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Someone Should kick Michael Arrington’s Arrogant Ass

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A month ago, April, 27, 2011, Michael Arrington posted “An Update To My Investment Policy”, which not surprisingly generated negative reaction from established journalists. I wanted to respond right away, but I’ve been too busy at Betanews, where new editorial responsibilities add to writing.

The issue is a long-standing one of debate regarding TechCrunch’s founder—that he invests in, or has other business dealings with, some of the companies he writes about.

Michael justifies this behavior:

Before TechCrunch I was an occasional angel investor, going back to the mid 1990s…Some people have seen this as a conflict of interest, which it of course is. To counter that I’ve always disclosed investments, and try not to cover these startups myself. Occasionally when news is breaking quickly or for other reasons, I will write about the company, but with the appropriate disclosure.

In 2009 the accusations of conflicts of interest by our competitors became somewhat distracting, and for a couple of years I discontinued investing in startups completely.

That policy has now changed. Over the last several months I have begun investing actively again.

Michael further explains that he can’t write about companies for which investments aren’t public (e.g., there’s some non-disclosure or other legally binding agreement), because he would disclose them first. Otherwise, when able to disclose and write: “I think that this will all be fine. I’ll still be very hard on companies I invest in when they deserve it”.

On the one hand, I laud Michael for disclosing these investments, but that doesn’t remove conflict of interest. What he writes can benefit these companies, even if he’s completely unbiased, or turns a critical eye. Investments’ disclosure is itself conflict of interest. Michael is known to be a successful entrepreneur—TechCrunch is proof of that—and shrewd seer of viable startups. Disclosure of these investments is tacit endorsement, and that can get the startups attention, perhaps needed funding or even eventual acquisition.

A Personal Example
I’ve written plenty of news stories over the years that moved companies’ stock, sometimes unknowingly. For small companies and their investors the results can be rewarding or devastating. One instance still bothers me. In September 1999, Dell briefed me on plans to offer WiFi cards from AiroNet. At the time, no Windows PC manufacturer shipped laptops with built-in WiFi. Dell chose an add-on to the portable’s PC Card slot as its first move into WiFi. The story posted at CNET News on Sept. 15, 1999. I didn’t realize two things, which may have been related: Dell exclusively gave me the story to (without saying so) and AiroNet went public a few weeks earlier.

CNET had no comments section on its site back then. Readers communicated by email. I received one from a desperate investor who had shorted AiroNet stock. He pleadingly asked if the Dell deal was true. Turns out that after my story posted, AiroNet shares started rising—up 40 percent over two days. No wonder he was panicked! Sometime later, Cisco bought the WiFi startup.

Suppose, hypothetically, I had been an investor in AiroNet, a new public company. The stock surge likely would have benefitted me, and surely I should have considered the possibility before writing one word. Similarly, any benefit Michael receives from writing about these companies is conflict of interest—plain, pure and simple. If he feels that disclosing investments is being transparent, I challenge him to go further. If there’s really no problem, then he should disclose when he financially benefits from these stories. That would be real measure of conflict of interest, as his critics insist there is.

“Screw Them All” Defense
However, Michael asserts he’s no different from other writers in followup post: “The Tech Press: Screw Them All.” He writes:

We can argue all day about whether or not my policy is a good one. You’ll have your arguments, I’ll have mine. But the really important thing to remember, as a reader, is that there is no objectivity in journalism. The guys that say they’re objective are just pretending. Everyone is conflicted in different ways, and yet the ‘rules of journalism”’don’t require any sort of transparency or disclosure unless it’s a direct financial conflict. I’m going to have to write a longer post about his yet again.

But when you read a tech blogger call a CEO ‘tough and misunderstood,’ should you know that the CEO in question is social friends with that blogger, and leaks confidential information to her? The answer is yes. But you’ll never know. Or when the same CEO is called incompetent by another blogger who was just turned down by said CEO to speak at his conference. Disclosed? No. Conflicted? Yes.

There’s a difference between being friends with a CEO and being an investor in his or her company. I wholeheartedly agree with Michael that conflicts of interest are unavoidable among journalists. But that’s no excuse for engaging them—actively, in this case—nor does the justification address issues of degree. When there are huge amounts of money involved, the difference between investments and accepting a product and reviewing it or having personal political biases simply don’t compare. There simply is no ethical justification for writing about companies in which you invest or have other financial relationships. For the record, I own no stake or stock in any company.

Would it be so hard for Michael to establish a hands-off policy about the companies for which he has financial relationship? What? Are there no other competent writers at TechCrunch, who could report about these companies instead? That Michael has to justify his relationships as disclosure demonstrates there is significant conflict of interest—that he must be concerned that TechCrunch reporting might jeopardize them.

When the AOL Well runs Dry
Surely Michael must already be thinking about the future and his end of days at TechCrunch. In late September 2010, AOL acquired TechCrunch. His site looked like the crown jewel for AOL’s new media empire, but then, in February 2011, AOL bought Huffington Post and put the queen of aggregation in charge of the media company’s editorial content. I don’t see how there’s room for two such large personalities at AOL, and they do have conflicting agendas. While I may gripe about Michael’s personal ethics, I praise what he has created in TechCrunch. Unlike Huffington Post, which lifeblood is aggregation, TechCrunch is nearly all about original reporting—using an effective technique sometimes called “Process Journalism.”

[Edtor’s note: Due to some unfathomable glitch, the post from the paragraph above onward simply vanished and could not be recovered even in browser history. It’s actually the portion of this commentary written first. What follows is a poor reproduction; it’s shorter, and the original impact is gone. I was in the zone when writing and completely lost momentum afterwards.]

TechCrunch not only excels at original reporting, it produces many scoops. By comparison, Huffington Post is a mashup of aggregated, freely-written and occasional original content. Ariana Huffington puts panache, style and hype behind the presentation. Huffington Post may be the Internet’s most successful gossip rag.

One might call Huffington Post and TechCrunch as two sides of a coin. I see them as antithesis to one another. Based on position, style and knack for navigating AOL’s political hierarchy, my money is on Ariana surviving before Michael. Besides, he is known for being gruff and pushy, qualities that won’t hold up long with AOL management. In the war of strong-willed personalities, Ariana is more likely winner. It’s not a question of if Michael leaves TechCrunch but when.

Change, What Change?
So Michael’s start-up company investments and other business dealings are crucial for what comes next, and surely he knows that. From that perspective, there is huge conflict of interest, because of his incentive to protect his on-the-side business dealings. If that’s not the case, then I again challenge him to prohibit himself from writing about these companies or having editorial oversight over the content. See, his argument cuts both ways. If there’s no problem with these business dealings, no benefit from his writing about them, then there should be no problem with someone else writing about them, too.

But there’s no incentive for him to change anything. Journalists can argue all they want about ethics or conflicts of interest, but in the end one thing matters to Michael: TechCrunch is a business. It’s his baby, which he wants to continue succeeding. Post-merger, his job also is to continue making money for the new AOL taskmasters. From a business perspective, this conflict-of-interest stuff doesn’t matter. If it did, TechCrunch would have lost masses of readers or advertisers in the month since his disclosure post, and there is no indication of that. TechCrunch posts interesting and timely content—plenty of scoops and original stories—and the readers are part of the storytelling process by way of comments. It’s not surprising, from that vantage point, Michael can take a “screw them all” attitude to his critics.

Still, someone should kick Michael Arrington’s arrogant ass. His disclosure policy is justification for the most egregious conflict of interest. No journalist should directly profit from his or her reporting.

Tech startups are suddenly hot properties again, and Michael wants some of the action. LinkedIn’s IPOTwitter’s TweetDeck acquisition and Microsoft’s pending Skype purchase are signs of a new tech bubble forming—and these are all deals that occurred after Michael’s April disclosure post. He just sold TechCrunch to AOL, he has strong ties to venture capitalists and writes about them and startups. Michael knows exactly what the venture capital investment opportunities are shaping up to be as the new bubble expands.

Way I see it, Michael wants to have his cake and eat it, too. Fine, then open and run a TechCrunch public relations agency, Mr. Arrington. But don’t pretend that eating and sleeping where you crap is healthy living.

Photo Credit: Robert Scoble

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