This article was written by Jim Parker, author of "Outside the Flags'. Jim spent 26 years as a journalist across all media, including a stint as on-line editor for the Australian Financial Review and representing the AFR's market coverage on television for CNBC, the ABC and the Ten Network. Helluva nice bloke too!
This a great explanation of why we shouldn't always take heed of the opinions that are so common on TV these days - particularly about money!
I understand the media's plight - they are a business who have shareholders to answer to. It's all about ratings and building an audience to sell to advertisers, which is harder now than it ever been due to the digital world and free real-time content. So what we get is a focus on the new, the shiny or the shocking, we get opinion dressed up as analysis and product plugs dressed up as advice. And being first is often more important than being right!
To quote Jerry Seinfeld - "Its amazing that the amount of news that happens in the world every day always just exactly fits the newspaper".
Anyway, over to Jim.
Imagine that you've just been appointed editor of a once popular, but now struggling, weekly dieting magazine. The publisher suggests as a front cover for your maiden issue - 'Scientists Reveal: Weight Loss Secrets'.
You dutifully work on the theme, deciding to expand the headline to 'Scientists Reveal: Weight Loss Secrets - Eat Less, Exercise More'. What a revelation!
As it turns out, this particular cover story captures the public's imagination, ensuring your maiden issue breaks all circulation records.
Calling you into her office, your hard-headed publisher is naturally pleased with the sales numbers, but perplexed at the same time.
"You've hit the jackpot with this one," she tells you, waving around the circulation sheet. "But did you ever ask yourself what you were going to run with NEXT week? 'Eat Even Less and Exercise Even More' perhaps?"
The publisher then marches around to the other side of her desk and sits in the chair alongside you. She picks up a copy of the magazine and flicks through the pages, stopping at the big display ads along the way.
"You see these advertisements? Diet pills, supplements, health retreats, hypnotists . . . these ads pay for your salary and mine. And these companies will not be happy if we keep telling people that losing weight is just a matter of getting off their fat behinds and eating more fruit and vegetables.
"So make this issue a one-off will you?" she hisses as she ushers you to the door. "Next week, run with 'Ten Painless Steps to the New You' and spotlight that guy with 'The Lemonade Diet' book.
This story, which is closer to the truth than you might think, echoes the sort of pressures that the editors of popular money magazines and financial newspapers often find themselves under as they struggle to say something new and exciting about investment every day or week.
Just as we know that losing weight ultimately depends on eating less and exercising more, sound investment boils down to a handful of principles - accepting that markets work, understanding that risk and return are related, diversifying, keeping costs low and maintaining a long-term perspective.
That story is fine if you're an advisor. But as editor, if you splash that every day, you will soon lose your readership and your job. So instead, you keep the advertisers happy and write cover stories on 'Six Stocks to Kick Start Your Portfolio', 'Make Money in Any Market' and '12-Month Get Rich Plan'.
At one level, there's nothing particularly wrong with this. Commercial media is, after all, a business. Its priority is to keep its shareholders happy. It does that by keeping its advertisers happy. And it keeps its advertisers on side by delivering content that attracts the eyeballs of readers and viewers.
But these are now desperate times in the media. Pressures to produce eye-grabbing content have become more intense as the availability of free real-time content on the internet has undermined a once successful economic model, one in which advertising subsidised quality journalism.
With little or no growth in circulation or ratings, there has been a major drive to cut costs. This has meant fewer resources for financial journalists, who find themselves stretched ever more thinly. Quantity rather than quality of output becomes paramount, so journalists end up barely rewriting press releases drawn up by savvy PR professionals often employed by product-flogging financial services companies charging fat fees.
This sausage factory mentality is what has become known as "churnalism", a phenomenon noted on Britain's Fleet Street by Guardian journalist Nick Davies, who wrote a book on the theme called 'Flat Earth News'.*
Davies' thesis was based on research by the journalism department of Cardiff University in Wales, showing some 80 per cent of a sample of 2,000 news stories in major UK newspapers was wholly, mainly or partially constructed from second-hand material supplied by news agencies or the PR industry.
In this new world, where so-called 'spin doctors' reign supreme, the media's traditional role in protecting the public from deception has been eroded to the point where distortions and propaganda are regularly presented as truth and marketing is dressed up as consumer 'information'.
This explains the source of all those fad diet stories, as well as the prominence given to stories advocating 'absolute return' funds, collateralized debt obligations and many of the complex, opaque and highly risky financial instruments that got the world into the mess it is in now.
This is not to deny that the financial media plays a vital role in an open society, particularly with the transfer to individuals the risk of making decisions about how they invest for their retirement. And there is a lot of very good and perceptive analysis out there if you know where to look.
But it's important to understand the media's agenda and how commercial pressures, due to structural changes in the economy and the need to fill more and more space with fewer and fewer resources, are dissolving the Chinese walls between advertising and editorial. The 'Fourth Estate' isn't what it was.
* 'Flat Earth News', Nick Davies, Chatto and Windus, Feb 2008