Royal Courts of Billionaires

Ben Smith talks about Ozy + a story from my days on The Crimson.

Ben Smith — the New York Times media columnist who brought the digital media company Ozy to its knees — spoke to Tom Dotan and Katie Benner for the latest episode of Dead Cat. (I was away on vacation. Now I’m back!)

You can listen on Spotify or Apple.

I thought this was a particularly thought-provoking line from the interview:

Ben Smith: “I do think there’s an element in which, right now, everything is sort of the politics of royal courts of billionaires. And half the talented people of my generation [who] I know — one way or the other — just sort of work for billionaires and are constantly worried about their position relative to other courtiers in their courts.”

For Ozy that meant staying close to Laurene Powell Jobs who was a major investor in the digital media startup. “She represents just this massive pile of money to people. And so I think there was a, well if he’s close to Laurene, no harm doing him a favor.

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Painting With a Broad Brush

When I was an editor at The Harvard Crimson, some enterprising undergraduates on our business staff contemplated fraud.

As I remember it, the news staff mistakenly forgot to print an entire page of the newspaper, which was supposed to include a pricey advertisement.

Instead of telling the advertiser, someone on The Crimson had the bright idea that the newspaper should print a few special copies of that day’s paper just for the advertiser.

Our readers had already received the edition without the ad, but the advertiser would get their own version that included the advertisement. The company would get to see their ad in print without knowing that no one else had.

Thankfully, the managing editor at the time discovered the imposter version of The Crimson teed up to go to print and intervened.

Principled voices prevailed.

There’s a meaningful difference between the world where the potential fraud was committed and where it wasn’t.

So I agree in part with Elad Gil’s recent essay about the impulse to over-extrapolate from the Theranos saga:

There is a big difference between drunk driving at 90 mph in a school zone versus driving 5 miles too fast on the freeway. (Or, in the case of most tech companies, simply respecting the speed limit).

He concludes:

An increasing portion of the discourse in the USA today seems to be anti-tech, anti-maker, and anti-success. This stance probably reflects more of what is currently happening in the people writing these negative pieces (or opining in articles) rather than in the tech industry itself. Theranos is being used as a catchall example to drive this false narrative that people can not do good work, benefit millions of people, and make money, without somehow being nefarious. As a techno-optimist, I encourage you to not buy into this false hype. :)

But at the same time, I do think Theranos and Ozy speak to broader phenomena. That’s obviously why that old Crimson anecdote is on my mind. While we went down a different path than Ozy seems to have, the impulse was there. Clearly, there was a sense that advertisers are generally oblivious to the impact of their ads. There’s a certain fast-and-loose culture that is rewarded in the business world. I’d also argue that the story reflects the conflict between how the business side of the house at media organizations think about breaking the rules and how the generally subordinate news-side of the house thinks things should be done. There’s a reason that reporters are using the Ozy saga as an excuse to turn their lens on digital media more broadly.

Bringing this back to Smith’s observation about the “royal courts of billionaires,” I think the sense that these startups live or die based on the approval of a few pot-committed rich people distorts reality even further. These billionaires are able to buy the truth — at least for a little while. If the press and the public feel compelled to respect private companies based on their valuations, and a single billionaire can set a soaring valuation, then those rich people can declare a private company is worthwhile even though every sane person seems to be skeptical. Nowadays, you could say the same for the public markets. Just because the public markets can be irrational for a long time doesn’t mean we should necessarily reorient our sense of reality around them. This is the drum Eliot Brown has been hitting on his WeWork book tour. Who was the victim in the WeWork saga? “Reality,” he told me.

So when companies like Ozy and Thernaos finally do implode, it’s validating that much of what we were asked to believe based on the whims of some wealthy investors doesn’t match with reality. Then we start wondering about the other companies that we’ve been asked to believe are worth what investors say they are.

So, yes, it’s often unfair to paint the outlier case as representative — but at the same time those outlier cases often reveal things about the more banal reality. And, yes, the media is inclined to paint with a broad brush, but it’s important to note that we’re happy to do it when it comes to talking about ourselves as well.

Correction: In an earlier version of this post, I said Eliot Brown told me that “the truth” was the victim in the WeWork case. He actually told me that “reality” was the victim.