Financial Journalists Need to Understand Numbers Better If They Want to Avoid Getting Played

Another one from the archives I was saving for while I am otherwise occupied. Enjoy.


Having a fluency in the writing arts is one of the prerequisites for a career in journalism. The ability to sum up an event in an understandable manner is crucial. But people with highly developed language skills often lack a similar set of skills in mathematics. They can be literate, yet innumerate.

This is highly problematic for those who cover financial news.

On an all too regular basis, the media finds itself doing the bidding of clever and sophisticated spin doctors who work for corporations, trade groups, and others with a specific agenda to pursue. Look no further than the annual holiday shopping forecasts as it gets unthinkingly parroted by the usual suspects in the MSM.

They ought to know better.

The most recent journalistic error involved a young, dumb kid making outrageous claims about his trading prowess to New York Magazine. The first mention of this should have immediately raised red flags for everyone involved:



We eventually found out that these guys hadn’t made any thing, much less $72 million dollars, and they were mere “paper trading” and basically, fabricated his returns. The NY Observer headline had I right: New York Mag’s Boy Genius Investor Made It All Up. New York magazine eventually changed the headline, but the damage was done.

Even writers who lack a facility with numbers should be skeptical to begin with. To paraphrase Carl Sagan, outrageous claims demand outrageous, beyond any doubt, proof. We have not seen that in the two examples above.

Any journalist covering a story with specific and hard to believe claims must be capable of asking very specific questions about those claims. Consider our whiz kid trader:

• What is the context of his claim of claimed performance? Did the supposed $72 million he made in trading start at $10,000 or $100m? Lacking that context means we have no idea what the performance was, even if it were $72m number was true.

• Is anyone really going to amass a spectacular track record by trading under their desk in High School class? Does it make any intuitive sense that some random kid is going to beat the best equipped, fastest and smartest algorithms, run by firms with effectively unlimited resources to pursue trading profits? That claim alone should get your spidey sense tingling.

• In any financial dealing, there will ALWAYS be ways to verify what occurs – trade documentation, assets held at custodians, audits from accountants, monthly statements from brokers. Lacking any of these should always be a giant red flag to reporters.

Next, a pet peeve: The uncritical acceptance of what paid public relation flaks or investor relations persons have to say about, well anything. It is their jobs to obscure unpleasant facts from the public’s eyes.That should make reporters even more aggressive and skeptical.

Let’s get a bit more specific, and to be blunt, personal.

Recall my column last month year revealing Pimco’s enormous bonus $1.5 billion bonus pool. As you might imagine, the numbers were so huge the story went viral. It was covered in great detail elsewhere (see e.g., this, this and this). However, the article also created more examples of journalists lacking appropriate skepticism — and numeracy — in the face of obvious spin.

As expected, the PR folks at Pimco denied the reported data, and they did so in a very disingenuous way. Hey, bullshitting people is their job. I understand that, But it’s a reporters’ job to understand the issues and ask appropriate follow ups.

That did not happen in several articles.

A little background: My source was thoroughly vetted by the editorial team at Bloomberg View. My colleague at Bloomberg News, Mary Childs, had two other sources. Having three separate and independent sources confirm the numbers – my source, plus two additional sources from Childs, made the bonus number for Pimco, Bill Gross, and the rest of the managing directors rock solid.

But the PR people claimed the numbers were wrong. That these enormous (and in some people’s view) outrageous numbers were so large the PR flaks needed to downplay them. Which is what they did, saying “While Pimco does not comment on compensation, the figures provided to Bloomberg are not correct.”

Here is where proficiency with statistics and data comes in handy: The dictionary definition of “correct” is “free from error; in accordance with fact or truth.” Following that definition, Pimco’s PR flak’s were only in the most technical sense correct when they said the $290 million dollar bonus was “not free from error.” However, that was done on purpose. To protect out source, we “rounded” all of the numbers to remove any precision. That changed the potential number of people who had access to the numbers, from a handful to many more. Providing the exact numbers to the penny would have pointed to a small number of potential sources, and we did not want to get our source in trouble.

This allowed Pimco to claim that a hypothetical bonus of $99.96 that was reported as $100 to be “incorrect.” They can honestly make a claim that the round, non-decimal number is not precisely correct. And while they might be right that the number is imprecise, it is – and this is the most important aspect of this discussion – “in accordance with fact or truth.”

In other words, it is imprecise but accurate.

The folks at Pimco were trying to thread the needle, challenging the numbers precision while silently ignoring its accuracy. That’s a clever way to deny something they know to be true, yet not actually tell a lie in response to the question.

A few journalists (see e.g., this or this) seemed to have misunderstood this. All they needed to do was follow up the denial with an obvious questions:

“Are the numbers accurate (if not precise)?”

“Is that an approximation of the bonuses paid?”

“Are these within one – two percent of the bonus pools paid out in 2013?”

Had those question been asked, PIMCO would most likely have lapsed back to their “no comment” posture – a nondenial denial. Wink wink, nod nod, the bonus numbers were truthful and very close to the actual dollar amount, even if they were (purposefully) not the precise number to the penny.

Since then, we have obtained even more confirmation about the accuracy of these numbers. In Mary Childs most recent article, she noted she had “interviews with 25 current and former Pimco employees, who asked for anonymity to discuss internal matters.” No one denied the numbers previously discussed, as Childs reported:

“Gross built Pimco with some of the best long-term investing track records, and was the face of the bond market with television appearances almost every day. Assets at the firm doubled between 2010 and 2013, making Gross one of the best-compensated money managers, with a bonus of about $290 million in 2013, a fortune even by Wall Street standards.”

I took that as a damning indictment of those who merely parroted the usual PR denials.

Look, the reality is that Journalists HAVE TO deal with PR people all the time. The job of the flak is to present their employer in the best possible light. However, the role of the journalist is not to act as mere stenographers, blindly accepting what is told to them by the PR staff as gospel. It is incumbent on those in the media that to probe and push and question the spin doctors to get closer to the truth.

And to be blunt, quite a few failed to do just that.

Bringing the truth to light is the job of the Press. Journalists need to learn to ask the smart follow ups to the PR folk, including more probing questions of those people whose jobs are to obscure the truth from view. Reporters need to be smarter when it comes to numbers.

Don’t get played.

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Discussions found on the web:
  1. RiverboatGambler commented on Feb 19

    Speaking of big claims, assuming that a journalist cares about the truth also demands “outrageous, beyond any doubt, proof.”

    After all, what’s that got to do with sales? I bet this author’s career does better, not worse because of this article.

    The truth is what they should be reporting for the benefit of us all. When viewed through the lens of “what is” rather than “what should be” it is clearly an illusion to think that even half of media outlets still report information that is useful to a person seeking fact and truth. That’s why we read The Big Picture :)

  2. mdanda commented on Feb 19

    Whenever I see a post like this that puts pressure on a lower-paying-than-my-own field, I immediately ask myself the following question:

    What is the talent pool available for ? What is the incentive to remain in that field, after getting such a negative review?

    Another way of looking at it:
    If said journalist had the numerical literacy and financial acumen to consistently see through the financier’s veil, and that journalist makes 1/10th the salary of the financier, what incentive does the journalist have to remain in that field and not convert to finance themselves?

  3. farmera1 commented on Feb 19

    This sounds much like “deflate gate” the NFL/ESPN/Patriots investigation and sports scandal???? . Somebody big is being played for a fool and nobody comes out looking good. The credibility of all the drivers looks bad to the extent it is funny and repulsive at the same time.

    There is an ongoing official NFL investigation (reportedly costing tens of millions) into whether the Patriots intentionally used deflated balls in the playoffs leading up to the Super Bowl. Since the investigation began the NFL has been doing repetitive slow leaks of “stories” mostly to ESPN about the investigation. ESPN has put sensational head lines on these stories (always based on un-named “sources”) and pointing accusing fingers at the Patriots and spread them far and wide all over the TV and internet. So far all of these reports based on “sources” have been proven to be inacurate and later over ridden by other “sources”. Yesterdays revelation based on “sources” is that an NFL employee was fired for taking official playoff game balls from the playoff game in question and selling them for personal profit.

    Somebody big is being played in this story. The whole thing is so weird that the Onion couldn’t have thought it up and the NFL shield has dirt and mud all over it. “Deflate gate” comes on the heals of some botched NFL abuse investigations. If the purpose is to keep the NFL in the headlines it has worked well. I say it is peak NFL and peak ESPN, reputations and credibility takes years to create and a couple of months to destroy.

  4. VennData commented on Feb 19

    It’s more than numbers it’s this vast PR conspiracy of spin.

    CNBC had the Hershey CEO on this AM, When asked what his response was to the fact the all the processed sugars in his product are bad he said, “Consumer want things in their products they can pronounce.”

    Besides looking smarmy, statements like that give the CEO zero credibility. Your product is making lives miserable. Make it better. Show how you plan to do that.

  5. dilbert dogbert commented on Feb 19

    What is the worst thing that can happen to a stenographer (reporter)? Get ignored. Not read. Not commented on. Not invited to the best parties. Be told by his editor the copy is dull. Therefore write smack and get noticed, read, commented on, go to the best parties and be told by his editor: That’s great copy!!! Incentives rule the world.

  6. davebarnes commented on Feb 19

    What if they don’t care that they are getting played?
    See dilbert dogbert comment

  7. slowkarma commented on Feb 19

    Everything you say is true, but that’s only part of the problem.

    For example, you seem to think that the Pimco PR people were simply prevaricating, and that if pressed, they’d have to retreat to “no comment.” Why do you think they just wouldn’t lie? PR people lie all the time. And that’s a serious problem. The same is true of politicians. They say something, then they say they “misspoke.” No, they didn’t — but now they’re lying about it. In fact, when a politician “misspeaks,” I think you’re probably gotten a glimpse of their true beliefs.

    But even deep skepticism doesn’t really get at the problem. One of the current tropes in journalism involves “income inequality.” The problem is, it’s very, very difficult to figure out exactly what that means. How much net worth do you have to have to get into the top 1%? Well, nobody really knows, do they, but we do know that the IRS and the Fed estimates are wildly different. [ ]

    Yet, we see stories about this all the time, and I believe the numbers are simply plucked out of whoever’s butt most closely parallels the personal ideology of the reporter.

    Then, you have the stuff that is absolutely correct, but is simply untrue. There was a widely reported story a week or so ago that too much jogging was as bad as a sedentary life. It was reported in an American cardiology magazine, and picked up from there by several newspapers, and then went viral. The New York Times’ Justin Wolfers did a great take-down on the story, here:

    In other words, the study was accurate, it just wasn’t true.

    Innumeracy in ALL reporters ought to be the next thing to a disqualification. Even cop reporters need to be able to understand statistics, and at a fairly sophisticated level. If I owned a newspaper, I’d have a rule: no merit pay for anyone who couldn’t pass a stat test — and I’d offer to repay tuition to any reporter who wanted to take a stat class.

  8. the bankster commented on Feb 19

    Lots of reasons for reporters to play the game the way they do that have nothing to do with laziness or innumeracy.

    I had dinner with some WSJ reporters before the GFC when rumors of LBOs were leaking daily. Some of leaks, I told them, were being planted by hedge funds to manipulate a quick stock pop. They said they had to report them, but it was clear that they personally benefitted by reporting a market-moving “scoop.” At another dinner during the crisis, I told other reporters that they were getting played by banks providing non-recourse lending to “sell” troubled assets. They were more interested in talking about my bank’s recent soiree at MoMA.

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