Saturday, 1 October 2011

Naked Hypocrisy?

This is a post RebelEconomist really did not want to write, partly because he has an economic post to finish that keeps getting interrupted, and partly because he dislikes to see personal disputes aired on blogs, but RebelEconomist is angry, so here goes.

In the early, and perhaps more innocent, days of financial blogging, one of my favourite blogs was Yves Smith's Naked Capitalism, which I valued for its links to influential posts and articles elsewhere, and its somewhat more opinionated and entertaining posts than many other analytical blogs. In recent years, however, Naked Capitalism seems to have become increasingly polemical and less analytical, with a bias against bankers, advocates of conservative economic policy and creditors in general. Perhaps encouraged by this tone, Naked Capitalism's commentary has become more vitriolic and dominated by prejudiced, fixated, irrational and often long-winded ranters, with many of whom it is impossible to have a civil, constructive debate of referenced facts and counter-facts, logical arguments and counter-arguments. Even Yves herself, under the strain of the daily grind of the information gathering, writing and technical problems that she sometimes mentions, seems to have become increasingly defensive and curt with critical commenters. Nevertheless, I still do look at Naked Capitalism, and occasionally engageed in the comment discussion when I feellt like a bullfight – with myself as the matador, of course.

A particular feature of Naked Capitalism that began to disturb me was its advertising. Despite the blog's content being rightly critical of the amorality and recklessness of the financial industry, in the UK at least, Naked Capitalism often carried advertisements for some of the most predatory financial businesses. Not wanting to embarrass Yves, I first wrote to her by email three years ago to ensure that she was aware of the issue – manifested on that occasion in an advert for a leveraged property investment scheme – which I supposed might not be evident to her in the US. She thanked me for letting her know, and said that blocking such automatically-placed adverts was possible but would take some time. Therefore, when a year later I saw an advertisement for payday loans featuring an apparently carefree barefoot blonde, which looked incongruous alongside a post praising the Michael Moore film "Capitalism, a love story", it was apparent that Yves had failed to modify the selection of advertisements for her site, so I was less diplomatic and made a comment on the post, pointing out the danger of appearing to be hypocritical. In her response to my comment, Yves made the same point as a year earlier about the difficulty of blocking specific Google ads, and remarking that the income from the adverts was "chump change", which made me think "why not just do without it, then"?

Fast-forward two years, during which I had mostly held my peace about the continued appearance of sleazy finance adverts on Naked Capitalism, until last month, when I was catching up on posts I had missed during a period bereft of internet access, and came across a post attacking payday loans, accompanied by a banner advert for a payday loan firm. The post deplores annualised interest rates on US loans of up to 572%, while the annualised interest rate on a loan from the British firm advertised was 1737%! I left a (perhaps bad-mannered, in which case I apologise) comment on the post and emailed Yves a screenshot of the UK appearance of the post to show her the clash and invite a response to my comment (it being late in the comment thread by then). Again, despite Naked Capitalism having migrated from Google Blogger to WordPress since I first raised the issue, Yves cited the difficulty of rejecting particular adverts. I suggested she might be better to do without financial advertising in general, given that Naked Capitalism's advert placement service seems to select quite a few dubious ones for the UK at least. These also include adverts for IVAs (individual voluntary agreements between debtors and creditors to write off debt, which are very lucrative for the financial advisor arranging them and are therefore aggressively marketed in the UK, but by putting the debtor one step from bankruptcy, leave them in danger of losing their house if they fail to make the reduced repayments), penny stock investment schemes and even advice on using tax havens. Yves responded that she needs the advertising revenue to keep blogging. She justifiably noted that, given the content of her posts, no-one could consider her to be beholden to any of the advertisers.

While I believe that there is no question that the conflict between the content of such a post and its accompanying advertisement looks – and if benefit is derived from the advert is – hypocritical in some way, my mind is genuinely open about whether that hypocrisy matters or is unethical. First, we should be wary of making the tu quoque fallacy; that is, that doing something oneself should not make one's criticism of that action less valid. Second, it could be argued that such adverts are just rogues thrown up by a poorly-targeted advert placement service that should be tolerated for the revenue serving a good purpose that the adverts generate overall. Or even, that by taking money from payday loan firms and tax haven advisers for their adverts to appear next to posts trashing their business cunningly exploits their clumsiness to bleed and undermine them.

Although it would be foolish to accuse a blogger as obviously vehemently against sleazy finance as Yves of tailoring her content to ingratiate such advertisers, there will always be, I think, a danger of being seen to have a conflict of interest when writing opinions about business that is paying you. For example – this is for the sake of argument, not a serious accusation – this week, Yves did not include in her daily links a BBC headline story about the closure of 62 UK debt consolidation firms, for which prominent adverts regularly appear on Naked Capitalism as seen from the UK, on the grounds of their misleading marketing. A more realistic danger is that the author of a blog which makes money from adverts might be tempted to write more opinionated and controversial posts, in a more provocative style, to attract notice and stir up comment, and to post more often to keep readers checking the site, in order to increase traffic to generate more revenue. I have wondered whether this might apply to some other up-and-coming blogs that have begun to take advertising, such as Scott Sumner's Money Illusion blog, which has attracted a lot of attention lately for its radical and controversial monetary policy proposals.

Minded to write a post on the subject of advertisers and blogs myself to raise, in a detached way, these questions for discussion, I asked Yves (respecting the copyright claim which appears at the bottom of Naked Capitalism pages) for permission to use my screenshot showing the juxtaposition of her payday loan post and the payday loan advert to illustrate the hazard involved in accepting automatically-placed advertisements related to the subject of the blog. Despite having claimed to be content with the ethics of taking payday loan adverts, Yves did not give me permission to use the screenshot, questioning my motives for wanting to raise the issue - Yves seems to believe that RebelEconomist is some financial-industry-funded saboteur of blogs like hers. Yves also warned me that writing such a critical post would get me banned from commenting further on Naked Capitalism. Evidently, Yves is no longer as receptive to suggestions of hypocrisy as she was when she wrote in a July 2008 post "On moral hypocrisy", "In my book, a true friend is willing to tell you when you are off base, and that feedback is usually most valuable when you least want to hear it".

Anyway, to this I thought "no problem"; I did not see the post as a priority and would cross the bridge of being excommunicated from Naked Capitalism if and when I came to it. So yesterday, when Yves wrote a post about the hypocrisy of Friedrich Hayek and Ayn Rand (with which, by the way, I am in complete agreement) in calling for the abolition of Medicare and then using it themselves, I could not resist making a comment asking how Hayek and Rand's behaviour in criticising something that they took advantage of differed from Yves' own position on payday loan adverts. However, when I tried to do so, I found that my comment was blocked – I have apparently been banned from commenting on Naked Capitalism even before writing a critical post! I am therefore writing the post now, and being denied use of the screenshot, am providing my own version of Yves' antidote du jour instead for readers' amusement.


Charles Butler said...

You were banned?

Her reaction seems a touch extreme. Most of these hight traffic places will publish a comment pointing out obvious inconsistencies in an argument and merely fail to answer.

It's all a question of positioning, in any regard. A writer attains a certain weight in the noise-o-sphere (and some economic/emotional dependence on same) and the task becomes one of defending editorial and ideological turf rather than actually providing useful insights or information - and certainly not one of engaging in debate or brooking dissent in the ranks.

As for the ads themselves, they are always of the payday loan and buy gold and penny stocks ilk. If she is making enough money from this trailer trash stuff (which is obviously the only type that shows a good return to advertisers) to make it worth the risk of being thrown in the heap with a zillion disreputable sources, then you can easily draw conclusions concerning the market position that she strives to maintain. 'Lowest common denominator' comes to mind.

She is not addressing you... and she certainly isn't Brad Setser.

Congratulations. Good piece.

RebelEconomist said...

Thanks for your support Charles. It sounds like you see similar adverts on Naked Capitalism from Spain - if you ever look of course. I am afraid that we may have been spoilt by Brad Setser's blog!

Charles Butler said...

Setser was how it was supposed to work. Consider for a moment the possibility that the incentives provided by the Google algorithm ended up destroying web 2. The survivors are the successful hit seeking devices.

She was brilliant through 2008 or 9. But the binary populism that everything devolves into over there just can't compete with the infinite dramatic possibilities offered by Europe.

Anonymous said...

Awesome post! You are brave and courageous RebelEconomist. You totally showed Yves Smith who's the REAL hypocrite! Seriously, if a google ad appears in her blog promoting penny stocks or gold, that is even BIGGER hypocrisy than Friedrich Hayek writing tome after tome denouncing Medicare and Social Security while secretly paying into them, or Koch spending hundreds of millions to kill Social Security and Medicare while privately championing the program to Hayek. What Koch and Hayek did doesn't even come CLOSE to what Yves has done, where google ads display small ads for penny stocks and stuff.

Think of the damage Yves Smith has done, hurting the reputations of good decent bankers and insurance executives. Who does she think she is? Doesn't she know that these people are the job creators? Some of them even endow university department chairs, and it's not like they have strings attached. Frankly, I'm starting to believe that Yves Smith may be responsible for bringing on the entire financial crisis herself, maybe not alone but I think we can agree that Ms. Smith had at least partial responsibility for creating the crisis. And all the while she's writing a blog criticizing the financial crisis players. How's that for hypocrisy?

That's a real scoop you should write up, RebelEconomist: Yves Smith helped to actually destroy the global financial system while blogging criticism of it publicly--you'll become HUGE if you have the guts to write that up. If the people find out that Yves Smith caused the financial crisis while blogging criticism of it, you will become an even bigger hero among the beleaguered folks in the financial industry than you already are. You are brave and courageous and don't let anyone tell you whom to shill for, keep up the good fight!

Anonymous said...

“Naked Capitalism seems to have become increasingly polemical and less analytical, with a bias against bankers, advocates of conservative economic policy and creditors in general. Perhaps encouraged by this tone, Naked Capitalism's commentary has become more vitriolic and dominated by prejudiced, fixated, irrational and often long-winded ranters, with many of whom it is impossible to have a civil, constructive debate of referenced facts and counter-facts, logical arguments and counter-arguments.”

It’s the problem with the whole shooting match (i.e. the economic blogosphere).

It’s a disease - there’s no such thing as unbiased analysis in this medium.

Who among bloggers can you say is truly, analytically objective and without material ideological bias?

RebelEconomist said...

Anonymous on 2 October 2011 15:28, I think I detect a little sarcasm in your reply! I am sorry your comment got spammed at first – I don't know why.

As the story I tell describes, I never thought that this was a big deal. When I first alerted Yves to the kind of sleazy finance adverts I was seeing from the UK, I was trying to be helpful; I expected her to be horrified and to fix it, and Yves' initial reaction suggested that she intended to do so. However, during the three years since, in which the blog has become shriller and the adverts have, if anything, been drawn from even more sleazy financial activity (payday loans, tax haven guides, personal debt managers etc – and, for the first time yesterday, ambulance-chasing compensation claims lawyers), the blog sank in my estimation and I became increasingly sceptical.

Of course I do not think that Yves secretly supports ruthless and exploitative finance while condemning it in public, but I do see links between her approach to blogging and the financial crisis. First, Naked Capitalism is obviously a business that Yves expects to provide her with a living, and judging by what she occasionally reveals on the blog, by ordinary peoples' standards, Manhattan living is not cheap. And the adverts suggest that Yves is prepared to tolerate a little association with some dubious finance in pursuit of that living. In that, I see parallels with the Kensington-living bankers I knew in the pre-crisis era, many of whom had qualms about the business, but considered themselves to be relatively uninfluential, blameless participants, paid no more than they were worth. Second, as I have occasionally remarked in comments on the blog (eg here and here), I fear that the prejudiced, simplistic and sometimes vitriolic tone of Naked Capitalism discussions that Yves has allowed to develop inhibits the kind of objective and informative discussion that is most likely to resolve the causes of the financial crisis, and, being easy to dismiss, detracts from the blog's influence to avoid a repetition of the crisis.

Anonymous said...

Further ... I have no problem with the adverts because I can ignore them. But the blog is shrill because the blogger is shrill. As well, the writing is poor, and there is nothing more pungent than mediocrity wrapped in hubris. So I tend to ignore it all. BTW, the blogger has a consulting business, quite apart from the blog.

RJ said...

Anonymous 1: I'm not sure I follow your argument.

RebelEconomist didn't imply that Smith is a bigger hypocrite than Hayek or Koch at all; his account is a little too kind on Smith if anything.

Any blogger who tries to block commenters who don't have a prior track record of being libellous, hitting below the belt, or otherwise irrelevant is obviously worried about something.

RebelEconomist said...

Thanks for your support, RJ. Perhaps what was worrying Yves was that she was planning the fundraiser she ran in November ( ) and really did not want this issue raised ahead of that.

On the subject of payday loans in particular, they were headline news in the UK again only yesterday:

Anonymous said...

Google-ads are targeted; if they advertise trash, it's because Google thinks your readers are trash.

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