I hate Ashton Kutcher for his smarmy moral posturing, but I am simply unable to fathom why this is such a big deal:
Kutcher guest-edited a special new online issue of Details Magazine in which he hypes four hot new internet startups. The problem? He fails to disclose he is personally invested in three: Airbnb, Foursquare and Flipboard (interestingly, the issue is only available on Flipboard and Facebook). By journalism standards, this is a big no-no. The bigger question is whether it constitutes a federal crime. [Emphasis added.]
In an article in the New York Times yesterday, reporter Nick Bilton investigates whether Kutcher violated S.E.C. rules by failing to disclose. If Kutcher's portfolio companies file to go public anytime in the next month—a highly unlikely scenario—his conduct would violate the S.E.C.’s “quiet period” which expressly forbids stock issuers from discussing a company 30 days prior to filing. The Times piece included a bureaucratic albeit tantalizing quote from the Federal Trade Commission: “It’s certainly a possibility a case like this could be investigated.”
First, is there anyone who thinks that people hawking certain companies and businesses aren’t already balls-deep in them? I, for one, automatically assume that anyone advising me to invest in something in a certain way (e.g. short RIMM or long WMT) is already doing the same in the expectation that doing so will be quite profitable. Yes, I understand that some people try to make money by lying to others in order to sway the market. But this sort of thing is, comparatively speaking, rarely attempted, and even more rarely successful. So, when someone says to buy a certain stock or to consider investing in a certain company, I assume that they're doing the same.
Second, why is financial advice considered less trustworthy when it comes from someone who has put their money where their mouth is? Everyone makes a big deal over the need for the media to be objective, etc., but the facts of the matter are a) the media are incapable of being objective, b) there is no way to be objective about the market anyway, and c) people are more trustworthy with their advice when they have money riding on the outcome.
The media cannot be objective because they are run by human beings, all of whom are themselves biased, imperfect, and ignorant. Being part of the media doesn’t eliminate this, or necessarily mitigate this. Just accept this and move on.
Furthermore, it’s pointless for the media to be objective. The value of any market thing is subjective. Stock prices are subjective. Commodity prices are subjective. The value of any and all consumer products (whether we’re talking ketchup or social networking web sites) is likewise entirely subjective. There is no way Ashton Kutcher can say with any degree of objectivity that Airbnb is better than Hotels.com. He can only say that he, personally, prefers one to the other.
Finally, Ashton Kutcher’s recommendations are more trustworthy because he has invested in them. Imagine someone recommends a restaurant to you and you ask him if he’s ever eaten there. If he responds negatively, are you going to say that you should go there because he can be objective about the matter? So, are you going to invest in something Ashton Kutcher recommends if he himself has not invested in it? Of course not. If it’s as great as he says, then why hasn’t he invested in it?
As should be clear, the media’s attempt to criticize Kutcher for doing something that isn’t even illegal is simply an attempt to demonstrate their moral superiority. Unfortunately, the media’s moral code is an ass.