuban has pledged all profits from shorting stocks will go back into Sharesleuth to fund more stories and hire more staff.
In addition, I pick our stories and make all editorial decisions. Cuban doesn’t know precisely when or what we’ll post, so he can’t time his trading to our publication.
Cuban’s agreed not to take profits in the immediate aftermath of our stories. He waits until the market fully absorbs the information and the companies we’ve written about either fix their problems or fade into oblivion.
To date, Cuban has shorted shares of only three companies we’ve written about – and hasn’t completed a single short.
Although I admit that I had some initial concerns about this funding method, I still believed the potential for public benefit was paramount.
Critics have suggested that Sharesleuth’s business model means I’m no longer a true journalist. I’ve decided I don’t care how anyone labels me. I’m still reporting stories exactly as I did when I worked in the newspaper business, and I know that my work serves a vital need. For me, that has always been the guiding principle.
Over the past three years, we’ve exposed an alternative energy company that falsely claimed it had a viable formula for turning wood chips and grass clippings into ethanol; a technology company that booked tens of millions of dollars in profits on investments that turned out to be largely worthless; and an oil company that was selling partnership interests through a telemarketing office in Thailand run by banned American commodities brokers and at least one convicted felon.
In the past few years, thousands of experienced print journalists like me have been laid off or bought out by their employers – many of which have cut well beyond fat and deep into muscle. But I’d submit that, in at least some respects, the bad news is the good news.
Never before has there been so much talent in search of new opportunities. And never before has it been so easy and inexpensive to set up an online home for independently produced journalism.
We created Sharesleuth with free blogging software, and put it on the Internet with a $20 a month Yahoo! small-business hosting plan. When we launched a second site, BailoutSleuth.com in October 2008, we repeated the process and were posting stories within 48 hours.
The catch – and it’s a big one – is finding ways to generate revenue online, to cover salaries, travel and other expenses that go into producing unique, deeply reported stories.
The same problems undermining newspapers also hinder the development of online sites. The distribution of free content, whether by the original sources or aggregators like Google, has created the expectation of free content.
And the rates that advertisers are willing to pay for online spots are nowhere near the rates they’ve historically paid for print or broadcast spots. So most sites can’t support themselves through advertising, either.
That’s why many independent journalism sites– from the Michigan Messenger to ProPublica.org – are structured as nonprofits that rely on donations.
We chose a different model for Sharesleuth, one that allows us to generate money independently and thus control our destiny. It’s conceivable that a single story could produce enough stock-trading profits to finance the site for years to come.
It’s also conceivable that we’ll find other sources of revenue to sustain and expand the operation. We’re building a database of suspect companies and individuals we’ve identified in the course of our research. Eventually, we could sell access to that database, either through subscriptions or daily access fees.
The entire media industry is changing so rapidly that it’s impossible to tell what the economic or technological landscape will look like even a few years from now. But it’s clear to me that the old methods for funding journalism – especially investigative reporting – are no longer working. So why not experiment?
Newspapers, magazines and other established media outlets are still sticking with traditional economic models and trying to get readers to pay for online content. But much of the information that they gather has become a commodity. I have a hard time believing that readers will ever again be willing to pay for it – especially if it requires more than a single click on their computer.
The information that does have value is that which is scarce, either because it requires digging to unearth or a certain degree of expertise to analyze. That’s where we’ve positioned Sharesleuth.
Calling out companies for questionable behavior – in the absence of any official confirmation – amounts to a journalistic high-wire act. One slip up can be fatal. Almost every time we contact a company with questions about our findings, we hear back from its attorney, warning of legal action if we publish anything false or misleading.
That’s why, before we published our first investigation, we decided to send all of our major stories to an independent fact checker. So far, we haven’t had to publish a single correction, and no one has sued us.
Sharesleuth now has two writers, and small team of part-timers working on the database. We started BailoutSleuth just after Congress approved the $700 billion Troubled Asset Relief Program to follow the flow of money from the government to private enterprise, with our primary focus on transparency and accountability.
BailoutSleuth was structured as separate, nonprofit entity. Because the site deals primarily with government information that’s available to all, there’s less opportunity to generate a profit from its unique content.
BailoutSleuth instantly became a go-to source for factual information about the bailout. I should note here that for the first three months of BailoutSleuth’s existence, I was its only reporter.
Interestingly, because of the difference in their business models, the stories I produce under the Sharesleuth banner are still viewed as suspect, while those I produce for BailoutSleuth are considered credible. Go figure.
BailoutSleuth now has three full-time writers, including a Pulitzer Prize winning refugee from the print world. He’s doing in-depth investigations and enterprise stories. We’ve also got a reporter in Washington, and another in Ann Arbor who produces daily news items from SEC filings and other documents – with an emphasis on original thinking, context and perspective.
Since the rise of bloggers and independent news sites, many in the mainstream media have sniped that online work is unreliable, putting ideology before accuracy or sensationalism before truth. In short, those critics charge that independent voices can’t be trusted if they don’t follow the same rules and conventions.
But it was the New York Times – which I consider one of the finest news organizations on the planet – that gave us Jayson Blair and Judith Miller. That tells me that no one has a lock on accuracy or ethics. No one is immune from mistakes.
The great leveler, as I see it, is transparency. Full disclosure – of sources, reporting methods and potential conflicts of interest – is the key to credibility.
Readers are increasingly savvy about differentiating between various streams of information. I have ultimate faith in their ability to understand the information we present and to make their own decisions about its veracity and its value.
In this period of global economic upheaval and almost unprecedented government involvement in the financial sector, we need more investigative reporting, not less, regardless of the messenger or the messenger’s motivation.
When so much is stake, what, really, is the risk of taking a new approach? If the story is accurate and performs an important public service, how much does it matter how the reporting was funded?
In response to criticism of Sharesleuth, Mark Cuban summed up his position in five blunt words: “Right is its own defense.” I concur. But I also need to be satisfied of one more thing: that the greater good is being served.
