Over at Forbes, Jeff Bercovici asks what superinvestor Warren Buffett’s true feelings are regarding the print press, particularly newspapers. Does he think they are a foolish business venture or a cause worthy of support? Using Berkshire Hathaway’s purchase of the Media General newspaper chain this week as his proof, Bercovici argues that while Buffett might have “tender feelings” towards newspapers, the terms of the deal mean that no one should “accuse him of committing philanthropy“:
What we know now, thanks to his acquisition of the Media General newspaper chain last week, is the exact shape of that soft spot. Buffett might his tender feelings to bend his investing principles, but he won’t break them. He’s a pragmatic savior who’s only interested in those papers that can be saved.
The deal he made to get his hands on Media General’s 25 dailies is hardly the work of a romantic. No one who takes a close look at the terms, as Ken Doctor notes, would accuse him of committing philanthropy.
But Buffett may have more philanthropic bones in his body than Bercovici gives him credit for. The situation is somewhat different — I believe it may have been Buffett’s personal money rather than Berkshire Hathaway’s — but his past support for the Washington Monthly is hard to view as a situation where “Buffett’s ethos about what’s good for society dovetails nicely with his ethos about what makes a good investment,” as Bercovici says of his recent newspaper investments. Indeed, according to Alan Schroeder’s Buffett bio, The Snowball, Buffett warned his fellow investors “not to expect big profits.” It’s true, apparently, that the Monthly’s financial problems caused conflict between Buffett’s journalistic boosterism and his business instincts:
Buffett brought Fred Stanback and Rosenfeld in as partners on the Washington Monthly warning them not to expect big profits. In fact, he thought the financial prospects might vary in inverse proportion to the magazine’s journalistic success. But the scandals it might uncover — the ideas it could promote — the exposés it could expose! They put in a little money.
In short order, the Washington Monthly ran through its initial capital stake. Buffett held out the possibility of another $50,000. He and Peters had a fifty-minute phone conversation, in which Buffett’s hard-nosed business instincts and his good-citizen journalist side went to war. “As an investment, it reeked of the potential for failure,” says Peters. “He was worried about his business reputation….Warren kept finding plausible escape routes, and I tried to block the exits.” Buffett said that the editors had to put in some of their own money, and raise some outside, which Buffett said he would match eighty percent.
Peters was a better journalist than accountant. They raised the money; the checks went out; then nobody heard from the Washington Monthly. “They just vanished,” says Buffett. Although the Washington Monthly was indeed putting out strong stories, it wasn’t enough. He had known from the beginning that he would not make money, but he thought that it ought to be accountable for the money that it had. He was embarrassed at having drawn in Stanback and Rosenfeld. Buffett wanted to be a partner in journalism, not just the guy who bankrolled idealism.
But Buffett seems to at least consider the investment to have been worth it for the type of journalism that the Washington Monthly produced. In the early 2000s, when the Washington Monthly transitioned into a non-profit, Buffett sent a note to the magazine saying as much:
The original shareholders had bought into Mr. Peters’s vision of a monthly magazine that covered government, and not just politics. Over the last year, most cheerfully mailed back their stock certificates, which had value as mementos and little else — so the magazine could be reorganized into a nonprofit.
”I’ve no problem turning The Monthly into a nonprofit (in fact, I think we already are a ‘nonprofit’),” Mr. Buffett wrote to the magazine. ”Despite the lack of financial return, society has already gotten its money’s worth out of the publication.”
So, what does this all mean in terms of interpreting Buffett’s newspaper investments? I frankly can’t say, but I do think it shades in the picture a bit, showing Buffett as someone who is willing to take a loss, perhaps begrudgingly, if it supports civic-minded journalism.