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ADAM SMITH'S MONEY GAME Missed the show? Get a phone call half way through? Fail to catch the name of a stock in "Personal Best"? In case you did, we are happy to provide you with a transcript. If you would like a transcript from a previous season, please visit 800-All-News at www.800-all-news.com or call them at (800) All-News. ANNOUNCER: [voice over] This program is made possible by a grant from MetLife, helping people become financially secure for 130 years. Funding has also been provided by the Roy R. and Marie S. Neuberger Foundation. ADAM SMITH: [voice over] In the Money Game this week, can this Englishman upset The Wall Street Journal with his pink paper? Is this ad from Miller Brewing excessively macho? Why do this hedge fund manager's critics say he does too much television? And how can you do your personal best in the venture capital game big Wall Streeters play? Find out next.
Face to Face ADAM SMITH: Hello, I'm Adam Smith and welcome to The Money Game. We have an enduring love affair with almost everything British. The most popular movie of all time, Titanic, is about a British oceanliner that sank. The Rolling Stones, now well into their 50s, still pack stadiums. Even The New Yorker magazine is edited by an English woman, Tina Brown. But a very British business newspaper? This question is at the center of a high profile contest in the fiercely competitive money game of American business journalism. It pits two media giants against each other. [voice over] In one corner, the champion Wall Street Journal, the definitive daily business paper for American readers. The British challenger is the Financial Times, the peach-colored paper you can think of as The Wall Street Journal of Europe. Now the FT is after new American readers in a big way. The paper's tall, silver-haired editor Richard Lambert is leading this newest British invasion. Meet Richard Lambert face to face. RICHARD LAMBERT: What's changing about the U.S., is that the U.S. economy is becoming locked into the world economy in a way that didn't used to be the case. ADAM SMITH: [voice over] From a small office overlooking Central Park, Richard Lambert is hoping to build his newspaper's circulation on America's growing links to the world economy. [on camera] So who are these readers? RICHARD LAMBERT: Well, they're all-- at the moment, they are rather senior people. They are the bosses of the banks. They're the decision makers in the Feds and those kind of people. But we would like it to spread a little further out from the corner office. ADAM SMITH: To? RICHARD LAMBERT: To people who want to be in the corner office. ADAM SMITH: I see. Are you going to sell this to ambitious strivers as the way to reach the top? RICHARD LAMBERT: Yes. ADAM SMITH: [voice over] If Richard Lambert sounds like he has The Wall Street Journal in his sight, you heard him right. But success won't come easily. Although the FT has been on some newsstands in America for years and its U.S. circulation now tops 50,000, it's still virtually unknown. Even on Park Avenue in New York City, an epicenter for the ambitious strivers Lambert wants to reach, the Financial Times is hardly a household name. 1st INTERVIEWEE: I can't say as I read it on a regular basis. 2nd INTERVIEWEE: I've never seen it. 3rd INTERVIEWEE: Because I have never heard of it. 4th INTERVIEWEE: Too many other papers to read. ADAM SMITH: In your field there is an 800-pound gorilla called The Wall Street Journal and you plan to tweak its toes? RICHARD LAMBERT: We plan to nip between its mighty legs and provide a news service which is different from the news service which they give. They-- The Journal is formidable in covering business American. We are formidable in covering business world. We can compete with it by being more authoritative on our international file than they are; more comprehensive than they are. I mean, they have a relatively small-- I mean, I think you'd find if you took a ruler that about 20 percent of The Journal is international, non-U.S. news. ADAM SMITH: Do you think you do a better job of covering the world than The Wall Street Journal? RICHARD LAMBERT: My starting point is that I think The Wall Street Journal is a great paper and I really-- I'm not just sort of being snooty about it, but if you take the Asian crisis which emerged last year. I think that if you read our file you would have understood earlier what was happening -- much earlier, what was happening. I mean, you could see Thailand coming. Of course, we didn't predict that the dominoes would fall in the way that they did, but you could see Thailand coming about 15 months before. And you would have had a clearer and comprehensive and better understanding of what it all meant. We have essentially one group of journalists filing for all our publications. We take the view that if you're a business person or a policy maker and you want to know what's going on in Shanghai, your interests are going to be the same whether you live in New York or whether you live in Dusseldorf and you'll want to know the same sorts of things. And so we have a central file of international news of a broader and fuller kind than the competition does. ADAM SMITH: Let's imagine a room like this one at The Wall Street Journal. They are discussing the Financial Times. Do they even notice it? Do they care? RICHARD LAMBERT: Well, my friends say they're saying that the reason they have obviously expanded their international coverage in the last few months has nothing to do with our arrival, but they did get approval for that one week after our plans were announced. ADAM SMITH: [voice over] The Financial Times is well known in Europe and throughout the world. Written and edited in London, it's possibly the authoritative daily voice on international business. The newspaper is the jewel in the crown of Pearson's media empire, which includes The Economist magazine, television and books. Ironically, Pearson is run by an American. CEO Marjorie Scardino is a Texan who spearheaded big gains for The Economist before moving to London. Is Lambert feeling any pressure from the top? RICHARD LAMBERT: One of the things about our newspaper is that we are editorially quite distanced from our owners, which I happen to think is a great advantage. They hire you and then they leave you to get on with it and a variety of jobs. So I don't have-- I never have had regular communications with the CEO of the holding company. ADAM SMITH: [voice over] Pearson has pledged millions to build the FT's worldwide circulation, most of it to be spent in the U.S. Lambert is away from his London editor's desk for a year to personally direct the FT's American push. Promotion has been a big part of his job with appearances on the tube designed to enhance the paper's name recognition. CHARLIE ROSE: [Charlie Rose/PBS] Welcome to the broadcast. Tonight, an analysis of the press coverage today of President Clinton and Prime Minister Blair with Richard Lambert of The Financial Times. ADAM SMITH: [voice over] In the race for readers, the FT will publish more news Lambert believes Americans want. But there will not be a makeover for America in the paper's overall content, tone or voice. RICHARD LAMBERT: And we're going to keep in it some of the sort of eccentrically European things that I think just have charm. For instance, we have a gardening columnist. A column about gardening written by -- in our Saturday paper -- a chap who is the world's leading - he's an academic. He wrote the book on Alexander the Great. And he writes a gardening column on carrots and things like that. So we'll keep that in and will be a bit odd. It's a bit odd in Europe, but it's just a good read. What we're trying to create here is a newspaper of international business made relevant to a U.S. audience. So we've made changes to the paper here to try and achieve that. And if you compare the paper this morning with a paper, say, in continental Europe, you will find that we-- our news priorities are different, so we won't lead the front page with-- the European paper this morning is led with story about a common agricultural policy and where there are big changes is coming up. It's not led with that here in the U.S. because there's only so much you want to read about agricultural policy. I don't know if you feel that way. So we rearrange the stories. We add material here which we think would be particularly relevant to a U.S. audience. We have half a page of Latin American news every day which we don't have there. ADAM SMITH: Do you have-- is it written in colloquial American? RICHARD LAMBERT: No, it's not. ADAM SMITH: It's written in British. RICHARD LAMBERT: It's written in English. [Graphic: Richard Lambert's Magic Number - 88. Daily increase in Financial Times sales required to reach circulation of 100,000 by year 2000.] [Back to Top]
On the Spot ADAM SMITH: There's a battle going on between two of America's leading brewers for supremacy in the low end of the beer market. Mighty Anheuser-Busch is still in the lead with their economy brand, which they call Busch, but Miller Brewing is fighting back with its economy brand, High Life, and the outcome may hinge on the ads. Miller is currently outspending its rival with a new campaign. And our resident critic of the ad man's art, Bob Garfield, is back to put one of the new commercials on the spot. Bob, there is a new campaign from Miller High Life, the beer. Let's take a look at the commercial. ANNOUNCER: [excerpt from Miller High Life commercial] Sometimes a man gets too hungry to clean his hands properly. The powdered sugar on this donut puts a semi-protective barrier between your fingerprint and your nutrition. But even if some grease does get on that donut, well, that's just flavor to a High Life man. ADAM SMITH: The grease on the donut just gives it a little flavor. Now, I don't know, this is not really for me. BOB GARFIELD, AD AGE Magazine: No? ADAM SMITH: Because I don't work in my garage and I don't like grease on my donuts. BOB GARFIELD: Yeah, it's not for you. Miller doesn't care about you -- at least Miller High Life doesn't care about you. They're not at all interested in impressing you because you're not drinking their beer. In fact, you know, the truth is I'm not drinking the beer either. The people who drink 97 percent of the beer are one guy in Chattanooga, Tennessee named Darrell, he runs a forklift at the Piggly-Wiggly and, you know, he's got a high school education and may even got a little bit of college and he drinks an awful lot of beer. And this advertising is for him, it's not for you. It's not for some investment banker in suspenders, it's for a guy who works in his garage on weekends and eats powdered donuts while he's doing it. ADAM SMITH: I talked to the people that designed this commercial and they said this commercial takes the product where it needs to go. Where does it need to go? BOB GARFIELD: Well, that's interesting because the agency who did this is Wieden and Kennedy in Portland, Oregon. What they understand, which is something that another Miller agency, Fallon, McElligott in Minneapolis doesn't seem to understand in their advertising for Miller Lite which is, you know, their big brand. And Miller Lite seems to think that, well, young people drink beer, young people are media savvy, let's do all these absurd post-modern, heavily ironic commercials that kind of make fun of the pop culture and it will really appeal to young people, as if all young people were equally astute. Well, the truth is they aren't. And they're wasting a lot of money reaching people who are not-- who don't get irony. Darrell is not stupid, he's a smart guy but he doesn't get irony, all he gets is thirsty. ADAM SMITH: He can fix his own car. BOB GARFIELD: And he can fix his own car. And what this does is kind of poke gentle fun at the sensibilities of Joe Six Pack without ridiculing him, but just kind of hitting him where he lives, talking to him in his own terms, appealing to his own sensibilities. There's a whole campaign of this stuff that is funny. It's about Darrell. It's about the guys who drink Miller High Life and I think it's really going to work. ADAM SMITH: The actor who did the voice for this seems to have a very hard, edgy approach and he, to me, he doesn't talk like Darrell. BOB GARFIELD: Well, no, because, look, Adam, Darrell's not a dope. Darrell's a perfectly smart guy. And he may not have a lot of education, but here's what he isn't. He's not one of these guys who dresses all in black and has a psychology degree from some elite Eastern university. And the problem with so much beer advertising, including the Miller Lite campaign, is that it has strayed by trying to talk to-- people dressed all in black speaking to people who dress all in black instead of speaking to the guy who is actually the customer, who is actually the consumer, who is actually drinking all this beer. And just because this guy is educated, doesn't mean that the guy who replaces his own starter isn't going to like him. [Back to Top]
In Focus ADAM SMITH: The status of Wall Street pundit usually goes to an investment legend whose style has made billions. That is not yet the case for the Street's latest media darling. Who is he and why has he become so famous so fast? My correspondent Adele Malpass has that story, In Focus. ADELE MALPASS, Correspondent: [voice over] Jim Cramer is a new media sensation. He's everywhere, from CNBC to Good Morning America, from Time magazine to USA Today. If this isn't enough, he created his own Internet publication a year and a half ago-- ANNOUNCER: [excerpt from theStreet.com commercial] theStreet.com. Blah-blah-blah. Not! ADELE MALPASS: [voice over] Cramer attracts media attention because he puts on a good show. But unlike hedge fund legends such as George Soros, who manages billions, Cramer only manages $360 million, yet his fund has turned out a solid performance, up 24 percent a year over the last 10 years beating both the Dow Jones average and the S&P 500. An excellent track record but still not as good as the hedge fund big boys such as Soros and Julian Robertson. Unlike most hedge fund managers, Cramer sounds off about what he is doing. That's not conventional journalism nor even conventional hedge fund management, which is normally quiet and even secretive. JIM CRAMER: The secrecy is a joke and I think it's wrong. I think the secrecy is done to try to mystify it and make it so that people believe that they can't do it themselves. ADELE MALPASS: [voice over] Lois Peltz, who tracks the hedge fund industry, disagrees with Cramer. She says the industry is secretive not because it wants to be but because it's the law. LOIS PELTZ, Hedge Fund Manager: There are certain regulatory rules that if a hedge fund manager is a registered investment adviser that he cannot advertise and he cannot do other things. So as a result, they tend to be low key. ADELE MALPASS: [voice over] But Cramer is anything but low key. And even he believes managing a hedge fund and doing media may pose a conflict. JIM CRAMER: I do everything I can to disclose. I do everything I can to acknowledge the conflicts. I do not deny the conflicts. I tell people where I'm coming from and what I believe in. ADELE MALPASS: [voice over] Cramer's unusual double life has already caused some problems. In 1995, he was investigated by the FCC for touting small stocks in an article he wrote for Smart Money, a Dow Jones publication. The column moved the stocks and Cramer's fund profited. [on camera] What was the conclusion from that investigation? JIM CRAMER: Nothing. They're never going to give you the congressional medal of honor. The investigation went nowhere. There was no conflict. I never sold the stocks. ADELE MALPASS: [voice over] The SEC cleared Cramer, but he felt the whole issue would have gone away if Dow Jones had publicly stood behind him. But it didn't and it instead even investigated him. JIM CRAMER: I thought I was treated shabbily and terribly by that organization, but I just persevered. I continued to write for the magazine. It didn't matter. ADELE MALPASS: [voice over] Here on Wall Street, some say Jim Cramer is a ticking time bomb and that eventually trading and writing will land him in trouble again. JIM CRAMER: I really have done everything I can to try to comply with the law, not just the letter but the spirit. I don't know what more I can do other than if you want to take my first amendment rights away and say I can't write. ADELE MALPASS: [voice over] Cramer continues to live on the legal edge and is still bitter that Dow Jones didn't publicly clear his name. JIM CRAMER: They did the total examination and they made me sign a paper which said that the investigation was complete and in return for what they would do is issue the white paper. Paul Steiger promised he would. It's been three years -- nothing. The hell with me, that's what they said. ADELE MALPASS: [voice over] Paul Steiger, managing editor of The Wall Street Journal who oversees Smart Money, sees it differently. PAUL E. STEIGER, ``The Wall Street Journal'': A white paper? I don't know what it would have shown. We said all along we had confidence in his integrity. One had to go through the exercise of examining his trading records because the SEC was investigating him. Did we run his picture six columns on page one of The Wall Street Journal at the end of this thing? No, we didn't. Yes, I'm sure that there were some statements that we made that might have had a lawyer's hedging. ADELE MALPASS: [voice over] Right now no one is forcing Cramer to choose between journalism and money management. [on camera] But if you had to choose, which would it be? JIM CRAMER: At this point in my life, I really like it and it's fun for me. [Graphic: Fast Growing Hedges Hedge Funds in the World 1990 300-450 1997 3,200-3,500 Money Under Management Estimates from Hedge Fund Research] [Back to Top]
Personal Best ADAM SMITH: A lot of you have written to me asking about what other investments there are out there besides stocks that are worth considering. The question we have chosen comes from Evan Olson in Minneapolis, who writes ``I've done very well in the bull market so far. But with a possible market top coming, I worry about whether I'll be able to keep my returns as high in the future. I keep reading about venture capitalism making big returns investing in start-up companies. How can an individual investor like me get in on investments like those?'' Evan, your signed copy of my book, The Money Game, is on its way. With me now is Bloomberg Personal magazine contributing editor Jill Fraser to help make your investment decision a personal best. Now actually this has gone on for a long time in this country and everywhere because people's cousins come to them or it could be the guy down the street or somebody you went to school with says do you want to come in to my business and can you bring a little money? So it's not new; you were just talking about a new dimension for it. JILL FRASER, Bloomberg Personal: Absolutely. And what someone like Evan is doing is, that's right, extending his network of contacts and trying to kind of find out about not just what his brother-in-law is doing, but the best of the business opportunities that are out there. And in fact, although angel investing has always been going on in this country, we're seeing it really in record numbers now. Much more-- there's much more angel money than there is venture capital money, in part because people have made so much money during the recent booming IPO market. It's just a trend that keeps building. ADAM SMITH: Jill, how can Evan do this? JILL FRASER: Well, it's not as simple as just picking up The Wall Street Journal and checking the stock listings. It takes a little bit of work. But that said, there are tremendous opportunities that you can find by networking in your community, talking to the big accounting firms, law firms, your local small business administration representative and really find out about very exciting start-up possibilities. ADAM SMITH: What do you say to them? ``I would like to invest in some local business that looks promising?'' JILL FRASER: Yes. Absolutely. You say I have $5,000 or $10,000 to invest or more. I'm looking for an interesting start-up possibility. Maybe you even figure out a couple of industries that you know something about and can bring some prior knowledge to your investment. ADAM SMITH: Is this-- are these really baby companies? Are you talking low-tech or medium-tech or high-tech? Are we talking about a gas station? A grocery store? Or a guy in his garage with a new router that's the next Cisco? JILL FRASER: Well, really, the third possibility. You could invest in something like a gas station or a dry cleaning store, but you're not going to see the kinds of returns that you would see if you invest in a company that's going to hopefully grow quickly and then have the potential to sell out to a big company or to go public. That's where the payoff is. ADAM SMITH: Well, I was going to ask you how do you get out? What if it doesn't sell out to a big company or have a public offering? Public offerings only come when the market is high. JILL FRASER: Absolutely. And, in fact, the flipside of a lot of start-up investments, Adam, is that they go bankrupt or they just kind of stagger along and they never do see those kind of returns. That's one reason why you have to be very shrewd and look very hard before you invest your money. ADAM SMITH: So, in summary, would you say-- what kind of a payoff are you looking for that really works? Twenty to one? Something like that? JILL FRASER: Oh, it could be even more than that. I mean, potentially the sky is the limit. When you get involved at a very early stage, if you put in $5,000 or $10,000, you might hope to get maybe 10 or 20 percent of a company's stock. That's not impossible. And if that company then has an IPO for $3- or $5- or $10 million, you've made a fortune. ADAM SMITH: But until that happens-- JILL FRASER: Until that happens your money is frozen. ADAM SMITH: Your money is locked up. JILL FRASER: You may never earn a dime. And you can't control the IPO market, so in fact you might hope that an investment might pay off in two or three years; it might take 10 before you ever see your money back. ADAM SMITH: So this is all or nothing basically? JILL FRASER: Yes, and it's also something that you should only be involved in after you have already diversified all the rest of your investments. [Graphic: Jill Fraser's Venture Capital Warnings - Beware a skimpy business plan. Beware a lack of professional advisors. Beware management without relevant business experience. Beware of no personal investment by management.] ADAM SMITH: What question would you like answered to help you do your personal best in the money game? Get in touch with our e-mail address, Letters @ adamsmith.net. Or write to us the old-fashioned way at Adam Smith Money Game, 885 Third Avenue, Suite 2800, New York, New York 10022. We'll be answering your questions on the air and if we choose your question, I'll be sending you a signed copy of my book, The Money Game. Americans these days are almost giddy with economic self-satisfaction. Our economy, we're told, is a Goldilocks economy -- not too hot, not too cold, just right. In other words, just enough growth, not much inflation and full employment. Perhaps before we congratulate ourselves again on the Goldilocks economy we should remember what happened to Goldilocks. The bears came home, discovered Goldilocks in the bed of baby bear and Goldilocks ran down the stairs and away into the forest. In other words, the bears got their house back. Has anybody thought of that? And finally, a couple of Money Game futures. In a few weeks I'll be talking to Wall Street legend Warren Buffett on this show about why smart people do dumb things. And, Suze Orman, author of The 9 Steps to Financial Freedom, will be my guest all month to answer your questions on Personal Best. Be sure not to miss them. I'm Adam Smith, see you next week as the Money Game continues. ANNOUNCER: For more of the Money Game, visit us in cyberspace at www.adamsmith.net. ANNOUNCER: This program is made possible by a grant from MetLife with over $330 billion in assets under management. Funding has also been provided by the Roy R. and Marie S. Neuberger Foundation. CREDITS Produced by ADAM SMITH EDUCATIONAL PRODUCTION Video Footage: Still Footage: Thanks to: Special thanks to: For a VHS cassette send $19.95 or $5.00 for a printed transcript to: Copyright _ 1998 Adam Smith Educational Productions Ltd.
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