The Overpaid Jokers at TheStreet.com
I've met Cramer twice now, and I don't know, I kind of like him. It's true he's not a suave Master of the Universe type?he plays up his Jersey-by-way-of-Philly bumpkin side, the rumpled shirts, the wife and kids back home, the humble offices of his Wall St. hedge fund Cramer, Berkowitz & Co. It's true he's an odd combo, part media guy (he edited the Crimson at Harvard, worked as a daily newspaper reporter for a while, became a financial columnist, which he still does at TheStreet.com, tv talking?often shouting?head), part stock maven who's been investing, as his legend has it, since grade school. Yes, there was some boilerplate and some shtick in the interview, but a lot of people who are getting interviewed too much fall into that. And, yes, the image he's parading lately?poor, aggrieved Jimmy Cramer, feelings terribly bruised by all the beatings he's taken in the media?wears awfully thin when you remind yourself he's worth tens of millions of dollars now. That buys a lot of hankies.
I met with him and Dave Kansas, the 32-year-old editor-in-chief at TheStreet.com. Kansas, who also made paper millions from the IPO, had been a reporter at The Wall Street Journal for five years when Cramer came calling. Although he's as quiet as Cramer is loud, they seem a good match, both workaholics, both "new media" boosters. Regarding Kansas, even among envious colleagues the consensus has been it couldn't have happened to, etc. Although it has lost money each year since 1996, despite a large infusion of venture capital in '98 and the larger bundle from the recent public stock offering, TheStreet.com has grown to where it has, Kansas says, a staff of 150, including 65 people full-time on the editorial side, with branches here and on the West Coast and a few desks covering overseas markets. Plus new linkages online (a new partnership with Salon) and on tv (the new show on Fox).
You're both journalists, but nobody ever asks you journalism questions. They just want to know about your money.
JC: I sure wish they would. I'm so much more interested in that. You'd be the first. Dave and I have struggled mightily since 1996 to explain to people that what we were trying to do was create a better form, a more interesting, more compelling, more accurate, more accountable, more hard-hitting form of journalism. And no one has ever point-blank asked us, 'Were you in it for the money?' 'Cause if they had, they would have known that for three years that was comical. I've read seven months' worth of what a creep I am because we made some money, and we haven't made any money, and I thought what we'd done before that was pretty good. The IPO really took away a lot of the excitement of what I regard as what we're doing.
JC: Because it changed the whole focus. It didn't change the focus internally. Dave is the focus internally. Dave knows that the focus is good editorial. I feel grieved by the IPO. When I think about the IPO I think about [the cover illustration of] the big puffed-up head of mine in The New York Observer [and an article] saying I'm worth $200 million. It makes me sick.
You write for them. I thought you were buddies with [editor] Peter Kaplan.
JC: I'm buddies, I'm buddies, it doesn't matter. People make fun of buddies in this world. I just wish people had looked at what we've accomplished. Who sets up a newsroom anymore? We're like the first bona fide employer of journalists in America since like P.M., and the crap we get is that we're swashbuckling opportunists.
DK: I think it's entertaining to watch people react to what we've done. We've worked really hard for three years to build something from scratch, basically. Before we were public everyone pissed all over us. (Cramer laughs) Now we go public and everyone's like, "They're too successful." Overnight we went from being the jokers to the overpaid jokers.
JC: This is a capitalist country. People perceive us as winners, whether we've cashed out or not. I think that's nice. It's great to be alive in the 90s. But it's not what this is about. It tends to be brought up particularly by people who've never read TheStreet.com.
DK: People who are critical of us, it's always the same thing in different clothing, different times: How dare some organization come and ruin the status quo. Whether it's Wall Street brokers or The New York Times. I mean, The New York Times is our partner [the Times, and Rupert Murdoch's News Corp., both made significant investments in TheStreet.com], and in The New York Times Magazine Max Frankel writes on Sunday that we're just a bunch of "buzz merchants." You know, Max Frankel thinks that television should not have been invented. And another thing, he's writing in The New York Times Magazine, which ran a big article on Kubrick, and?shockingly!?there's all these big ads for...Kubrick's new movie.
JC: Buzz merchant. I don't despise the ground that the Tina Browns walk on, but I'm not going to be at the Statue of Liberty [for Tina's Talk party]. If I were invited I wouldn't go, but I won't be, because I'm a schlubby guy who goes home to his wife and kids in New Jersey. To be a buzz merchant repulses me.
You're not on the invitation list? Multimillionaire media personality? You're a celebrity. (Kansas laughs) You've written that you think she should have started up talk.com instead of Talk.
JC: Definitely. It's perfect for the Net. Short pieces that have very little shelf life.
JC: It makes no sense to do Talk. It's silly. It's a big waste of money and trees.
DK: (grinning) We're all environmentalists here.
JC: But that's a different world over there. That's a world that's based on a level of glamour that I am not comfortable with.
Is it truly new media versus old media?
JC: It's actually worse than that. Old media is a group of [editorial] guys sitting around pissing on the business side, because the people on the business side, who are making three times as much, they play a lot of golf, they go golfing a lot, and not only that, I don't know if I've mentioned that they golf. The journalists work really hard, and they're the "content," but their lot in life is to be really miserable while the other guys go to Canoe Brook or Wing Foot and Piping Rock. That's old media. And the reason it works like that is because most of old media is designed to bring it to your door. It ships here and then it ships there and then it's bundled here and then it's boxed there and then it's unboxed here and then it's unbundled there and then it's delivered to you by hand, or maybe it's postal. Like diapers were done before Pampers, like milk before the supermarket. That's the way it is.
New media, content is everything. The people who write the content get paid. I can tell you from my Communist days, Marx and Engels make a lot more sense in understanding old versus the new media than Adam Smith does...because the old media guys are so liking their chains. I find them looking at us and saying, "Look at those stupid free people making that money. Those morons. Don't they know they should be in fetters watching the business side play golf?" Stalin said the peasants truly like their chains.
Then why are they investing in you?
DK: That's the business side. The business side is getting wise. These big media companies are trying to figure out how to play in the new space. They laughed at Internet journalism for a long time. It's like Bloomberg. They figured they'd ignore him and he'd go away. Well, they ignored him and he put Dow Jones right out of business, basically. All the media did that with new media on the large scale, They ignored it, ignored it, ignored it, and now it's not going to go away.
JC: Intel, Cisco, Motorola, Lucent, Microsoft?these are powerful companies. Versus Knight-Ridder, Gannett, New York Times, Washington Post?these are not powerful companies. The market capitalization of Intel, Microsoft, Cisco is dependent upon newspapers going out of business. Those guys are vicious competitors, and if they have to put newspapers out of business, they will. And we will be the beneficiary.
There does seem to be a fair amount of envy among other journalists who aren't suddenly millionaires like you two.
JC: You know, when I started this I said, for the first time in my life, after making... [He pulls out his wallet, fishes in it, removes a very old, crumpled, torn paycheck stub.] I always look at this to remind me of the proletariat days. You take a look at what I made at the Tallahassee Democrat, which was $240?but look, that's with four hours overtime?so that's 200 bucks a week.
How old is that paystub?
JC (examines it): This is from 3/15/78. This is the salad days.
You were making $7.50 an hour.
JC: You bet I was. And I said, "You know what? I'm gonna devise a business model so that this never happens again." I wanted the journalists all to have an equal stake in the business.
How many of the 65 people in editorial have a piece of the company?
So everybody made something.
DK: Oh yeah. Due to the technicalities of IPOs it's locked up for six months?
JC: But everybody got stock... And not like The Wall Street Journal, where everybody got like 57 shares... But everything gets lost in the translation to my blown-up head on the cover of the Observer.
And what was up with that Suzanna Andrews piece in the June Vanity Fair?
JC: That was bad. Sheesh.
You and [editor] Graydon Carter aren't buddies? Not through Kurt [Andersen]?
JC: I've never met Graydon Carter. No, that was a skein of bad luck, bad press.
You really did get a run of terrible articles.
JC: That wasn't just a pothole, that was the old Miller Highway before they tore it down. That was nasty.
Still, you can't feel that bad, given the way things have turned out for you. Some bad press, so what?
JC: No, but I would lie to you if I told you that I am so tough... If I were an actor and I got these terrible reviews it would crush me... I read that [Vanity Fair piece] and it was, "He's a hack. He's a hack. He's a hack. Well, people say he's despicable, but he's really just a hack." And you know, I spent my whole life trying not to be a hack. That's the essence of why I get up at 3 in the morning and work till 11 at night. Everybody in my family tells me I work too hard and I'm like, listen, I never wanna be a hack, never wanna be a hack, never wanna be a hack. Didn't want to be a hack in high school, college, law school, American Lawyer, Goldman Sachs, blah blah blah. And there it is, the 8000-word Cramer is a Hack. There's no coming back from that. It stung. Let's find the meanest thing we can call Cramer. Let's call him a hack... I did love that blind quote, "He's despicable, but he loves his wife." ... The Jim Cramer as Goebbels thing was kind of disappointing. You know, he is not Himmler, he is Goebbels. That was okay. Thank you very much, Graydon Carter. I'm glad you managed to pin me down...
My friend Marty [Peretz] was portrayed as being my enemy. I've only talked to him like a billion times since the article.
Really? I came away from that article thinking you guys were over, finished, kaput.
JC: (to Kansas) I've spoken to him how many times today? As I said to her repeatedly after she came to us, "Listen, we patched it up." She was like, "Yeah, uh-huh." I think she'll have to live with that piece for the rest of her life. I asked the photographer when he called, "What do you think? Should I sit for this?" He said, "What, are you kidding? It's a total hatchet job." I asked the factchecker when she called, "Well, how is it?" She said, "Oh, you don't come out too good." I'm like, this is great. This is a goddamn 18-wheeler coming down the pike. Graydon Carter?I am so not owned by Paramount or Disney, or Tina Brown, or Si, or Morton?I'm so not owned by that constituency. I'm somebody from Philadelphia, you know? I'm so provinces. I'm so boonies to them that you can run me over with your 18-wheeler and there won't be a single Barry Diller call to defend me. There won't be a single call from the people at the Four Seasons saying why did you do this to my friend Jim Cramer. 'Cause those aren't my friends.
Where are your friends?
JC: My friends are all out in Summit, NJ, playing with my kids like I should be. My friends you will see as I coach soccer in the suburbs. I'm going up against Graydon's team. He's coaching third grade. He and Liz Smith are co-coaching. With Mort. He's coaching Peewees.
How many subscribers do you have now?
JC: It's like McDonald's, millions and millions served.
JC: (laughing) Surfed.
DK: Roughly 60,000. We have to be careful what we report, because we're in the [second quarter] earnings period right now.
JC: I used to talk about this with Kurt Andersen. Like when we were 18,000, he'd say, "Jim, you know..." And I'd say, "But on the Net that's..." And he'd be like, "Well, you can't use that dog year-people year thing." But it's a big deal to get people to pay.
DK: And we have a great retention rate. Once they convert they stay.
JC: Our business model is like HBO. You get a premium product on top of your ISP, and people don't cancel. They take it and renew...
Everybody who's free says to us, "When are you going to go free?" And I say to them, "When are you going to go paid?" We have proved that you can go paid if you offer 10 times the value. I find that people who want us to go free are already free and desperate to see us fail. We're making too much money paid to go free. It would be a colossal mistake. We think everybody who's subsidizing their webs will eventually lose, so much because their website?like The Washington Post or The New York Times?is so much better than the paper. The next generation?and it is a generational thing?like my daughter doesn't understand why I go down to the end of the drive to get the paper?and I've cut out two that I was having delivered?when it's on the PC and faster and better. As soon as we have the syntax where you can ask [an online] paper where the best fireworks are or where the best movies are, I don't think the paper document will hold any more weight in the family firmament than the cloth diaper does.
(Kansas' cell phones buzzes him. He flips it to his ear.)
JC: This could be Bob Rubin. (to Kansas) Is it Rubin or is it Greenspan?
DK: It's my mom. (laughter)
Your subscribers are like the ones for The Wall Street Journal's site?they come to you for the instant, up-to-the-second market figures they don't get from print, right?
JC: Sure. You can charge for business. It's much harder to charge for something like?let's take the case of Slate. If there was a print Slate, I probably would read it. But I'm used to receiving... (He points over his shoulder at a computer screen scrolling market data) Before there was the Net, I paid to have an individual pipe come into my place to give me the financial news scrolled. Now I have it, it's just not an individual pipe. There's no difference. It's just as fast. But Bloomberg charges you $1500 for what we charge 10 bucks. Instead of why shouldn't we go free, I think why shouldn't Bloomberg charge 10 bucks?
But then why are people willing to pay so much more?
JC: Because they [Bloomberg] have a huge infrastructure and they gotta pay for it.
No, but why do their subscribers pay more?
JC: Why were the dinosaurs so big? Those people haven't seen Fantasia. I know how it ends. Hey, they were tough sons of bitches, those dinosaurs, and it took some ice ages to bring them down, but they came down.
With all the capital you've raised, you still lose money, right?
JC: The decision to lose money, so to speak, is a decision to be big. There was an article in Forbes recently about briefing.com versus us, and it portrayed me as the hare. It was so galling, because it wrapped up all the negative thinking about what we're up to. On a revenue base, based on our original business model, we could have been in the black last year. But we'd be nothing, we'd be nobody.
Because you originally planned for smaller staff, fewer expenditures?
JC: Yeah. What did we have in revenues last year, $5 million? Well, $5 million, in my back of the envelope that I did with Marty Peretz back at the start, we'd be making money hand over fist. But we'd have no scale. We'd be nothing. We would be?(He pauses theatrically, then he and Kansas say simultaneously)?briefing.com! (They both laugh) The venture capitalists come in and they say, "Listen, you gotta spend some money." And I said no no no, because I'm a mom and pop guy. And they asked me, "You wanna be big? Or you just want to be a small newsletter?" And we said, "We want to be as big as you can be." We think we have a template to take over the world here.
Explain to me how TheStreet.com could have a market value of $2 billion.
JC: For one day.
Granted, for that one day [the first day of the IPO, when the stock price skyrocketed 220 percent]. But it's still, what, $850 million? Explain that to me. How is that value calculated?
JC: It's a present value of something that seems to me very exciting, but I don't want to engage in hype or say this is what you have to buy right now in order to realize the $50 billion dream Dave and I are concocting in our heads. It's an on-the-come situation. You're betting that we can continue to execute. I can say broadly, for most Net stocks. Amazon.com was at a billion. Yahoo was at a billion. Those were crazy valuations?if they didn't execute. But they executed and it turned out to be they were cheap.
DK: The basic thing is, a Net stock is going down a Montana highway 100 miles per hour. The person is making a bet that they go from point A to B at that speed. But the Net case is, a single pebble in the road could change the whole trajectory. So everyone's betting that it's a straight road. It's all on the come.
It would seem to me that all you online financial sites started with the advantage that your core audience were, as you said, already conditioned to look to the screen for information.
DK: But only 20 percent of our readership is institutional. There's a big chunk of people in Texas and Montana and California who are?
JC: We caught a wave of people who decided to take care of their own finances. We should have been out of business if people had not adopted a different model of how to run their own money. There's no reason for us to exist if the business model when I worked at Goldman Sachs still existed. It doesn't. People trust themselves more than they trust brokers now, and they'd rather trade off news that they believe is vetted and written fairly than off of research, which they believe is corrupt and on the take by investment banking.
Which brings up another complaint that's often written about, that Cramer talks about stocks that he's got a position in, he's pumping stocks to make himself money?
JC: Oh God, I disclose, I disclose, I disclose... I can't win. People say I shouldn't have a position, but even when I don't have a position I get in trouble. I got in trouble for WavePhore [he said on CNBC that speculators were shorting the stock, and the next day the stock price plummeted]. I wasn't shorted. The stock went from 12 to 5, and people accused me of being shorted. There's no way you can talk about stocks according to some people's rules. If you're long it you can't talk about it, if you're short it you can't talk about it, if you're not long, if you're not short?it sounds like we're the North Korean parliament, and that's why I live in America and they can all go to North Korea!
DK: These people who think that only pristine journalists should write about stocks, that's just stupid... If you have a philosophical belief that people outside journalism should not write about the stock market I think that's a severe disservice to investors and readers. They don't believe that people inside the arena can provide expert opinion the way people in politics or sports can? There's a simple answer: Have them all disclose where they're coming from.
JC: We have both. We have reporters, who are not allowed to hold any stocks, and we have commentators like me. When I read a negative article about Skechers by reporter Suzanne Kapner, I don't want to think, "Say, is she short that thing? Is that why she wrote that?" But if I read a negative commentary about Sun Microsystems by Jim Cramer, and at the bottom [is the disclosure that] he's short it, I can take it with a grain of salt. That's how disclosure works, and that's why you don't want your reporters either hiding behind it or taking positions. They're supposed to be out there finding the facts. I'm a commentator, for God's sake.
All right, now I'll ask you about the money. Explain to me how it works. You, Jim, were worth $200 million the day after the IPO, now it's around $90 million. Dave, you were at $9 million, now it's like $4 million?
JC: Oh God...
I left it till the end.
DK: Here's the deal. We'd have to wait six months. But take Jim Cramer, to sell?he's a director of the company, he'd have to register with the SEC and say he's selling his stock. The truth of the matter is, the value of those shares would be such if he tried to sell that he can never sell [because if he dumped all his shares onto the market the value would plummet].
Me, my entire net worth in the world is with TheStreet.com. Literally. I have no diversification. Not even a car.
But on paper you're both filthy rich. Can you borrow against it? Get a mortgage or a car loan?
JC: No. You absolutely cannot. We bought a car last night. A Volkswagen Cabriolet. Very nice. It'll take three weeks. But I wouldn't even bring up the stock. "Could you sell that?" No. It's not a factor.
DK: If I wanted to get an apartment in Manhattan I couldn't. I can't use the stock.
The consensus is that the Net market bubble has burst, that you guys were one of the last big winners.
JC: Well, but the market's still very vibrant for Net... There was one today that was huge.... The issue is, if you have a Net company, it's more easily financed. Talk.com would still get the money. With all that buzz, with that Navy Yard thing? Oh, man, it woulda been so big! Instead, International Paper's the big winner. And Harvey Weinstein.
Last question: When's the big market correction coming? The Economist has been predicting it for what, a year now?
JC: Yeah well, and what's their circulation like? It's like Barron's has been predicting the big correction since 700, and what are their numbers like? Single-digit growth. My take is that you're in a benign environment... I'm not looking for anything big. I could see it going down a couple hundred, 300, 400, 500, but I don't think it's going to be thermonuclear war.
You've written that there's plenty of froth at the top end of the market. Will that be the correction?a few hundred points of froth off the top?
JC: Sure, that's the 300 or 400. But it wouldn't even make the front page of The New York Times. [pause] Those buzz merchants.
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