I
Every weekday, from early morning, a steady stream of town cars made their way from lower and midtown Manhattan up the West Side Highway and across the George Washington Bridge. Once in New Jersey, the cars took the Fort Lee exit, hooked a couple of right turns, and deposited their passengers in front of an ugly gray office building that is home to CNBC. With more than twelve hours of programming to fill each day, the CNBC producers couldn’t be too picky about whom they put on screen, but they did have some standards. Their ideal studio guest was a former beauty queen who covered technology stocks, spoke in short declarative sentences, and dated Donald Trump. Since there weren’t many of these women available, the producers generally had to settle for balding, middle-aged men who revered Alan Greenspan and tried their best to speak in English. The vast majority of CNBC’s guests were bullish. Bears weren’t exactly banned, but they weren’t exactly welcome either. They tended to come off as crotchety, and the viewers didn’t like them. But when the market was plummeting they couldn’t be avoided.
Monday, October 24, 1997, was one such occasion. By midafternoon the Dow was down almost 400 points, and pain was etched into the faces of the CNBC anchors. The network turned to Barton Biggs, hardly a CNBC favorite. As well as being congenitally bearish, Biggs had an annoying tendency to speak over the heads of the viewers. But on this occasion he was on his best behavior. He avoided gloating and warned investors not to panic. “I don’t think anybody should do anything right now,” he said. “Within twenty-four hours this thing could be going in the opposite direction.”1 While Biggs was speaking, the Dow’s fall passed 500 points. At three-thirty, with the Dow down 554 points, its biggest-ever points drop, the New York Stock Exchange halted trading and closed for the day. It was the market’s first early close since the shooting of President Reagan in 1981.
Remarkably enough, Biggs turned out to be correct. The following day, the Dow jumped 337 points, its biggest points gain ever. CNBC’s reporters didn’t hide their delight. “It’s great to see all those arrows pointing up,” Susie Gharib gushed. A couple of days later, the excitement and tension in Fort Lee was still palpable. “Asia’s down; Latin America’s down; Brazil has allowed two banks to be taken over by foreign firms; it’s a backdoor bailout,” Ron Insana, a CNBC anchorman who had worked for sixteen hours on the day of the big sell-off, told a visitor.2 While Insana went off to prepare for his daily show, Bill Bolster, CNBC’s aptly named president, pointed out that the network’s ratings had quadrupled, to almost one million, in the past few days. “We caught on to a Gulf War that’s going to last forever,” Bolster declared. “An event like this happens and Ron Insana becomes Norman Schwarzkopf.”3 Jack Welch, the chairman of General Electric, which owns NBC, had personally congratulated Bolster. It is not every day that Welch calls up his underlings to praise them. Bolster, a strapping Iowan who generally keeps two packs of Merits on his desk, was as pleased as punch. “We had a chance to define our brand, and we took it,” he said, beaming. When it was suggested to him that CNBC had been cheerleading for the stock market during the downturn, Bolster didn’t flinch. “That is an observation that I am very comfortable with,” he replied.4
NBC started CNBC in 1989 as a hedge against the declining ratings of its broadcast network. The new network, which was situated in New Jersey so it could utilize cheap, nonunion labor, started life as the Consumer News and Business Channel, presenting a combination of shopping tips and financial advice. In 1991, NBC purchased the assets of the rival Financial News Network, which had recently gone bankrupt, and folded its assets into the renamed CNBC. FNN had been a pioneer in business television. It was founded in 1981 by Glen Taylor, a former minister and children’s television producer, and it started airing on three UHF stations in California with a stock ticker running across the screen. FNN never made any money, but it managed to get distributed to 30 million homes, which is why CNBC bought its remains. Many of CNBC’s reporters, including Insana, Bill Griffeth, and Sue Herera, started their careers at FNN. Insana would later call FNN’s launch the “seminal moment” in the democratization of the financial markets, since “it was the first time you didn’t have to call a broker to get a stock price.”
After the merger, CNBC added a stock ticker and shifted its focus from consumer news to Wall Street. Over the next few years, it turned itself into something between a notice board for investors and a fan club for corporate America. Chief executives loved to go on CNBC. When they had good news to impart, they could deliver it directly; when they had bad news, they could sugarcoat it for investors. Either way, they were assured of a respectful hearing. Between the corporate bigwigs, CNBC filled its airtime with the town car passengers. When the stock market took off in the mid-1990s, this strategy paid off. In 1996, when Bolster arrived from WNBC-TV Channel 4 in New York, he found that he was sitting on a printing press. CNBC’s audience wasn’t very big—a couple of hundred thousand on an average day—but it was affluent enough to attract major advertisers. Compared to other networks, CNBC’s production costs were minimal. Its reporters were paid less than their NBC colleagues, and its guests appeared for nothing. No wonder that Jack Welch became such a big fan of the network.
CNBC didn’t create the stock market boom, but it did help to perpetuate and amplify it. To borrow a term from biology, the network acted as a “propagation mechanism” for the investing epidemic. All across the country—in bars, banks, health clubs, airports, and doctors’ waiting rooms—televisions were permanently switched to CNBC. The network’s reporters didn’t hype stocks directly. Rather, they helped to create a populist investing culture in which adulation of the stock market was the norm. The word “adulation” is not an exaggeration. CNBC treated the stock market as a sport, and there was never any doubt which side was the home team. The network’s daily schedule was set up like the coverage of an NFL game. In the morning, there were pregame shows, detailing the latest team news (overnight corporate announcements, market activity in Europe and Asia) and focusing on key match-ups ahead (economic statistics to be released, earnings announcements, important speeches). Throughout the trading day there was live coverage, with a revolving cast of announcers and color commentators. And after the market closed, a lengthy postgame show reviewed the day’s action, focusing on the big winners and losers.
On all but the darkest of days, an upbeat tone was maintained. CNBC’s reporters were enthusiastic, perky, and well informed. Together, they produced smart, entertaining television, which was all the more impressive for being largely unscripted. What they didn’t produce was objective news. The vast majority of CNBC’s guests were analysts and fund managers who “talked their book”—pumped up the stocks that their firms owned. CNBC’s reporters were more than content to let them do so. “A lot of financial journalists seem to hate capitalism,” Joe Kernen, CNBC’s stocks editor, himself a former Wall Street broker, complained. “It would be like having sportscasters who hate sports. I love capitalism.”5 Unlike other journalistic organizations, CNBC allowed its journalists to trade the stocks of the companies they covered, as long as they held on to them for several months. This policy wasn’t advertised to the public, but most viewers probably wouldn’t have minded even if it had been. CNBC’s appeal was largely based on the fact that it seemed to be willing the stock market higher. Why should its employees be deprived of the chance to get rich along with everybody else?
CNBC wasn’t the only stock market booster. If viewers tired of Maria Bartiromo, the “Money Honey,” on the floor of the New York Stock Exchange, they could switch to CNNfn, where similar, if less appetizing, fare was being served up. Bloomberg Television provided a third source of financial news. The major networks were much slower to catch on to the stock market story. Their evening news reports rarely went beyond recitations of that day’s closing prices, and during trading hours they were showing soap operas. As the boom continued, NBC News began to use CNBC reporters on its evening broadcast; CBS News and ABC News didn’t have that option. The networks’ problems went well beyond the fact that they were primarily geared up to cover the White House and the State Department. In many ways, they had lost control of the nation’s news agenda to cable television and the Internet. As a result, for the first time since the dawn of commercial television, they missed the biggest story of the decade.
II
The October 1997 sell-off proved to be a hiccup—another chance for investors to “buy on the dips.” In January 1998, the month Newsweek revealed the Whitewater prosecutor was investigating charges that President Clinton had had a sexual relationship with a White House intern, the Dow moved back above 8,000. The stock market and the Monica Lewinsky story would dominate the news for the rest of the year, with some of the biggest headlines reserved for Internet stocks. Nineteen ninety-eight was the year that Internet fever turned into an epidemic, with investors of all types succumbing. In just twelve months, America Online’s stock rose by 593 percent, Yahoo!’s stock rose by 584 percent, and Amazon.com’s stock rose by an astounding 970 percent. Old media companies sought desperately to clamber aboard the Internet bandwagon. The Walt Disney Company took a stake in Infoseek, the search engine, and also created the Go network as a potential rival to Yahoo! and America Online. NBC invested in C-Net’s Snap site.
The number of Internet IPOs continued to increase. In late January, VeriSign, a Silicon Valley company that provided digital identification cards to facilitate online commerce, went public in an offering underwritten by Morgan Stanley. On the first day of trading its stock rose from $14 to 25 1/2. CDNOW quickly followed VeriSign’s example, selling 4 million shares at $16 each. In February, DoubleClick, the online advertising agency, became the first Silicon Alley firm to go public. Its stock jumped from $17 to 27 3/8, and Kevin O’Connor, its founder, saw his stake rise to $76 million. Mere mention of the word “Internet” was now enough to send investors into conniptions. In April, the Dow broke through 9,000, and K-Tel International, the mail-order music business best known for its “Hooked on Classics” series, announced that it would soon start distributing its compilations of old hits over the Internet. Before the announcement, K-Tel’s thinly traded stock was below $7. During the next ten days, it quadrupled. On April 21, after K-Tel announced a stock split to “further enhance the availability and affordability” of the stock, it jumped another $12, to 41 5/8.
At this point, two prominent British publications called on Alan Greenspan to bring the stock market back to earth before it crashed of its own accord. “America is experiencing a serious asset-price bubble,” The Economist announced in an editorial. “The Fed needs to raise interest rates now. Uncertainty is no excuse for Mr. Greenspan to sit on his hands.”6 A week later, The Financial Times compared the U.S. economy to Japan in the 1980s, saying: “This is unquestionably a bubble.”7 It is just conceivable that if the American media had taken up these arguments and pressured the Fed, Greenspan would have responded. But the American media was no longer an objective observer of events: increasingly, it was itself part of the bubble. In response to the carping from London, The New York Times published an editorial defending the nation’s amour propre. “America today is nothing like Japan eight years ago,” it insisted. “The American economy today is nearly a mirror opposite.”8 Economic downturns hadn’t been abolished, the Times conceded, distancing itself from the more extreme New Economy enthusiasts, but “a recession that might start now would reflect the ordinary ups and downs of a complex economy, and not the inevitable implosion following speculative excess.”
Newsweek also did its bit for national pride, reporting that Greenspan had privately poked fun at the Economist article.9 Few American publications queried Greenspan’s wisdom. This wasn’t just a matter of hero worship—although there was some of that. Questioning the stock market’s rise had already embarrassed many newspapers and magazines. In April 1996, Fortune published a cover story, “How Crazy Is This Market?” which said a “confidence-shattering crash” was inevitable at some point.10 In July 1997, with the Dow 2,000 points higher, Fortune ran another alarmist cover story, this one posing the question: “Time to Cash In Your Blue Chips?”11 Readers who sold out after either of these articles missed another big run-up in stock prices. Not surprisingly, Fortune’s coverage of the stock market became notably less questioning as time went on—and this was true of a lot of publications.
A few individual curmudgeons remained: Alan Abelson, of Barron’s; Allan Sloan, of Newsweek; Jim Grant, the editor and publisher of Grant’s Interest Rate Observer, a Wall Street newsletter. These writers maintained a steady supply of skeptical interpretation, but bearish journalists, like bearish analysts, were largely ignored. The truth was that few Americans wanted to read negative pieces about the stock market. Journalism, like all commodities, is subject to the laws of supply and demand. As the demand for skeptical reporting dropped, the supply fell back to match it. Similarly, as the demand for upbeat coverage increased, the supply expanded to meet it.
In July 1998, Money magazine addressed the boom in stocks like Amazon.com, Yahoo!, and K-Tel. “Seeing such price gains, you may have two questions,” Money noted. “One, is Internet mania based on nothing more than hype? And, two, is it too late to get it on the action?” The answers were reassuring—at least to Wall Street: “First, the Internet boom is for real,” and “Second, you are not too late.” The article went on: “It’s true that eager investors have bid up many Internet stocks to astonishing prices. Yahoo!, for instance, trades at more than 40 times sales; by comparison, even premium-priced Microsoft goes for less than 15 times sales. But the Internet’s potential is so great that even today’s rich prices will likely be justified for many companies in the long run”12
It is unfair to single out Money—many other magazines ran similar articles—but the fact that such a conservative publication could recommend Yahoo!’s stock demonstrated how far American journalism had been compromised. A few weeks later, Time, which had been running boosterish articles about the Internet for years, surpassed itself with a cover picture of Jerry Yang above the headline “Kiss Your Mall Goodbye: Online Shopping is Faster, Cheaper, and Better.” Of all the dubious articles published about the online economy, this was one of the most hysterical. “In our 20th century consumer culture, it may seem almost too good to be true: the latest and greatest products, custom-made and delivered whenever you want!” writer Michael Krantz gushed. “And how to pay for all this online bounty? We hope you’ve bought some Yahoo! stock.”13
Yahoo! was the latest media darling. A week earlier, its stock had surged to more than $200, making paper billionaires out of Yang and David Filo. In September 1998 both Business Week and Upside published cover stories on the company. A few months later, Advertising Age made Filo and Yang their “People of the Year.” Most articles about Yahoo! parroted the company’s line that it had transformed itself from a mere “search engine” into a “portal,” or even a “broadcast network of the Web,” and that this strategy would prove highly profitable. There was even some evidence to support this story. In the first quarter of 1998, Yahoo! recorded its first profit: $4.3 million. By the summer, its Web site was attracting about 40 million visitors a month—“more than the 30 million who tune in weekly to NBC’s top-rated TV show, ER,” Business Week pointed out—and only America Online was receiving more traffic.14
But Yahoo!’s future was far from assured. Unlike America Online, it had no subscription income, so it was totally dependent on advertising, which was little more effective on Yahoo! than elsewhere on the Internet. Overall click-through rates—the percentage of people who click on banner ads—refused to rise above 2 percent; often they were lower. Conversion rates—the percentage of people who make a purchase after seeing an ad—remained minuscule. Yahoo! nonetheless charged its advertisers premium prices, which it was able to get away with because most of them were other Internet companies desperate for publicity. This was a highly questionable business model. For Yahoo! to succeed in the long run, investors would have to keep pouring money into Internet companies indefinitely, so they could keep spending it on marketing. Should Internet stocks ever falter, most of Yahoo!’s revenues would surely dry up.
The media tended to ignore such subtleties. Like Yahoo!, it was reveling in all the advertising that the Internet generated. Many publications put on new sections to accommodate the extra ads they were receiving. The New York Times added a weekly “Circuits” section, which was stuffed full of computer ads. The Wall Street Journal added a weekend section and sometimes split its first section in two. Entertainment Weekly added an Internet section. Business Week, Fortune, and Forbes all expanded their coverage of technology and personal finance, the two main sources of additional advertising. Even The New Yorker started publishing special issues devoted to technology. Generally speaking, and with some honorable exceptions, the reporting in the new sections was tame and business-friendly, which suited the advertisers and the Internet companies just fine. For any start-up, a favorable mention in the media was valuable; for loss-making Internet companies, whose futures depended on raising more money from investors it was essential. “We happened to launch on the same day that the Communications Decency Act was dealt a fatal blow, which was great timing,” Rufus Griscom, the founder of Nerve.com, later recalled. “As a result, the day that we launched it was on CNNfn; a week later we were in Newsweek; a month after that there was a full page on us in Time, and off we went. We had almost immediately several hundred thousand readers. And, in retrospect, arguably the single largest benefit of being online has been the press hype.”15 In many cases, the Internet start-ups could pick and choose which newspapers and magazines they wanted to cover them. “It was unbelievable how traditional media fell over themselves to praise and cover Internet companies,” Nicholas Butterworth, the founder of SonicNet, an online music site, said. “Every day we all got streams of visitors from traditional media trying to write positive things about Web companies because their readers were demanding it. It sold magazines and made them look hip.”16
III
The most enthusiastic proponents of New Economy journalism were the technology and business magazines that sprung up in the wake of Wired. Louis Rossetto failed to become a media mogul, but he started a trend. By the end of the 1990s, the nation’s magazine racks were groaning under the weight of magazines covering the New Economy from every conceivable angle.
In November 1995, Alan Webber and William Taylor, two editors at the Harvard Business Review, founded Fast Company, a monthly lifestyle magazine that promoted itself as a Rolling Stone for MBAs. Webber and Taylor started out with $200,000 of their own money, and they persuaded Mortimer Zuckerman, the owner of Atlantic Monthly and U.S. News & World Report, to back them. Their publication was a glossy incarnation of the pro-business but bomb-the-corporation ideology taught by management gurus like Peter Drucker and Tom Peters. It was devoted to the proposition that “a new generation of businesspeople is changing how people work and what work stands for; that as a result, companies are changing in fundamental ways; and that business, in turn, has become the most powerful force changing the world.”17 Fast Company turned Marxism on its head. In its view, workers, far from being oppressed, were being given a chance to express their individuality through their roles in the production process. In its first-anniversary issue, Fast Company published an article entitled “John Doerr’s Startup Manual,” which described the Kleiner Perkins VC as “an avatar of the Web” and highlighted some of the character traits that had made him such a success: “his unrelenting drive and competitiveness, his willingness to take huge risks and go beyond standard procedure to achieve success,” and his “superhuman energy.” Clearly, Doerr was Fast Company’s type of business executive. “There’s never been a better time than now to start a new business,” he told the magazine. “America honors, supports, and encourages new business. Not that it’s easy. But part of the American dream is building a new business that creates jobs and financial independence.”18
The spring and early summer of 1998 saw the appearance of two new magazines devoted exclusively to the online world. In April, the first issue of The Industry Standard, a San Francisco–based title that described itself as the “weekly newsmagazine of the Internet economy,” hit newsstands. International Data Group (IDG), the owner of PC World and Macworld, was behind the new venture, and John Battelle, a thirty-two-year-old editor who was formerly Rossetto’s deputy at Wired, served as its president and publisher. Battelle said The Industry Standard’s intended audience was “the senior-level person who wakes up at night and wonders how the Net affects my business,” and he guaranteed advertisers a circulation of 60,000.19
The Industry Standard started out as a semiweekly, with plans to go weekly in 1999. Battelle hired an able and experienced staff. Jonathan Weber, a veteran technology editor at The Los Angeles Times, became the editor in chief. Michael Wolff, the New York Internet entrepreneur who had by now reverted to journalism, signed on as a columnist, as did Carl Steadman, the founder of Suck, an influential early Web site. James Ledbetter, The Village Voice’s media critic, became the new magazine’s New York bureau chief. Under Weber’s steady hand, The Industry Standard quickly established itself as a reliable and comprehensive source of reporting on the people, deals, and technological developments that kept the Internet economy humming. Its first cover story, “Domain Games,” described how speculators were buying up addresses on the World Wide Web and then selling them to corporations at a big profit.
Business 2.0, a glossy monthly whose first issue appeared in July, was very different from The Industry Standard.20 Published by Imagine Media, the owner of PC Gamer and several other technology magazines, it described itself as the “oracle of the New Economy,” but “courtier of the New Economy” would have been more accurate. The magazine set up an “advisory board” that included Jeff Bezos, Halsey Minor, the founder of C-NET, and Jeff Mallett, the chief operating officer of Yahoo! Business 2.0’s editor was James Daly, another veteran of Wired. “The New Economy—decentralized and antihierarchical—is the most promising opportunity in years and the biggest business story of the next decade,” Daly declared. “Other magazines touch on this point, but none are inspired by it.” Business 2.0’s editorial content was dutifully reverential. In the first issue, there were profiles of “The 25 most intriguing minds of the new economy.”21
The new Internet magazines had little trouble attracting advertising. The advertisers in the first issue of The Industry Standard included IBM, Anderson Consulting, Hewlett-Packard, and Silicon Graphics. In the first issue of Business 2.0, Netscape and IBM bought space, and so too did BMW and Absolut Vodka. This was another indication of how the Internet’s reputation was changing. In the early days it had been viewed as an obscure preserve for computer nerds and other eccentrics. Now it was being promoted as a sexy and fashionable destination for affluent young things—an online Club Med.
The surge in Internet-related advertising also benefited a number of existing magazines that focused on technology, such as Upside and Red Herring, both based in San Francisco. By the beginning of 1998, Upside had 150,000 subscribers, and its ad-heavy issues usually ran to more than two hundred pages. Red Herring—the name was the slang term for an IPO prospectus—was sometimes even fatter.
The appearance of so many magazines devoted to the same subject was a classic sign of a speculative boom approaching its peak. During the mania for railways in 1840s England, the railways press expanded to include fourteen new weekly papers and two new daily papers, one for the morning and one for the evening. The list of railway titles included: The Railway World, The Railway Express, The Railway Examiner, The Railway Globe, The Railway Standard, The Railway Mall, The Railway Engine, The Railway Telegraph, The Railway Register, The Railway Director, and The Railway Review. Following the financial crash of 1847, most of these publications perished.
IV
The media bubble also spread to the Internet itself, despite the fact that many early attempts to launch online magazines, such as Slate and Salon, had struggled to overcome the reluctance of Internet users to pay for editorial content. The only newspaper that enjoyed much success in attracting online subscribers was The Wall Street Journal. Financial information and pornography were the two items that people seemed willing to pay for online. By the start of 1998, there were tens of thousands of pornography sites, offering material catering to every taste imaginable. The Internet pornography companies pioneered a number of business tactics that later spread to mainstream Web sites, such as disabling the “back” button so people couldn’t leave their site and utilizing pop-up advertisements. Two of the online sex firms were even listed on the Nasdaq: Metro Global Media, which was based in Rhode Island, and Private Media Group, a Swedish company. They reported 1998 revenues of $34 million and $20.5 million, respectively.
The market for financial information was somewhat less well served. Emboldened by the popularity of The Motley Fool and the success of the online Wall Street Journal, James Cramer, a journalist and investor who was a frequent guest on CNBC, decided to set up his own financial Web site, TheStreet.com, to cater to the growing number of individual investors who wanted to trade like the Wall Street professionals. “The personal computer is the communications tool that has made all the difference,” Cramer wrote in his weekly column in New York magazine. “It has become the equalizer between amateur and professional.”22
Cramer’s multifarious activities demonstrated the blurring of the lines between journalism and Wall Street. Basically, he was a professional speculator, but he was also a prolific writer, a would-be media mogul, and an energetic self-promoter. The son of a gift-wrap salesman, he grew up in the suburbs of Philadelphia and won a scholarship to Harvard, where he edited the student newspaper, the Crimson. After graduating, Cramer worked for Congressional Quarterly in Washington, then did reporting stints at the Tallahassee Democrat, the Los Angeles Herald Examiner, and American Lawyer. In 1981 he returned to Harvard to attend law school, but spent much of his time watching the Financial News Network and investing in stocks. Every week, he would leave a stock pick on his dorm-room answering machine. One day, Marty Peretz, a Harvard lecturer who owns The New Republic, called to ask Cramer to write a book review and heard the message. After taking Cramer’s stock tips for several weeks, Peretz demanded to see him at a local coffee shop, where he handed over a check for $500,000. (Peretz’s wife is an heir to the Singer sewing machine fortune.) In two years, Cramer tripled Peretz’s money.
After leaving Harvard, Cramer joined Goldman Sachs, where he traded stocks for wealthy clients. In 1987, he quit Goldman, and a few months later, he co-founded a hedge fund, Cramer, Berkowitz & Company, with Peretz as one of the original investors. Between 1988 and 1996, Cramer’s fund made an annual return of 22 percent, compared to 15 percent for the S&P 500. Cramer made a fair amount of money, but he wasn’t content to be just another Wall Street rich guy. He also wrote financial columns for a variety of publications, including GQ, New York, and Worth. Being a journalist and an investor at the same time presented obvious conflicts of interest, but Cramer shrugged them off, and he was rarely called to account. In 1995, in Smart Money, he recommended four stocks without disclosing that his fund owned significant stakes in the companies (almost 10 percent in two cases). After the piece was published, Cramer’s stock jumped in value by more than $2 million. The SEC cleared Cramer of any illegality, but the Columbia Journalism Review questioned his ethics. That didn’t stop other magazines from continuing to employ him.
With $3 million each from Cramer and Peretz, TheStreet.com launched in November 1996. In order to placate the SEC, Cramer agreed to have nothing to do with its news coverage and to stay away from its offices. He recruited David Kansas, a reporter from The Wall Street Journal, as TheStreet.com’s editor. The site offered financial news, online chat, and a daily column by Cramer called “Wrong!” Subscribers were charged $12.95 a month. The prospect of writing a daily column while he was running a hedge fund didn’t disturb Cramer, an insomniac who arose at 3:45 A.M. each day. “We’ll have stuff that will blow your mind,” he told Fortune. “I intend to make a fortune on this.”23
TheStreet.com didn’t live up to either of those promises, but Cramer’s column provided an entertaining insight into the mind of a speculator. “I am a big believer in the Internet,” he said in March 1998. “I am always looking for stocks in that field.”24 Three months later, his enthusiasm for Internet stocks remained undiminished. “We simply don’t have enough pieces of paper that represent the right to own future profits from the Net,” he wrote.25 Most of TheStreet.com’s readers seemed to appreciate Cramer’s blunt arguments, and the fact that he was backing them up with real money, but not everybody was convinced. “For the most part all we have are pieces of paper representing the right to own future losses from the Net,” a subscriber named Jonathan Magulies complained in an e-mail posted on the site. “Most of these companies are bloody with red ink.” To Cramer, that was the sort of antediluvian thinking that kept people poor. “There are companies whose business wouldn’t exist if it weren’t for the Net, and a lot of them are good businesses,” he insisted a while later. “AOL is a great business: they have thirteen million subscribers. Thirteen million of anything is good. [Robert] Pittman is a genius. I think Yahoo! has a possibility of being a good business if they can execute. . . . Amazon, by virtue of the inefficiencies in our capitalist system, has a model that works. Whoever thought Amazon would be crushed by Barnes & Noble and Borders massively misjudged the market.”26
In former times, Cramer might well have been dismissed as an engaging tout. In the late 1990s, he was invited to appear on Fox, CNN, CNBC, and ABC’s Good Morning America to dispense investment advice to the masses. He even appeared in an advertising campaign for Rockport shoes. President Clinton wrote him a congratulatory note on his fortieth birthday, which he framed and hung in his office. (Cramer was a big contributor to the Democratic Party.) “He’s on track to enter Wall Street’s hall of fame for ubiquity, right alongside Brooks Brothers ties,” the New York Post commented.27
Cramer portrayed himself as the embodiment of the new stock market populism—the fast-talking Jewish boy who crashed his way into Wall Street—but he wasn’t quite the outsider he pretended to be. From his Harvard days onward he was friendly with plenty of powerful people, including a number of prominent journalists. Some of these journalists invested money with Cramer. The investors included Michael Kinsley, the editor of Slate, Kurt Andersen, a former editor of New York, and Hendrik Hertzberg, a senior editor at The New Yorker. The fact that illustrious journalists were speculating with Cramer rarely appeared in print, although it was well known in New York media circles. Many of those who knew didn’t consider it newsworthy. At book launches and magazine parties, it was rare to meet anybody who wasn’t heavily invested in the stock market. The gossip on such occasions often centered on how so-and-so had got in early on such-and-such a stock. Jason Epstein, the editor in chief of Random House, was said to have made a small fortune on Amazon.com Kinsley and the other Slate journalists had certainly made a lot of money from their Microsoft stock. The notion of journalists as observers maintaining an Olympian detachment, an idea that had always been questionable, was now a quaint myth. Like so many of their countrymen, America’s journalists were enveloped in the speculative bubble up to their necks.
During previous speculative episodes, journalists and writers, unless they knew something about gold mining or biotechnology, had enjoyed scant opportunity to get in on the action. In such circumstances, it was easy to remain aloof from the money-grubbing throng. But the Internet boom was centered on the media industry. The sight of Jim Cramer and others creating online businesses that seemed headed for successful IPOs set minds racing. Many journalists came to see themselves not as mere artisans hired to fill up the space between advertisements but as “content providers” and would-be entrepreneurs. With the normal constraints of founding a business removed—e.g., the requirement that the venture should have a realistic chance of making money—the possibilities were endless. Why not set up a Web site for women? For angry consumers? For pet owners? For space enthusiasts? For journalists? For people who don’t want to stand in line at the Department of Motor Vehicles? Before long, all of these businesses would exist—and journalists would write favorable articles about many of them.