|No-one is better qualified to comment on the economic rises and falls of the previous decade than American journalist Randall Lane, whose stable of magazines—including Trader Monthly—celebrated the high flyers but ultimately cost him every cent he had. Lane documents the visionary ideas, eccentric personalities, back room deals, excesses and betrayals in his new book ‘The Zeroes: My Misadventures in the Decade Wall Street Went Insane’.
Have you recovered financially from the events in The Zeroes?
Ah, no. But, you know, my kids have food to eat, I’ve got a roof over my head and I’m happy to get up every day. Those are the main things. Certainly. And that’s the perspective I’ve gotten from reflecting on all of this.
After taking so much personal responsibility for the losses incurred by your publications, how do you feel about the heads of other organisations getting off scot-free post-GFC?
That’s the problem with the financial system in the western world right now—there are too many people playing with other people’s money, and that’s where all of the risk-taking came from. I talk about the history of hedge funds in the book. In the old days, the managers co-invested.
So when a fund blew up, you knew whoever was managing it was doing his darndest to make it work; taking prudent risks and not reckless ones. He was right there, shoulder to shoulder. Those are people you can only admire—and if it does work out, you’re happy for them. But these bank chieftains are making giant bonuses and have very little ‘skin in the game’—or if they do have skin, it’s because they were granted stock options, they didn’t buy them. So they’re playing with house money. Of course it’s infuriating, and it’s also dangerous. And as it continues, I worry we haven’t learnt our lesson.
Could a magazine like Trader Monthly launch now?
No. We knew we were in trouble with the last issue of Trader Monthly, which had the cover line “What’s next?” and a dour-looking trader on a black background. The magazine had been go, go, go, then when things started to get choppy in the Autumn of 2008, we were a little bit restrained. Then absolutely everything that Trader Monthly was about, which was celebrating these guys as rock stars, fell apart. ‘Wall Street’ became two dirty words. Trader Monthly was sustained on advertising and suddenly the advertisers didn’t want to work with us because they couldn’t be seen advertising to that crowd. And that hasn’t gone away. So until Wall Street types are seen as the good guys again, a magazine like Trader Monthly doesn’t really work, and I don’t see that happening in the foreseeable future.
You give the example of BMW, who said they knew that ads in Trader Monthly sold cars but they just didn’t want to be associated with traders.
That was the day we knew we were in real trouble.
Do you think the magazine would still be around if you and your partners hadn’t tried to expand the stable with Dealmaker, Private Air, The Cigar Report, etc.?
Yes, it could have survived as an electronic newsletter and we could have kept some of the events going. There were aspects of it that, if we weren’t so leveraged, we could have still had a small business. But that was never the goal. We were of the time. Especially when Jim [Dunning] came on board and we started to feel the success, the idea was to do something monumental. And in the end, we paid the price for that. But I don’t think Trader Monthly as a magazine works anymore. It’s amazing how fast something can go from a vibrant product to a museum piece. They should put those magazines in a time capsule. In 50 years, people will pick them up and their mouths will be agape.
It was interesting reading how keen traders were to be on your cover—kinda like the glamour models who dream of being on ours. Did any big businessman try to buy his way into that coveted spot?
We were never offered bribes. It was more that we were lobbied—as I’m sure you guys are. Although I’d rather be in your position. Having some 40-year-old millionaire kissing your arse probably isn’t as good as being courted by an Australian beauty!
It’s amazing how many bullshitters and backstabbers you’re forced to deal with throughout the book. What about the good guys/gals—who do you still respect?
My partners, Magnus [Greaves] and Jim. I still talk to them and I still respect them. They put their money where their mouths were and they lost a lot.
They paid their debts.
Absolutely, and you can only respect that. There were a lot of stand-up people… It’s almost uncanny the correlation—the people who were willing to take risks with their own money were generally the ones who came out okay or at least with their integrity. The ones who were playing around with other people’s money… Either they made money and you kinda winced, or else they blew something up and you winced about that, too.
|Did you suspect or were you warned that the credit crunch was coming?
Even in August 2008, when we were trying to do that social network, we had a venture capital firm value us at US$17 million. And in January 2008, we had the term sheet from Citigroup for $25 million. So we always knew we had a core asset that was worth something—we were never really worried that it was gonna all be worthless. But everything turned so negative so quickly, starting in September 2008, it was like a tornado came through the financial system.
It happened to Lehman Brothers, where one day they’ve got a market cap in the billions and the next day they’re worthless. It happened at BusinessWeek, one of the biggest magazines. It was worth probably a billion dollars in 2007—literally—and it was given away to Bloomberg for a dollar. There were two perfect storms. The magazine industry was in free fall in 2008 because everyone had started pulling back the ads. And our core industry, Wall Street, was ‘cratering’ at the same time. So we’ve got these two awful vortexes converging and we were right in the middle of both. That was very scary.
We don’t want to focus solely on the bad times… so what’s your happiest memory from working on Trader Monthly and the other titles?
Launching new magazines is like giving birth. So the pride of doing that—launching things into the community and seeing the reaction. Especially when we were doing something nobody had done before. We were taking trade magazine audiences, B2B audiences, and giving them Conde Nast-level products. You’d see a look on people’s faces like, “What is this thing?” We blew them away on quality—that was always a big kick.
And by the end, when we had half a million people who we were reaching, we were able to do a lot of things for charity. We could send an email and raise thousands of dollars for charity. It was heady. Just the influence you had on such an audience. We tried to do good things with it… although there was that awful team from Extell. That still makes me insane.
They hijacked your charity boxing tournament, scored free publicity, made sales and never paid the charities what they’d promised.
They still haven’t paid. It’s disgusting.
With the benefit of hindsight, what would you change?
We could have done a lot of things differently. We shouldn’t have expanded so quickly. It seems obvious in retrospect, but those are the lessons you draw. That’s the core lesson: we should have been more cynical about ourselves.
What about the foreign versions of Trader Monthly—were they a mistake?
Dubai wasn’t a mistake because that was licensing, but we lost way over a million dollars on the UK operation, all told, because we wanted to own it. As you know, usually with outside markets, you do a licensing deal and the local company runs it and gives you some money, so it’s good for everybody. But in the UK, we actually paid Conde Nast to produce the magazine for us, and so we lost a lot of money as a result of being over-aggressive.
Is there a lesson to be learned by other publishers from the demise of your group of titles?
Yeah, don’t go into magazines! Unless you’re already there and in a strong position, it’s a very tough business right now. Web sites have their problems, too, but digital doesn’t have all of the paper and printing costs and the distribution. I mean, in 2008 we did US$12 million in revenue and we were still losing money! It’s very daunting economics and that’s the lesson for the magazine world.
And with web sites, your pages can’t be hijacked by an ex-baseball star…
People ask about that, and the thing about Lenny [Dykstra, who won the World Series in 1986 with the New York Mets] is that he was paying us. I always thought that was a crazy idea in terms of a business, but he had a model that he didn’t want to make money from the magazine—it was a marketing piece for him [and his financial advice].
So I got that. It was actually quite a good deal, because he was paying us to do what we were good at and we got a lot of residual benefit. In the end, after he didn’t pay us, he wound up jumping ship to American Express Publishing, and they were happy to take his money and steal him from us. He didn’t pay them, either, but I still think that, in theory, it was a good deal.
Because nobody knew he was going to turn against you.
What are you gonna do? It’s the classic confidence game. We ask him for 100 grand and he writes a cheque for 150. Then, later on down the line, he’s asking us to lend him money. It’s tough, though, when you’re dealing with a guy who’s a public figure, owns a giant house, flies around in private jets and is writing you cheques whenever you need, not to go down that path. It’s easy to regret it, but it was hard to resist. It would have been hard for most people to resist.
You now write for The Daily Beast (www.thedailybeast.com). Have you left print journals behind for good?
Never say for good, but right now I’m enjoying the immediacy of the web. The Daily Beast is fun because [editor in chief] Tina Brown has a magazine sensibility and we’re translating that into kind of a daily digital magazine. It’s fun to do something where we’re breaking new ground. I miss magazines, but I don’t miss
the magazine business.
In your opinion, is the behaviour of Wall Street any less insane these days?
It’s like an iceberg right now—it’s under the surface. That’s the scary part, and I end the book that way. A lot of the crazy bonuses are still happening. A lot of the behaviour hasn’t changed. A lot of the incentives to take risk have not been removed. You don’t see Wall Street spending as conspicuously or acting as arrogantly, but the institutional problems are still there. So that’s cause for all of us to be a little worried.
You mention Goldman Sachs telling its employees not to be ostentatious.
That’s right. And that was a real memo. That’s not fixing the problem. That’s putting a coat of paint on it. That’s worrisome. They’ve changed their public perception, but I’m not sure they’ve changed the drivers that caused the problem in the first place.
Have you got any more books planned?
Nothing in the pipeline, but this one was very cathartic. I enjoyed getting back to my roots—I’d forgotten how much fun it can be to write. Like most things, if you’re looking to do it, it’s not going to be very good. I was never looking to write this book. In fact, until everything imploded, the thought didn’t even cross my mind—then my mother told me I should write this stuff down. I’d started telling these stories and we were all realising, “My God, it’s an unbelievable cross-section of what went wrong during the decade.” Luckily, I had it all in email.
Was there anything you didn’t put into The Zeroes because you thought, “No-one will believe this”?
I’ve gotta say, for good or bad, I didn’t leave very much out. That’s why I had the book fact-checked. I actually hired a fact-checker out of my own pocket, who spent the better part of a month going over every email and every line in the book to verify its accuracy. Because even I, as I was re-reading it, couldn’t believe it all happened. But it did.
It’s like a dream.
It is. And it’s one of those dreams where, for most of it, you’re having a happy dream, and then you wake up in a sweat.