Too big to fail?

by Al Portner

Too big to fail has been the rationale for endless bail-out votes in Congress and discussions among various political talking heads. We are warned a governmental failure to help big business will bring the entire economy down.

Bush Treasury Secretary Henry Paulson approached Congress last fall with a three page request for $700 million to stabilize the nation’s financial markets. Congress argued for a couple of weeks, added 330 pages to the enabling legislation, and agreed to provide the money in two big slugs of $350 million each. Treasury doled out the first slug, but now has no idea how it was used. Worse, the bankers who received the money feel no responsibility to account for their actions.

No one, with the possible exception of the recipient banks, has been satisfied with the result. Endless conversations continue about how to make the system more transparent and more accountable. Unfortunately, the basic issue has yet to be publically discussed.

The issue is size.

If we believe in the capitalist ideal, then some companies will be winners, others will be losers, and some will disappear. It is intolerable that some companies have become so large that they cannot be allowed to fail.

Companies should not be allowed a market share over “x” percent of the total in whatever business it engages. If memory serves, President Theodore Roosevelt addressed similar difficulties using the 1890 Sherman Anti-Trust Act for authority.

The Theodore Roosevelt administration filed 44 lawsuits to dismantle the trusts of his time that included railroads, oil cartels, and some banks. T.R. was not opposed to big business, but he did believe that regulation must serve as a check to keep business from overwhelming government.

Today, our situation is similar. History teaches that companies or governments tend to become so complex over time that they collapse under their own weight while becoming tyrannical and/or non-competitive. Recent advances in computing power have allowed for ever-larger companies to be managed in what seems to be an effective manner. The downside is that fallacies in original reasoning are more difficult to identify because speed pressures have encouraged these very thinking errors.

The society should count to ten and break up a number of these huge, dominating concerns so that they can once again be allowed to fail if that is what they deserve.

Your thoughts on this and any other previous postings are always welcome.

Al Portner is a former daily newspaper editor and publisher who operated newspapers in seven states from Maryland on the east to Hawaii on the west. He is currently the proprietor of The Assignment Desk, LLC, an editorial services consortium with over 200 affiliate writers, photographers, and designers.

Portner is also the author of hundreds of articles and the forthcoming non-fiction book “Mark Twain and the Tale of Grant’s Memoir.” He can be reached at alanportner@theassignmentdesk.net. The Assignment Desk URL address is www.theassignmentdesk.net.

Whatever happened to newspapers?

By Al Portner

A column blasting management for the decline of newspapers just crossed my desk. It repeats an argument made frequently by legions of newspaper journalists and could as easily be applied to general distribution magazines, radio, and television. The continual whining and desperate rending of clothing is exhausting and serves no purpose.

Newspapers, as we have known them, are at the end of a business cycle that started around 1880 with the introduction of the Mergenthaler Linotype and is completing a natural arc. The old business model is broken. Traditional revenue streams have dried up and newer technologies are not sufficiently monetized. Publishers struggle to identify revenue streams, but no financially viable template has yet emerged.

Circulation was never more than 19 percent of revenue. Classified receipts in big-city newspapers contributed around 40 percent. The remaining 40 percent of cash streamed from display, national, and legal advertising. Much of this is gone.

Rather than ruminate “on the good old days” and damn the perceived misdeeds of those to whom we reported, it is far more important to ask fundamental questions on the future of news, technology, and distribution.

Given:
Democracy requires its citizens have access to “The News” as a condition to it being able to flourish.

Questions:
What will be the method(s) for transmission of this information?
How will reader convenient information be gathered and sculpted?
Who will pay the gatherers and sculptors (i.e. the journalists)?

Ever since 1880, new technical iterations have allowed publishers to become continually more efficient. Production of the product required fewer and fewer people behind the scenes. Initially, the changes were invisible.

Coincidently, advertising rates and circulation penetration increased as the literate population boomed and the economy expanded. For a relatively short period, editorial staffs also grew as production staffs shrank. Media companies threw off obscene rates of investment return sometimes exceeding 40 percent of “Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA).”

Newspapers became valuable -- cash cows selling for more than twenty times EBITDA. The next generation couldn’t afford to take over. Inheritance taxes, growing lines of descendents, and high company taxes encouraged consolidation into a few corporate owners. Individuals were priced out of a market unwittingly subsidized by government.

Stock analysts (funding all this consolidation) worked from historical earnings expectations. Although technology continued to evolve, revenues shrank or got divided up among more mediums and more players. To satisfy the analysts’ expectations, staffs were further reduced and facilities closed. These reductions included writers, editors, and photographers. No one else was left to downsize.

A Connecticut state legislator recently proposed government extend financial help to newspapers. This suggestion was met with fierce opposition from interference-phobic journalists. On the other hand, the well respected B.B.C. is funded at least in part by government. Here in America, the Federal government once believed distribution of news information was so important, it subsidized newspapers with free mail delivery service in the early years of the republic.

Events have caught up to media industries. Even Draconian amputations won’t allow service on massive consolidation debt. A new business model will be developed, but it won’t afford the profitability of the old model.

If we, as a nation, believe “News” is important, then accommodations must be made. Somehow, the news/editorial department must be walled off from the rest of the business. New paradigms should encourage local owner/operators of media. These folks tend to be satisfied with more modest ROIs and sensitive to their readers/viewers concerns then are managers accountable to a distant headquarters. Law must allow family businesses to pass from one generation to the next without a penalty for success. Finally, financing decisions must be based on the actual perceived value of the asset rather than on future currency devaluations and exit strategies. Reasonable performance should afford companies the ability to repay lines of credit.

There is a future for “News,” but an adequate way must be found to compensate the news-gathers. The future lies in helping to formulate the new model.

Al Portner is a former daily newspaper editor and publisher who has operated newspapers in seven states from Maryland on the east to Hawaii on the west. He is currently the proprietor of The Assignment Desk, LLC, an editorial services consortium with over 200 affiliate writers, photographers, and designers.

Portner is also the author of hundreds of articles and the forthcoming non-fiction book “Mark Twain and the Tale of Grant’s Memoir.” He can be reached at alanportner@theassignmentdesk.net. The Assignment Desk URL address is http://www.theassignmentdesk.net/.

Meeting the energy challenge

By Al Portner

America must be energy independent of countries whose people don’t like us very much. This requires development and adoption of technologies that minimize some older energy models and re-examine discarded ones. Energy self reliance is a primary national goal.

Strategically, it makes no sense to risk allowing potential adversaries the ability to turn off the spigot that runs our defense machinery. Economically, every dollar spent in the United States circulates seven times. Energy dollars spent overseas are gone once they leave our shores. A negative balance of payments must, over time, inevitably lead to a U.S. default. From an employment standpoint, energy self reliance will be a primary engine for job growth. And environmentally, most scientists agree carbon emissions negatively alter the global climate.

Texas oilman T. Boone Pickens is leading the charge for energy independence with his well advertised “Pickens’ Plan.” He proposes that wind power and natural gas replace many uses of oil for energy. If successful, Pickens’ initiative will yield him a tidy profit.

“The Pickens’ Plan” requires a significant investment in energy infrastructure to move wind power from where it is generated to where it is needed. The time required for the “Pickens’ Plan” to show significant benefits is eight to ten years. Boone Pickens will be approaching 90 years old. His profits aside, Boone is a patriot promoting a bold idea.

A number of additional potential technologies will contribute to America’s future energy independence. These include geothermal heat, nuclear power, ocean wave-action, bio-fuels, and hydrogen fuel cells. Is it possible to harness the power of coal in a way that doesn’t pollute the environment? Who knows what research can achieve when research into cleaner, local, more cost-effective alternatives becomes a primary national goal?

Can existing technologies become more efficient? Why do vehicles made by U.S. manufacturers overseas achieve several times the mileage of similar cars sold here?

The discussion is not new. Gas lines in 1972 and 1973 forced us to drive smaller cars for a few years. Too bad the short memories of many allowed a return to wasteful ways as prices declined and supplies became plentiful. Today, last summer’s $4.00 a gallon gas prices have declined again. In the 1970’s our big concerns were price and supply. Today, the stakes are ever so much higher.

In 2000, H. Ross Perot suggested a 50 cent increase in gasoline taxes as a means to pay off the deficit when he ran unsuccessfully for President. The idea was very unpopular.
Perhaps Perot’s proposal was too timid. An increase in the gasoline tax could be used to build mass transit, encourage vehicles that get better mileage, or even redirect some industry away from the most populated centers both relieving problems of infrastructure congestion and encouraging community rebirth. Like the international negotiators say, no option should be off the table.

Your thoughts on this and previous postings are always welcome.

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Comments from the Inaugural posting of Assignment Desk Notes were very positive and helpful. Commenters were initially concerned with the Financial and Healthcare systems. Columns that open these areas, the media, communication, and others for discussion will be posted shortly. Let the conversation continue. It is hoped readership and contributions will continue to grow. Yesterday's massive turnout and tremendous good will shown on the National Mall by over 2 million eyewitnesses was heartwarming despite the cold day in Washington.

The Assignment Desk, L.L.C. wishes the new President nothing but the best.
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Al Portner is a former daily newspaper editor and publisher who has operated newspapers in seven states from Maryland on the east to Hawaii on the west. He is currently the proprietor of The Assignment Desk, LLC, an editorial services consortium with over 200 affiliate writers, photographers, and designers.

Portner is also the author of hundreds of articles and the forthcoming non-fiction book “Mark Twain and the Tale of Grant’s Memoir.” He can be reached at alanportner@theassignmentdesk.net. The Assignment Desk URL address is www.theassignmentdesk.net.

An Introduction and an Inaugural Posting

By Al Portner

Here’s hoping this inaugural entry to a new web log marks the beginning of a long conversation. This week our government is transformed. A new administration takes office. It is my hope that the new President, his advisors, and the new Congress live up to the huge challenges placed squarely in front of them.

Observers from many points on the political spectrum have commented that President Obama’s plate is full. I would argue the multitude of issues now facing our country tumbles over the sides of the plate. The man doesn’t need a plate; he needs a tremendous bowl with high sides to hold all the issues, but then again it is only in the face of great crisis that great progress can be made.

Perhaps a little introduction is in order. I’m Al Portner, a recently retired daily newspaper editor and publisher, who lives in the Washington D.C. area. Writing several columns each week is a habit I have tried to break without success and which you (as reader) are about to become either beneficiary or victim depending on your point of view.

My goal in beginning this journal is to enunciate some of the issues facing us today and to offer possible solutions without regard to political point of view. Not everyone will agree with someone from the heartland of America like me, but I’m used to that. (Following is a tip for all newspaper publishers out there. Never drop a comic strip from your newspaper. It is the quickest way to make sure your readers hate you.)

President Obama has said that he wants to hear from us… you and me. He needs opinions from outside that bubble that he and his family are moving into called “The White House.” Your comments to the issues discussed on this web log are your unofficial way of sending your message right to the top.

I have confidence that it will shortly be discovered and our good thoughts will be added to the federal mix-master and hopefully come out the other side of the grinder as part of a gold nugget that helps better our national lot.

Check back frequently and we’ll see where this new conversation takes us.

Your thoughts on this and any other previous postings are always welcome.

Proprietor of The Assignment Desk, LLC is Al Portner, a former daily newspaper editor and publisher, who has operated newspapers in seven states from Maryland on the east to Hawaii on the west. The Assignment Desk, LLC, is an editorial services consortium with over 200 affiliate writers, photographers, and designers. Portner is also the author of hundreds of articles and the forthcoming non-fiction book “Mark Twain and the Tale of Grant’s Memoir.” He can be reached at alanportner@theassignmentdesk.net. The Assignment Desk URL address is http://www.theassignmentdesk.net/.