On Minyanville’s Pivot

This week I’m reading Josh Brown and Jeff Macke’s Clash of the Financial Pundits (New York: McGraw-Hill, 2014) during my work commute. Brown and Macke interview financial media pundits and bloggers. Minyanville’s Todd Harrison has overshadowed the book’s release in announcing that the popular financial news site will pivot to financial services:

 

Our current business model does not extend to financial services, and that’s OK — it’s broken anyway. I do, however, believe that what we’ve built is extremely valuable to a broker-dealer looking to leverage a fertile audience, acquire new customers, optimize the social sphere, turn clients into community, market through new channels, engage next-generation investors, and build a lifetime relationship.

This, in my view, can be accomplished by attaching Minyanville to an existing financial services firm as an incubation lab and allocating our assets and abilities across their business model. There are several reasons this makes sense — among them, education, credible content, and creativity are rare commodities on Wall Street.

Financial institutions have been reticent to embrace the online world given regulatory and reputational concerns; they now understand the digital realm isn’t going away and the millennial generation — along with a massive transfer of wealth — is quickly approaching. If they don’t incubate the human capital and creative elements necessary to service the entire vertical across multiple channels, they will be left behind.

Minyanville provides a plug-and-play, end-to-end solution that delivers smart market commentary with editorial rigor through a FINRA- and SEC-compliant mechanism. This is not traditional research; content is the best online currency — engage the audience in a daily dialogue with one foot inside the firewall (give them a reason to stay in the walled garden) and the other foot outside the firewall (broaden the brand shadow and more effectively target the marketing spend).

 

Over 14 years ago when Richard Metzger and Gary Baddeley hired me to edit the Disinformation website they were pivoting to television production, publishing, DVD, and video-on-demand interests. Stratfor’s George Friedman planned the StratCap hedge fund before Anonymous hacked his geopolitical intelligence website.

 

Behind all of these moves are two strategic realities: (1) most web content generates zero income – a painful truth for editors and writers; and (2) value creation often lies in tailored products and services for a website’s audience. Minyanville’s version of (2) was a subscription service for premium content. Disinformation’s version was book, DVD and video-on-demand projects — the site became mostly user-generated content from March 2008. This was all prior to Henry Blodget’s career ‘second act’ with BusinessInsider.

 

I made a series of decisions about these shifts over the past decade. After undergraduate and postgraduate school I pursued a university-based research career from 2004 whilst doing a second editorial stint with Disinformation. I stopped freelancing for magazines during this period due to publishing embargoes that the research consortium I worked for placed on my research. After leaving TDC Entertainment on 29th February 2008, I turned down several offers to edit websites or to be involved in publishing projects. After March 2007, I self-funded my academic research. Today, I blog – as Josh Brown does – primarily for self-education.

 

On the surface Harrison’s pivot decision for Minyanville to partner with financial services as an “incubation lab” looks like an entrepreneurial venture. I’m a little skeptical:

 

(1) As Brown and Macke show in their new book, most financial commentary is noise that is unhelpful to traders. Twitter, Andrew Ross Sorkin’s Dealbook section in The New York Times, and a Bloomberg or Wall Street Journal subscription provides most of the major financial news and the major newswire services.

 

(2) Harrison omits that most website content is usually either for subscription traffic, or is a loss leader.

 

(3) I read Fundamentals of Stream Processing (New York: Cambridge University Press, 2014) and it confirmed that the real alpha is already in complex event processing, machine learning algorithms, news analytics, and high-frequency trading algorithms. This area is at least 4 to 5 years old in quantitative finance already. It may continue to disrupt the broker service model that Harrison has in mind. How many of Minyanville’s customers really have the financial assets to become high net worth customers for a broker?

 

(4) Harrison looks to the Millennials as the new investor class – but most of them can save money and time by paying US$1 for William Bernstein’s monograph If You Can: How Millennials Can Get Rich Slowly; investing in a low-cost index fund like Fidelity or Vanguard; and reading free web commentary for self-education. More Millennials are likely to use mobile services than subscription-based websites.

 

(5) As George Friedman found with his StratCap venture, developing alpha/edge in investment and trading is a very different skillset to financial news or commentary. My experience from several different contexts over a 10-year period is that news arbitrage strategies are hyped by journalists and editors — but have significant alpha decay for traders — particularly in a market dominated by high-frequency trading algorithms and low-latency arbitrage. Brown and Macke confirm that this is the case for retail traders who try to trade the news on Bloomberg or CNBC – and that the major news outlets are set-up with availability and disposition biases in mind.

 

(6) Thomas Frank’s One Market Under God: Extreme Capitalism, Market Populism, and the End of Economic Democracy (New York: Doubleday, 2000), Thomas Schuster’s The Markets and the Media: Business News and Stock Market Movements (Lanham, MD: Lexington Books, 2006), and Dean Starkman’s The Watchdog That Didn’t Bark: The Financial Crisis and the Disappearance of Financial Journalism (New York: Columbia University Press, 2014) show that the financial media-retail trader nexus has been a problem noted in the 1995-2000 dotcom and 2003-07 real estate speculative bubbles, and also in the 2007-09 global financial crisis.

 

I will keep an eye on what Harrison’s Minyanville evolves into and what it incubates. However, Harrison’s pivot decision looks like an exit.

6th March 2012: SXSW 2012 Sabbatical

 

I’m taking a sabbatical over the next 10 days to visit Austin, TX for SXSW Interactive 2012 with Rosie X. I’ll be meeting University of Texas at Austin professor Jeremi Suri about his work; and having face-to-face chats with Disinformation‘s publisher Gary Baddeley, and Austinites Roy Christopher and Don Webb. I’m looking forward to the session with Stratfor founder George Friedman: read my analyses of the Wikileaks leaked emails and the planned hedge fund StratCap. In the meantime, you can read my body of work to-date.

28th February 2012: Wikileaks & Stratfor’s Emails

Stratfor in December 2011

 

Yesterday the activist site Wikileaks prepared to publish 5 million emails from the Austin-based private intelligence firm Stratfor. Anonymous hacked Stratfor on 24th December 2011 and gained access to client passwords, databases, and internal emails. Wikileaks claims the emails: “reveal the inner workings of a company that fronts as an intelligence publisher, but provides confidential intelligence services to large corporations, such as Bhopal’s Dow Chemical Co., Lockheed Martin, Northrop Grumman, Raytheon and government agencies, including the US Department of Homeland Security, the US Marines and the US Defence Intelligence Agency. The emails show Stratfor’s web of informers, pay-off structure, payment laundering techniques and psychological methods.”

 

The leak prompted some hilarious and insightful responses from political pundits. “That @Wikileaks thinks publishing @Stratfor emails matters is a big compliment for Stratfor, biggest sign yet that Wikileaks is clueless,” tweeted Dan Drezner, and then he wrote a Stratfor/Wikileaks critique. “Statfor is on the mild end of the scary shadow CIA/stodgy think tank spectrum,” observed Dan Murphy for The Christian Science Monitor. “A friend who works in intelligence once joked that Stratfor is just The Economist a week later and several hundred times more expensive,” noted The Atlantic‘s Max Fisher.

 

I briefly subscribed to Stratfor so am probably on the leaked email/credit card list. I found many of Stratfor’s weekly reports to inflate threats. I got Friedman’s first book America’s Secret War during the book buy-up for my PhD but found it to be sensationalistic. Several Stratfor analysts contacted me whilst I edited the alternative news site Disinformation and claimed to be ex-psychological operations people.

 

I seriously considered developing a private intelligence capability on two occasions.

 

The first time was at Disinformation in 2000, I pitched a subscriber service to publisher Gary Baddeley that would do for the nascent conspiracy industry what Nikki Finke’s Deadline Hollywood does for the United States entertainment industry. I also had in mind the subscriber services that do 5-8 page summaries of business books. Baddeley wasn’t interested and the nascent conspiracy industry evaporated after the September 11 attacks.

 

During my postgraduate studies I studied under David Wright-Neville, Andrew Newman and Philip Gregory, and wrote essays on Ulrich Beck‘s world risk society (PDF); Rupert Murdoch’s use of game theory (PDF); considered the developments circa 2002 for news publishers (PDF); explored the collapse of the hedge fund Long-Term Capital Management (PDF); outlined the post-September 11 changes to intelligence services (PDF); and evaluated DARPA’s Terrorism Information Awareness system (PDF).

 

The second time was at the Smart Internet Technology CRC (SITCRC): I scoped out a project for Canberra firm The Distillery and looked at the major international and Australian firms that provided market intelligence on information technology trends. I proposed a market intelligence capability for the Smart Services CRC successful bid that would use strategic foresight and strategic intelligence methods. However, this remained scoped out work only for the unfinished Disruptive Internet project, although I did trial the methods in a public blog for a month. I left the CRC in March 2007 due to infra-team conflict.

 

During preparation for my PhD studies I considered several topics. One was on design patterns and counter-terrorism. A second idea was ‘The Markets for Political Risk: An Analytic View’ modelled on the research of Deborah Avant (The Market For Force) and Andrew Lo (Hedge Funds: An Analytic Perspective). I outlined the historical precursors to Stratfor (RAND, Royal Dutch/Shell, and Kissinger & Associates); found six market segments; considered risk arbitrage, securitisation and trading applications; and began to develop contagion/rumour models. I noted that Friedman “may cultivate ’boutique mystique’ as reputational capital.” In 2009, I began reading the hedge fund and trading literature, and decided it was easier to develop a personal capability for market arbitrage and trading (reflected on during an October 2011 visit to Tokyo’s Stock Exchange). In March 2011, I began a part-time PhD on the strategic culture debate and counter-terrorism studies (2011 initial proposal PDF).

 

Stratfor’s chief executive officer George Friedman is scheduled to speak at SXSW Interactive 2012 in Austin. I’ll definitely be attending.

25th November 2011: Reconstructing Disinfo.com Dossier Archives

I recently started a Google Scholar personal profile. I spent a day importing most of my academic publication history from the past decade. (There are a few gaps, such as some unpublished work I did on Clayton Christensen and Google for the Smart Internet Technology CRC in 2006-07. I’m reworking that material for peer reviewed journal articles.)

The biggest challenge was what to do with my Disinformation material, which was never peer-reviewed nor published in an academic journal.

I edited the site on a daily basis in two stints: November 1999 to August 2002, and April 2003 to February 2008. I took over from co-founder Richard Metzger who had launched the site on 13th September 1996, and Russ Kick took over from me in the interim, before launching his Alternewswire project. The first period is archived here whilst The Wayback Machine has a snapshot of Disinfo.com’s historical evolution here.

21C publisher/editor Ashley Crawford put me in contact with Metzger in mid-1998 after an RU Sirius profile. Metzger suggested I write some dossiers – partly as a therapeutic outlet to get over 21C‘s print demise and a messy relationship break-up. I emailed him profiles of Anton LaVey, George Gurdjieff, memetic engineering and space migration. When Razorfish acquired The Disinformation Company, Metzger and publisher Gary Baddeley tapped me to edit the site whilst they worked on the Disinfo Nation series for the United Kingdom’s Channel 4. 2000 and 2001 were my most productive years.

By mid-2002 I was burnt out and had turned to archival material from my La Trobe University student newspaper Rabelais, 21C and other sources. I also experimented with event-driven news reportage using lessons from information visualisation, values systems theory, media studies and political science. One day whilst drafting a dossier on the philosopher Peter Ouspensky I realised that I just couldn’t write anymore. Metzger and Baddeley had watched the content decline and reached a similar conclusion.

When he took over the daily editing responsibilities, Russ Kick brought a different, current issues sensibility to the site (Metzger excelled as a curator which he continues to do at his new project Dangerous Minds). My 2003-2008 period shifted away from writing original material to daily news coverage, as I completed graduate school and worked full-time as a researcher for the Smart Internet Technology CRC. Baddely wanted the site to be more blog-like and user-driven. I wrote a final editorial message to Disinformation’s readers that summed up the new user-driven direction, which the site continues with today.

I never kept a daily list of the specific dates that dossiers were published on. We lost several dossiers during site transfers. The early content management platforms did not have the functionality of today’s WordPress and Movable Type blogs. For instance, there were no version control or  rollback features, so articles may have been published at earlier dates than the current site version might suggest. From 1998 to 2002 I did compile an editorial master list of possible topics for the freelance contributors to explore, keyed to an old site topic structure: the Disinformation archives are thus only one of several possible sites that could have eventuated over the 1998-2003 period.

I am reconstructing a timeline of rough year dates, in order to get the bibliographic and citation data of the Disinformation dossiers and articles archived in Google Scholar (and possibly into Swinburne University’s research bank). The initial printout of the relevant dossiers and articles comes to 5 pages — larger in size than the academic research I’ve subsequently done. The material varies from excellent to failed experiments and deadline-driven messes.

It feels strange to re-engage with this material for archival and citation purposes — it feels like another lifetime ago.

PhD: Academic Publications & Scholarly Research History

For the past five years I’ve been working on ‘draft zero’ of a PhD project on counterterrorism, intelligence, and the ‘strategic culture’ debate within international relations theory and strategic studies.

The project ‘flew past me’ during a trip to New York City, shortly after the September 11 attacks, and whilst talking with author Howard Bloom, culture maven Richard Metzger, Disinformation publisher Gary Baddeley, and others. An important moment was standing on the roof of Bloom’s apartment building in Park Slopes, Brooklyn, and seeing the dust cloud over Ground Zero.

The ‘draft zero’ is about 240,000 words of exploratory notes, sections, and working notes; about 146,000 of these words are computer text, whilst 80,000 is handwritten (and thus different, and more fragmentary).

In the next couple of weeks, I’ll write about the PhD application process, and the project when it gets formally under way, to share insights and ‘lessons learned’.

For now, here’s a public version of my CV and academic publications track record (PDF).

This is part of the background material prepared for the target university’s formal application process. In the publications section, the letter and numbers relate to Australia’s Department of Education, Employment and Workplace Relations (DEEWR) coding for the annual, institutional process of Higher Education Research Data Collection (HERDC); and the 2010 final rankings of peer reviewed journals for the Australian Research Council‘s (ARC) Excellence for Research in Australia (ERA) program. Universities and research institutions in Australia use the ARC, ERA, HERDC and DEEWR codings for bibliometrics, inter-institutional benchmarking, and to inform the strategic formulation, development and review of research investment portfolios.