01/29/2006: Oprah Winfrey blew it for the same reason Dan Rather blew it.
A publisher–with much to gain–called her and recommended a book, James Frey’s self-portrait of his drug abuse years, A Million Little Pieces. Oprah, being a softie who likes stories where people conquer big nemeses–such as substance abuse–pounced on it and recommended it to her national audience.
Andrew Goldberg of thesmokinggun.com had already exposed Frey’s screed as having the historical reliability of an Oliver Stone flick. However, rather than check the facts herself, Oprah simply called the publisher and inquired about it.
The publisher, with the prospect of losing millions of dollars–stood by the story. Oprah went ahead and endorsed the book. The publisher successfully transferred the bulk of THEIR risk to Oprah, and she even gave them free advertising to boot. James Frey and his publisher took Oprah–and her fans–for a ride.
While Oprah is not a reporter, she wrongly signed off on a story–that was under suspicion by credible sources–that she failed to confirm. She wanted the story to be true. It was irrational faith-based reporting. When she learned the truth, she tried to minimize the damage. To her credit, once she realized the gravity of her blunder, she apologized and even retracted her support of the book.
Oprah was suckered in this case because she provided an emotional response to something that required a rational assessment. That is hardly a sexist assertion–men and women both do this at times. (Anyone who lost money on tech stocks in the debacle of 2001-2002 did the same thing Oprah did.)
I don’t know Oprah, and I don’t watch her show–I haven’t watched television for over a year–but I’d wager that Oprah has a tendency to trust people too much. I can empathize: I’ve made similar blunders, and lost serious money that way.
I woke up and smelled the napalm and realized that everyone was expecting ME to take THEIR risks! Then I got angry–pissed would better describe the severity of emotion–just as Oprah did on her program.
That alone would not have changed anything: I had to fundamentally change the way I did business with people. I used to rarely say no to people. Today, my favorite question is, “What part of the word “no” don’t you understand???”
When people seek me to invest in something that they are recommending, I’m always very suspicious. What are they standing to gain in this? How much risk is involved? What is my share of the risk in this? What is the proportion of the risk they are taking? How much compensation do I stand to get for taking that risk? Does it square compared to what I could make taking less risk? What are the known facts? Can I provide a rational basis for supporting this? Am I willing to devote the time to monitor this? Would a rational investor of my risk tolerance and risk capacity invest in this?
If this sounds like investment advice, that is because it is. Whether you are Oprah (who endorses books) or an investor (who endorses stocks by purchasing them) or a reporter (who endorses stories by reporting them) or even a politician (who endorses lobbyists by taking money from them), you are making a business decision, the quality of which can reflect poorly on you if it is a dud.
Oprah will recover from this: she will become a more rational investor and–in the long run–she will do well. I may not be an Oprah fan, but she is–by and large–successful for very good reason: she’s smart and has business savvy.
The real issue is will larger body of Americans take away the lessons that Oprah learned so painfuly?