The time I said `no' to a fortune on the internet

Two and a half years ago I found myself at a conference table with a few other people who wanted to create a financial magazine on the internet. We decided to start by choosing a name. Someone suggested Up The Street, and everyone liked the edgy, aggressive, vaguely political ring of the name. Up The Street was paraded before potential advertisers, who disliked the edgy, aggressive, vaguely political ring of the name. And so Up The Street became TheStreet.com.

As ours was to be an internet magazine, we had another critical task to perform before deciding what exactly was going to be in it. We had to divvy up the equity. For this purpose the two founders, Jim Cramer and Marty Peretz, called a meeting at Cramer's home in Pennsylvania. After a long day of discussions, the two founders took me for a walk around the grounds.

When I close my eyes before I fall asleep each night, I replay in my head every step of that walk, and try to recall how I lost my way. As I recall, the soundtrack from The Godfather played in the distance, and the two men told me that in exchange for my blood oath, or at least for the weekly column that they wanted me to write, they would give me an equity stake of 2.5 per cent, with an option to acquire another 2.5 per cent.

I said I'd think about it, and when I got home I did - for about two minutes. I think very highly of Marty Peretz, which was why I had turned up to talk about his magazine in the first place. But the decision not to accept a 5 per cent stake in his newest venture lost me no sleep - not then, anyway. TheStreet.com was expected to lose a great deal of money from the start and, as far as I could see, would continue to lose money right up until Marty went bust. Five per cent of nothing was still nothing, even if it was 5 per cent of nothing owned by Marty Peretz. Plus, there was the opportunity cost: any work I did for TheStreet.com would be work I didn't do for The New York Times, which paid cash up front.

Two and a half years later, in advance of TheStreet.com Inc's initial public offering, the New York Times Co has just purchased a minority stake in the magazine for $15m. I open newspapers and find myself ridiculed.

The other day, The Wall Street Journal said that I left at least $5m on the table. Of course, the real number is probably bigger - more like $12m. But whether it is $5m or $12m, it raises a question: how do I feel? Like a fool, of course. But a fool who would now like to raise another question: what the hell is going on? Truly, I do not understand this new economy of ours. If I write for The New York Times, which has about 4 million readers, a great deal of advertising, and huge profits, it pays me some few tens of thousands of dollars a year.

If I had agreed to write for TheStreet.com, which now has 37,000 subscribers, annual losses of $16m and very little advertising, The New York Times would now think me worth paying millions for. Why would my services be so much more valuable to The New York Times if they are practised in an obscure publication with few readers rather than in the world's most powerful newspaper. If I can solve that mystery, I am probably qualified to own my own internet magazine. Sadly, I can't. I do have a few theories about it, however, none of them very persuasive.

1) The New York Times has gone mad. It is panicked that it is missing out on The Next Big Thing. Fifteen million dollars means nothing to The New York Times. Its corporate officers view their investment as disaster insurance - a hedge against radical change, from a world where people read the Times, to one in which they have no interest in anything but internet tip sheets.

2) My financial advice, and the financial advice of other would-be scribes for TheStreet.com, is precious. When I write for The New York Times I do not offer financial advice, as I would if I wrote for TheStreet.com. Moreover, I am not allowed to give financial advice - The New York Times does not sully its hands in this way. In mining the financial acumen in the journalistic mind, TheStreet.com has hit gold. The New York Times wants a piece of the new action: journalists picking stocks.

3) The internet is a game of self-fulfilling prophecies, and The New York Times has suddenly figured that out. By tapping a group of people who are no less plausible than any other group of people hovering around the internet and saying, very publicly: "Here, take these $15m belonging to the great New York Times and do something with it,'' The New York Times creates its own success. The golden rule of internet business is: if people believe it is a success, it is by definition a success.

TheStreet.com might not be worth anything, but the people who started it are not embarrassingly stupid. They have gumption and ambition. If The New York Times pretends they are worth a lot, and throws capital at them, other people are sure to follow. Pile enough capital in a heap, and something good is bound to happen. At the very least, the stock price will go up. After all, The New York Times is an investor.

n Michael Lewis is the author of `Liar's Poker', `The Money Culture' and `Trail Fever' and a columnist for Bloomberg News.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Life and Style
Suited and booted in the Lanvin show at the Paris menswear collections
fashionParis Fashion Week
Arts and Entertainment
Kara Tointon and Jeremy Piven star in Mr Selfridge
tvActress Kara Tointon on what to expect from Series 3
Voices
Winston Churchill, then prime minister, outside No 10 in June 1943
voicesA C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
News
i100
News
An asteroid is set to pass so close to Earth it will be visible with binoculars
news
Arts and Entertainment
Benedict Cumberbatch has spoken about the lack of opportunities for black British actors in the UK
film
News
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Recruitment Genius: Outbound Sales Executive - OTE £25,000

£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Java Developer / J2EE Developer - Watford - £45,000 - £47,000

£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...

Ashdown Group: Marketing Product Manager - (Financial Services) - SW London

£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project