Hiltzik: Narratives that made their believers into idiots

By Michael HiltzikBusiness Columnist

Published Dec. 22, 2022 Updated Dec. 23, 2022 6:26 PM PT

‘Tis the holiday season, when we pundits look back at the most uplifting moments of the last year and ahead to what may gladden our hearts in the next.

Not this time.

The year 2022 was one in which financial, political and social observers saw their most cherished narratives blow out at every seam. It was, in short, the year of the Big Fail.

If you’re incompetent you have to be honest, and if you’re crooked you have to be clever.

— Rule of the game allegedly ignored by Sam Bankman-Fried of FTX fame

I’ll take a page from the estimable money manager Barry Ritholtz, who published his list of narrative fails of 2022 a few weeks ago, regretfully noting that he had limited himself to 10 because “otherwise, the list would have become too long and unwieldy to manage.” I know the feeling.

My list overlaps with his somewhat, though I have some choices of my own. Let’s dig in.

The Musk Mythology: The notion that if you’re a billionaire, you must be brilliant or at least smart has been reduced to a smoking ruin, thanks to Elon Musk’s misadventure as the buyer and tweeter-in-chief of Twitter.

Not only have his erratic decision-making and sedulous embrace of far-right loony-bin politics sent countless users and advertisers fleeing from the social media platform, but it appears to be eroding his support among the core buyers of electric vehicles made by Tesla, the shares of which are his chief personal asset.

Until this year, Musk’s role as Tesla CEO was the key factor in the company’s buoyancy, despite its dubious profitability and persistent issues with delivery schedules and the product quality. His behavior at Twitter has opened the floodgates of long overdue reporting about his management capabilities, as my colleague Russ Mitchell laid out in November.

In just the last week, some of Tesla’s most dependable cheerleaders in the financial world have turned on Musk by suggesting, shockingly, that Tesla’s sycophantic board should rein him in or even find a new CEO.

That’s unprecedented but unsurprising, as the automaker’s stock, which was once valued at more than the nation’s legacy automakers put together, has plunged by a nausea-inducing 69.2% this year.

Farewell to crypto: In an episode of the great 1980s Britcom “Yes, Prime Minister,” the banker Sir Desmond Glazebrook explains “the basic rule of the City” (that is, London’s Wall Street): “If you’re incompetent you have to be honest, and if you’re crooked you have to be clever.”

Sam Bankman-Fried, founder of the collapsed cryptocurrency enterprise FTX, apparently broke the rule at both ends. According to an indictment handed up in New York federal court, a bankruptcy court declaration by the firm’s receiver and charges laid against him by federal regulators, he was both dishonest and incompetent.

It may be incorrect to call FTX a Ponzi scheme, which is a particular species of con game, but it certainly looks like a con judging from the Justice Department’s indictment; the evidence and Bankman-Fried’s own admissions indicate that customer deposits that were supposed to be sequestered were used to bail out the firm’s own hedge fund.

FTX claimed it had the most sophisticated computer-driven accounting system in all of crypto, but in fact its system was run by “a very small group of inexperienced, unsophisticated, and potentially compromised individuals,” in the words of John Ray, who is functioning as the bankruptcy receiver.

Yet much of the coverage of the FTX collapse is making a category error. It treats FTX as an aberration in the crypto field, as if crypto was fundamentally sound except for Bankman-Fried and his merry band.

That’s wrong. Cryptocurrencies are a scam. They’re would-be assets with no intrinsic value other than what their holders can persuade some fool to pay for them.

Bankman-Fried is portrayed as a one-time billionaire who lost his fortune; in fact, he never had a fortune — the claim was always based on fake values of his self-created cryptocurrencies and others.

It’s true that he was able, briefly, to convert his crypto holdings to dollars in time to make lavish political contributions and pay for stadium-naming deals and a Super Bowl commercial, but the values were built on quicksand and it has now swallowed him up.

Will the fall of FTX take the myth of crypto with it? Unfortunately, that’s doubtful. The legion of credulous marks never goes away. Count on crypto marketers to find some way to portray FTX as an outlier and keep at their efforts to persuade investors and politicians that they’re for real. They’re not.

A watchdog falls for a COVID conspiracy: The independent journalism organization ProPublica spent years establishing a reputation for smart, painstaking investigations.

That reputation came crashing down in October, when it unaccountably joined up with a conspiracy theorist at Vanity Fair to push a long-debunked claim that the COVID virus escaped from a Chinese biology lab before spreading worldwide. That claim is at odds with prevailing scientific opinion, which holds that the virus reached the human population via infected wildlife.

The article was almost entirely based on a Chinese government document that had been translated by an American who claimed to have a unique ability to understand the convoluted Mandarin of official dispatches. He led ProPublica to assert that the lab had experienced a mysterious crisis immediately before the first COVID outbreak.

As I reported, however, numerous other experts determined that ProPublica’s source had mistranslated, selectively quoted and misinterpreted the document. ProPublica also granted undeserved credibility to a U.S. Senate committee report concluding that the virus had escaped from the lab, without adequately informing readers that the report was the product of the committee’s GOP minority and a rehash of the old refuted lab-leak claims.

ProPublica responded to widespread critiques of its article with an editor’s note a month later in which it said it consulted three (unidentified) Chinese language experts. Two questioned the translation, and all found the quoted passage “ambiguous.” Bizarrely, ProPublica pronounced its article “sound.”

Sadly, it was nothing of the kind. ProPublica failed its readers by promoting what is a right-wing, partisan claim about the origins of COVID, and damaged its own reputation in the process.

The red wave that wasn’t: The notion that Democrats were sure to be slaughtered in November’s midterm elections became established as an article of faith almost as soon as President Biden uttered the last words of his inaugural address.

It persisted even after the Supreme Court handed down its seamy and dishonorable decision in Dobbs vs. Jackson Women’s Health Organization in June, overturning Roe vs. Wade and thereby rescinding a civil right of long standing, almost uniquely in the history of American jurisprudence.

That the ruling provoked dismay and anger nationwide went unnoticed to politics reporters, except to the extent that they were sure it wouldn’t affect the election. That was only one political trend that the insular, Northeast-based reporting and poll-taking class overlooked; another was that the anti-democratic rhetoric and actions of Republican candidates turned voters off.

We know the harvest. Democrats actually augmented their majority in the Senate and kept a sufficiently solid minority caucus in the House to raise the stakes of disarray emerging in the narrow GOP majority.

Donald Trump’s power over the Republican Party was seriously eroded by the electoral losses of most of his endorsed candidates. Have political reporters awakened to this emerging new reality? Next year will tell the tale.

The roar of the Russian bear: The British journalist Andrew Cockburn identified the Russian bear as a paper tiger in his book “The Threat”—in the 1980s, when the subject was the military might of the Soviet Union. Cockburn documented how the Red Army’s might was systematically exaggerated by Western generals who needed a powerful enemy to justify their budget requests.

Contemporary events suggest that among those who failed to read “The Threat” or at least ignored its lessons is Vladimir Putin. The Russian president put his faith in the might of his army, foisted a myth on his people about restoring a long-gone Russian empire and believed his own propaganda about the meekness and cowardice of a Ukrainian populace faced with overwhelming force. Obviously his confidence was misplaced.

A couple of weeks ago I asked a Russian emigrée of my acquaintance how long she thought Putin would last in office, now that the actualities of the invasion are becoming known to Russian families through the bodies of slain soldiers and bathetic phone communications from their sons in the field. “Days!” she exclaimed. But he’s still there.

The endgame of the Russian attack remains an imponderable as I write. The devastating consequences of its battlefield losses are inescapable, as is the damage wreaked upon the Russian economy by worldwide economic sanctions.

The best that can be said is that the attack hasn’t gone as Putin expected. In geopolitical terms, it’s the biggest Fail of 2022.

It’s tempting, if unwise, to speculate about what might be the biggest Fails of 2023. Here goes, anyway. My top expectation is the fizzling of Ron DeSantis as a national figure.

Supporters of the thuggish Republican governor of Florida think he’s the second coming of Donald Trump. To me he looks like a dim rehash of Scott Walker, a similarly smug and sleazy culture warrior who, like DeSantis, had all the charisma of a painted wall.

Anyway, it’s hard to imagine that DeSantis’ campaign against “wokeness” will have legs nationally, since the voters have signaled that they don’t have much patience for candidates who don’t offer solutions for real problems.

Then there’s the investigation of Anthony Fauci that the House GOP majority says they’ll be launching in the new year. Prediction: The effort to turn this widely respected scientist into a villain will evaporate in a miasma of ignorance and stupidity, as will talk of “prosecuting” him, most recently promoted by that paragon of sober judgment, Elon Musk.

Also, crypto will still be dead. See you a year from now, at this same place.