Sheldon Jacobs is the founder of one of the nation’s top investment newsletters, The No-Load Investor, as well as the author of 25 books. When we sat down with him recently for a 5 Questions feature, he had a lot of great basic tips for anyone covering investment and finance. Here are the outtakes from that bigger interview.
Listen and strive for accuracy
At the outset, let me admit that I would make a lousy reporter. That’s because I am not a good listener. (That’s why I became a guru instead.) So my first advice is be a good listener.
Secondly get the facts straight. Check, check, check. See that the data you quote are the latest available. Make sure they are reasonable.
Let me give you an example. About 20 years ago, the Westchester section of The New York Times had a page-one headline that read, “Twenty-five percent of people living in Westchester are so poor they can’t afford both food and shelter.” The body copy quoted a study to this effect. (This is from memory; these were not the headline’s exact words, but they accurately convey its substance.) The headline was in at least 26-point type.
Now Westchester is one of the 10 richest counties in America. Yes, there are pockets of poverty, but 25 percent! If you took the headline literally it would mean that one-fourth of the people were either starving to death or sleeping in Westchester’s parks. The New York Times had never reported any such happenings, so why did they accept such a preposterous study at face value? I don’t know, but I assume there was a bias somewhere.
It is my observation that many writers, who are very good with words, aren’t so hot at numbers. This is a condition called innumeracy. A few of these afflicted people remind me of the old joke about a man who orders a pizza pie. When asked whether he wants it cut into six or eight slices, he replies “eight, I’m hungry.” This may not be a problem if you are writing about the arts, but it certainly is a problem if you cover business or investing. Top-flight business reporters are not innumerate.
When you are writing about any subject that depends on statistics, such as climate change, rising income inequality, the effects of secondhand smoke, or the effectiveness of preschool interventions, make sure you understand the data.
Learn to construct charts and tables that can stand on their own, back up the written content, and are properly labeled. Make sure the point they are endeavoring to make is clear. If you are working in print, follow the lead of television news shows where the graphics are far cleaner and easily read on the small screen.
Take a survey course in statistics
Learn the significance of the margin of error for polling data. Take that into account when describing polling data. Very few reporters do. Learn to identify sample bias.
Be very careful when color-coding graphs
I once saw a chart in a major newspaper coded in five colors. Three of the five colors were various shades of red (which don’t reproduce as well in newsprint as in glossies). Since I am one of the 7 to 10 percent of men who are red-green color blind, this chart completely lost me.
Here are two examples to illustrate innumeracy. The first is a wistful paragraph in Barron’s introducing an article about the market:
“Back in high school math class one of the problems I hated was this: A bathtub is filling at x gallons per minute, but water is draining at an (x-1) rate. How long before the 60-gallon tub is filled? The math geniuses—most of whom probably run their own quant shops now—figured it relatively quickly, but I struggled. I’d always think, why not plug the drain?” - Vito J. Racaneli
Another example of innumerate judgment appeared in The New York Times business section on April 14, 2001. The article reported that profits increased by 58 percent at Conoco and by 51 percent at ExxonMobil. The headline that topped the article read: “Profits More Than Double At Conoco and ExxonMobil.” Perhaps the headline writer (probably a different person than the reporter) added the two gains together to get the “double.” Or, maybe he thought +50 percent is a double. Of course, his mind may have just been elsewhere when he wrote it.
Stop the pitfalls behind major studies
When reporting on a major study, read the whole study. These studies, which can be 20 or more pages in length, generally come in two parts. The first part is usually called the “Executive Summary” which can be one to three pages in length. The Executive Summery is then followed by the body of the report, which is where the tables and questionnaire with responses are placed. The organizations that produce these studies have found from long experience that the only thing that gets read thoroughly is the Executive Summary. The bodies of the reports are briefly scanned at best. These readers, of course, include the press, many of whom are either lazy or pressed for time.
Many, many years ago I read about a study produced by Channel 13, the PBS television station in New York City. It told of remarkable audience gains and greater interest in public TV programs. Since I was working for NBC at the time, I obtained a copy of the study and read it thoroughly. I found (to my surprise) that there was absolutely no data in the body of the report backing up the Executive Summary’s glowing conclusions.
Know what is unknowable
Luckily your job is to report, which is easier than to know. But it still helps to be able to differentiate what is knowable from what is unknowable. The best current example for reporters is “global warming.” It is my belief that the earth’s temperature in the year 2100 (a date that has appeared in print) is essentially unknowable. There are simply too many variables to consider. This means nobody knows whether or not there will be global warming in the future.
I speak as an expert in this matter. In both my television and financial careers, forecasting was a major part of my job description. If you think it’s possible to forecast the weather over decades, I challenge you to forecast the Dow Jones Industrial Average’s level 88 years from now. This is a fairly simple task compared to weather forecasts as the Dow has only two variables. The weather has many more. Any takers? I thought not. Understanding what is not knowable will make you a far better reporter.