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From AJR,   November 1999  issue

Continuation of Follow the Money   


By Lewis M. Simons
Lewis M. Simons is a magazine writer whose work appears regularly in National Geographic, Smithsonian and other publications. A longtime Asia-based correspondent for the Associated Press, Washington Post and Knight Ridder Newspapers, he has won the Pulitzer Prize and many other awards.     

Accelerating in his red Porsche roadster through a steeply climbing curve, Rich Oppel is taking for me a spin around Austin and up into the west Texas hill country, putting the throaty machine through its paces with measured nonchalance. Suntanned and white-haired, Oppel acquired the car a few years back to mark his simultaneous arrival at midlife--he is now 56--and a new life, as editor of the American-Statesman. He wheels into the parking lot of a casual chic techie hangout, pulling his sporty little car to a stop between two absurdly stretched limos, one black and one white. Inside, our dinner entrees arrive in volcano-like peaks, a style a West Coast friend later informs me is known as "tall food." This, of course, is yesterday's news in Silicon Valley.

Like other emerging high-tech hubs, such as those found around Boston and in the Northern Virginia suburbs of Washington, Austin is echoing to the shot first fired a generation ago in California's Silicon Valley. As recently as the mid-'80s, Austin was still best known for sheltering the state capital, the University of Texas and a melange of aging activists, causists, dropouts, musicians and other social border-dwellers. Now suddenly it's hot--103 this particular afternoon--but we're talking business climate here.

The Austin revolution began 15 years ago when Michael Dell started up the eponymous computer company now known around the world for its market-beating low prices. Not yet out of his teens at the time, Dell was treading in the footsteps of those who had emerged from the middle-class garages around San Jose. And today, like those other members of a super-elite fraternity, Dell lives in the requisite $21 million, stadium-scale mansion in the dramatic, stone-strewn hills above the city.

Because of Dell and the corporations and entrepreneurs who flocked here in his wake, Austin is no longer a funky, eccentric burg but one of the world's tech capitals--a veritable "technopolis," to borrow a phrase from Oppel's American-Statesman. In fact, Technopolis is the name the paper has given its new weekly section devoted to business, high-tech and lifestyle. Previewing the section for me--it wouldn't launch until October--Oppel promises it will "look at the culture of technology... How technology is changing people's lives in this place, and making Austin a 'technopolis,' a place as unique as this section's going to be."

Oppel is ex-Marine Corps, ex-AP and ex-Knight Ridder. He left a job running that chain's Washington bureau to edit the Cox-owned Austin paper, which has a daily circulation of 190,000. Part of the appeal, he admits, was the fact that his son was then based in Austin for the Dallas Morning News, covering high-tech. A few months ago, at age 30, Richard A. Oppel Jr. left Texas for New York and the Times. "The quickest and surest way for a young reporter to make it these days is through business," says the proud father.

Oppel comes by the enthusiasm honestly. "It's a special place at a special time," he tells me, meaning both the city and the paper. "There's high growth, an interesting collision of very different people--'60s slackers and go-go entrepreneurs--a liberal Southern city, a place where good writers want to live. So we can attract them, as well as mature editors. We're growing both in circulation and ads. About the only downside is that it's getting expensive to live here."

Oppel's managing editor, Kathy Warbelow, represents some of the new blood infusing Austin. Until 1996 she was at the Detroit Free Press. Having left behind a rusty community built on iron and steel for one being built on silicon, Warbelow is a true believer. Back in Detroit, she says, "the core city is broken. Here the story is all about possibilities, and the newspaper can play a significant role in that."

The Technopolis section was born of that brio. Oppel had invited a task force of staffers to come up with ideas for a new way to cover the specifics of Austin-area business life. "We quickly moved away from gadgets and gimmicks and focused on how technology affects life--society, community, individual attitudes, all of that and more," he says. "The closest sister we found was the weekend section of the Friday Wall Street Journal, which talks to readers about how they live."

Technopolis is overseen by Assistant Managing Editor Melissa Segrist and edited by Gretchen Heber. The section, which debuted at a prosperous 24 broadsheet pages, is staffed by a business reporter who specializes in personal technology, a general features writer, a designer, a photographer, a graphics artist, a part-time copy editor and a part-time clerk. "This is the first time in quite a few years that we've had this kind of growth around here," says Segrist.

With the region's economic expansion, the paper's circulation has been ticking up nicely at about 1 or 2 percent a year. But a readership analysis shows that penetration is low in the community's Hispanic precincts. Since advertisers here pitch to the upscale end and reporters tend to worry about the deprived, staff meetings have seen questions about whether Technopolis will ignore the lower socioeconomic classes while catering to the wealthy. "These are, obviously, highly legitimate concerns," Oppel responds. "But we mustn't disparage the high end, because that's the end that makes everything possible. Bluntly, yes, there is an emphasis on the high end, but that strengthens our ability to do better journalism."

While Oppel expresses only praise for the editorial freedom he receives from Cox, it's clear from this and other of his comments that he is under pressure to raise ad revenues. "An editor's shrewdness about where to take a newspaper provides the way for that newspaper to grow in the next 10 years," he says. "We've got to figure out ways to build alliances with advertisers and circulation. But we don't prostitute ourselves."

The concerns of Austin's staff are of a piece with other touchy areas arising from the business bonanza. Yes, the boom has created new opportunities for revenue generation, promotion and corporate partnerships, but what is a paper's rightful role? When a newspaper gets too cozy with the businesses it covers, the potential for conflicts can rise dramatically. Take newspapers' sponsorship of investment conferences, something popularized by the Los Angeles Times and spreading nationwide. These can be lucrative--the papers typically sell sponsorships to companies in exchange for ads and exhibit space--but they are rife with potential pitfalls.

In October, for instance, the Philadelphia Inquirer held its second such conference, drawing upwards of 4,500 participants. At other papers, editors have told me privately they're not sure enough steps are being taken to ensure journalistic probity where these programs are concerned. But in Philadelphia, Business Editor Hank Klibanoff says he has taken pains to construct "high brick walls" to separate his journalists from the paper's advertising staff, which organizes and promotes the affairs. "We [journalists], not the ad people, provide the content ideas," he says. "And even the invitations aren't handled by the ad people; they're issued by a third party, Morningstar."

Despite the precautions, Klibanoff acknowledges being nagged by a sense of "mushiness" about the fact that corporate sponsorships of the conferences have enabled the Inquirer to launch a Tuesday investment section. Although he praises the section as being "smart, sophisticated, yet not above the eye level of the average reader," he admits that it wouldn't exist without "our knowing that companies out there would advertise in it."

The ongoing argument between editorial staff and ad sellers is as old as newspapers, and it has never been resolved to both sides' satisfaction. But it has become more acute, especially in the wake of the technology boom, as business sections metamorphosed into significant revenue earners. Business pages are particularly attractive draws for certain types of ads. One is the so-called tombstones, often full-page announcements placed to herald the offering of new securities. These ads--understated, heavy on white space, with just a few lines of names and numbers plus a corporate logo--represent leading profit-earners in the business pages. Another strong category is advertising for mutual funds. A third and fast-emerging sector is the dot-com ads for Internet-related companies.

And then there are the "island" ads, for broker services or banks, say, which float in a sea of agate stock tables. Island ads were highly controversial when the newspaper industry advocated their adoption in the mid-'80s, many editors considering them an unprecedented breach of news content. To this day such major papers as the Journal, Times, Post and Inquirer, among others, still won't run them. But they are in the minority, and you scarcely hear the practice even debated anymore. Island ads are now so standard that they appear in countless other top papers, among them the Atlanta Journal and Constitution, Baltimore Sun, Denver Post, Miami Herald and St. Louis Post-Dispatch.

Like other editors I talked with about this issue, Oppel happily acknowledges the earnings potential of the fledgling Technopolis section, but emphasizes the paper's insistence on editorial integrity. "Publishers stand accused of not using their papers as a public trust, while editors are guilty of not recognizing them as businesses--which they've always been," Oppel says. True enough, and as you drive about a community like Austin, where development hits you like the heat, squarely between the eyes, you want to applaud a paper that recognizes and capitalizes on the phenomenon. At the same time you hope its writers and editors are up for what is surely the greater challenge: Caring about, and covering, not just those who are enjoying this boomtime ride, but those who are left behind.

In cranking up Technopolis, the American-Statesman turned for some pointers, not surprisingly, to the San Jose Mercury News. Once the Merc was a sleepy daily in an even sleepier town thought to lie somewhere south of San Francisco and known primarily for apricots and prunes. Today San Jose is the unofficial capital of Silicon Valley, itself the unofficial capital of the digital universe. And the Mercury News, its unofficial voice, tells the story of the place, the products and the people in ways that excite the envy of countless other news organizations.

Two decades ago the Merc pretty much had to invent high-tech coverage, since at the time practically no one in daily journalism knew much about the burgeoning industry. Columnist Jim Mitchell recalls that when he joined the paper in 1977, the business department had a staff of three. Now it has 40, not counting dozens of other employees at Mercury Center, the paper's online extension that itself specializes in the tech realm. "We were very weak," Mitchell says. "Today, we're the best in covering electronics--and probably all technology--as we certainly ought to be."

Executive Editor David Yarnold, who succeeded Jerry Ceppos to the top job in May, says that tech coverage has come to distinguish and differentiate the Mercury News brand. Certainly there's little question that the paper and its owner, Knight Ridder--which last year moved its corporate headquarters from Miami to San Jose, a clear sign of where it believes power lies--will continue to grow the business report. "It's one of the most important stories in the world and it's happening right here," says Yarnold, pointing out that two years ago Silicon Valley led the United States in exports, and last year ranked second.

More than that, the paper has excelled at doing precisely what Austin says it wants to do, which is go beyond conventional news reporting to convey the feel and pulse of this dynamic place, in every venue of the paper. Considering how thoroughly the Merc has achieved this integration, it's hard to imagine how close it apparently came to missing out on its own story.

Ceppos, my old boss and now Knight Ridder's vice president for news, recounts this from the deck of his home, perched amid disappearing wineries in the Los Gatos hills. By 1995, he says, the paper was covering high-tech, of course, but more or less in the rote way that it might handle education or the courts. It had become complacent, and just maybe a little myopic: The high-tech story was happening at such close proximity that the Merc wasn't seeing the broader ramifications. Then outsiders began slipping into the paper's backyard, setting off alarm bells. In February 1996, for instance, Time published a cover story on Marc Andreessen, the 24-year-old programming wizard behind Netscape. Seeing it, Ceppos says he felt violated. A week afterward, he summoned the news staff to a slide-illustrated speech in which he told them that they "were on the verge of missing..the full story of the people who make Silicon Valley unlike anywhere else on Earth."

He credits former Assistant Managing Editor Jonathan Krim, who during 16 years with the paper edited both its Pulitzer Prize winners, with "drawing the map" that guided the Mercury News through the resulting period of growth and improvement in its business coverage. That plan focused heavily on what Ceppos has called "the modern-day Medicis" of the valley. As a result of the changes, the paper emerged "ahead of the curve, but only by a hair, and just managed to avoid having our lunch eaten," says Ceppos, merrily mixing metaphors.

Simultaneously, the paper was building its Internet presence. Mercury Center debuted in 1992, and with its spinoff sites it has grown right along with the Web even as it has covered that growth. Today Knight Ridder is moving aggressively to parlay its many newspaper Web sites--already linked in the RealCities network--into portals, which are megasites that provide a variety of services to users and steer them to myriad other news and commercial links. At the same time, the company is exploiting the Merc's unique position and expertise in a bid to become the authoritative address for high-tech information online as well as in print. Hence the advent of Siliconvalley.com and other tech-oriented sites.

In some ways the Mercury News may have succeeded too well. The paper has become a spawning ground for high-tech reporters who, once they're trained and polished, are snapped up by the Times, the Journal, Fortune and, in the newest wave, by Web sites like TheStreet.com. One such notable is Adam Lashinsky. For a reported $250,000 salary plus options, the young reporter evidently found it easy to walk away from the rambling, warehouse-like building on Ridder Park Drive to write a Silicon Valley column for TheStreet.com.

Indeed, Lashinsky's case raises the specter of money--big money--which is unavoidable in Silicon Valley and which poses increasing problems for the paper in a host of ways.

First and foremost is the high cost of living, the flip side of the Silicon Valley dream. Prunes have pretty much disappeared from the landscape, and the orchards that once flourished across the flat countryside have been seeded with college campus-like complexes housing hardware, software and everything-in-between-ware companies. Not far from the work sites as the crow flies, but an hour or more as a BMW negotiates the ever more sclerotic "freeways," nothing-special houses cost a million dollars and more.

Real estate has breached these stratospheric heights because of the over-abundance of new wealth. At the same time, the San Jose area is heavily populated by recent arrivals from Asia and Latin America. Some are financially well off; most are not. How, the Austin people were curious to know, does the Mercury News tell their story while covering the broader setting of a cultural and economic flowering that Ceppos has likened to Renaissance Florence?

I ask Evelyn Richards, a prize-winning business reporter with whom I'd worked on several stories when she was covering technology from San Jose and I was based in Tokyo. As we chat alongside her paper-heaped computer terminal, she and some other writers are just winding up a year-long project on what she half-jokingly refers to as "the rich, the super-rich, and the obscenely rich--meaning anyone with $8 billion and a 60,000-square-foot home." But truth is, tales of such excesses no longer drop jaws around here. So Richards and her colleagues are using the area's stunning wealth as a vehicle for relating the largely ignored lives of those who are not only left out but, ironically, suffer even more because of the wealth surrounding them. "Not everyone shares in the high income," she explains, "but everyone shares in the high costs."

That includes newspaper staffers--who, while they live substantially better than many others in Silicon Valley, increasingly must look further and further afield for houses they can afford. Still, established writers on the business staff typically earn $10,000 or so more than their colleagues on other beats, as is the case at many other papers, because reporters who understand the intricacies of business--particularly specialists--are quite hard to come by. And to attract them to expensive spots like San Jose requires some sweetening of the pot.

Even so, no amount the Merc or any other paper might summon can begin to compete with what business journalists can snag if they make the leap from print-on-paper to print-on-glass. Skilled reporters who have gone to TheStreet.com, for instance, not only are paid salaries well beyond $100,000 ($70,000 for beginners), but they're eligible for options in the site's stock, potentially worth millions. The New York Times, which owns 15 percent of TheStreet.com, even now is confronting a management problem in seeing this kind of remuneration continue while its own staffers receive much less.

The big money and fast fortunes commonplace out here create other problems, too. Consider the well-chewed case of Chris Nolan, which for months has fueled an online debate about what constitutes journalistic ethics in the Internet age. Over the summer the Merc exiled the former tech-biz-buzz columnist after the Wall Street Journal reported how she had profited $9,000 when a local company went public. Nolan had purchased shares in an online automobile supply outfit at the urging of the company's CEO. Nolan maintained that the CEO was an old friend and that she didn't cover the company; the Merc contended he could be considered a source and that the transaction violated journalistic ethics. The case remains in arbitration.

The Web has been rife with arguments, pro and con, about Nolan's case. They take up not only the fuzzy particulars of her case--e.g., did asking her boss about the purchase constitute adequate clearance?--but its broader implications. Is it time, some wonder, for the industry to revisit such longstanding commandments as "a reporter shall not invest in a company he covers"? Can today's business journalists be expected to be monklike in their investing when they have the brains and opportunity to better themselves and their families? And isn't what's good for the goose good for the gander? After all, one reason Knight Ridder relocated to San Jose was to be closer to the tech action, and the company has been a serious investor in a variety of startups.

In a day when celebrity journalists can exceed their base salaries with lectures and TV appearances, business reporters too are encountering ways of making more money. As Nolan told the Journal, "We don't take vows of poverty and chastity when we go into the newspaper business." And as Yarnold unhappily conceded in an explanation to readers, "It's only human for a journalist covering technology to be tempted by the vast wealth in this valley, and that's an argument for ongoing and clear discussion about what's permissible and what's not."

Meantime, the Mercury has its ethics policy under review with an eye toward updating it. The paper hopes to issue these new guidelines by early next year.

It's not the Mercury News' job to peddle new IPOs, of course, any more than it's the American-Statesman's job to help sell Dell computers. But a lifelong newspaperman can't help but derive some perverse pleasure in the fact that, at a time when people are questioning the relevance of ink on paper, the business pages, at least, are clearly packing a wallop.

I saw that first-hand back in Portland. The day after Jeff Manning's piece about the new Nike sneaker appeared in the Oregonian, I dropped into the Nike showroom in downtown Portland to get a peek at the purplish/pinkish/yellowish Air Tuned Max and see what all the fuss was about. The showroom, really a cross between a museum and a shrine honoring the sneaker deities, occupies a prominent block near the core of Portland's crunchy-clean restored downtown. "Read that article in the paper?" asks the clerk, in his shorts-and-T-shirt uniform. I nod. "You're probably the 50th person to come in today looking for those shoes," he says. "We don't have a single pair left."

I smiled. Even Silent Cal might crack a smile. The business of America, indeed.


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