June 14, 2012

Media Sensationalization

Patrick Laverty

Well, that word is a big of mouthful. I even have to slow down to make sure I type it correctly. Sensationalization.

Anyway. I get a morning email each day of the top stories from GoLocalProv.com, which include some headlines and a brief blurb about the story. So this morning when I saw there were some "secret" documents uncovered, I couldn't wait to see it. Additionally, Helen Glover has the "Big Story of the Day" around 7:40 each morning and this was the topic and how exciting it was that these secret documents were discovered. So what were they about?

They explained that lending money to 38 Studios was a huge risk. One that should not be taken lightly. These disclosures were made to another potential investor in 2009, when the company was seeking a $25M loan. However, similar documents were not made available to the EDC prior to backing the $75M loan to the company.

Is that a big deal? I don't know, maybe. Should the company have offered the same disclosure to the EDC? Of course. However, this seems like an attempt to imply that something really dastardly or underhanded was done here and possibly give a reason for why the EDC didn't properly evaluate the risk. C'mon. If the EDC didn't have any idea of the risk without being told that it was a high risk, then they are far more incompetent than we could have previously imagined. I mean, if the EDC were handed these documents, do we really think that then they would have thought to themselves, "Oh, this really is a big risk. We don't want to do this deal." Seriously? They had no idea that the full investment could be lost? I dabble in the stock market every so often and I fully understand that all the money I put into it could be completely lost. I'm aware of that kind of risk. If I'm aware of it at this level, then how in the world could the EDC be unaware of it at their level without that disclosure? Clearly, they weren't unaware. They knew at least that much. So when you take that away, what then is really the big secret?

I can understand what GoLocalProv is trying to do. They're new, trying to establish themselves in this media market, trying to take on the Journal head on. I get that. But they have some great writers over there that work hard and do some excellent work. I'm not sure that the headline writers need to embellish quite so much. This wasn't the first time I read an article and felt the content didn't quite match the excitement of the headline. Eventually, you get a "Boy Who Cried Wolf" mentality with that kind of stuff, but like I said, the writers are great, so that in itself keeps you coming back.

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PROVIDENCE, R.I. (WPRI) - Rhode Island's director of revenue said Friday she "was not in favor" of the 38 Studios deal in 2010 and expressed those concerns directly to then-Gov. Don Carcieri.

Gallogly said she expressed concern that the loan was a "large amount" of money and that 38 Studios was a startup company with no revenue, making it a risky investment

Gov. Carcieri still won't face taxpayers despite the stunning implosion of the $75 million loan guarantee he got them to give Curt Schilling's video game company,

Citation WPRI...Tee-Vee

Is Carcieri hiding-out in Dick Cheney's bunker LOL.

Posted by: Sammy in Arizona at June 14, 2012 7:04 PM

Sammy - Why don't you contact Carcieri and ask to hear from him on the 38 Studios Loan? A lot of us would like to hear from him on that matter. While you're at it, ask to hear from Gordon Fox, Paiva-Weed, the rest of the Democratic GA, the progressives on RIFuture, and all other people who supported the loan or had a hand in making it happen.

Posted by: Dan at June 15, 2012 7:33 AM

At this point I could care less what the 'Don' has to say. What would he say? "Yea, it was a bad deal all along. I really screwed that one up." I'd be more concerned with who else connected to this story benefited. The 'Don' is gone. He won't be back. Let's connect the dots and clean house.

Posted by: Max D at June 15, 2012 9:18 AM

"...the progressives on RIFuture"

Yes, we progressives and the governor had soo much in common, a virtual love fest for his economic plan over there (the notable exception was former EDC director Saul Kaplan who was mentioned favorably by myself and others until Carcieri dumped him for Stokes - good move, eh?).

Fact is, no one at RIF supported that deal when it was proposed as much as you'd like to pretend that's the case.

Members of the RIEDC want us to believe they thought long and hard about bringing Curt Schilling’s video game company to the state. They keep telling us about the extensive conversations and the sleepless nights they had while making the decision. But you know what was really going through their heads Monday morning before they voted 8-to-1 to offer 38 Studios a $75 million loan guarantee to move to Rhode Island? “How many baseballs can I get Curt to sign before he asks for a few extra mil?” And… “Would this be the appropriate time to ask Curt to speak at the Hasbro gala?”...

The problem is that no matter who is attached to the project, and really, no matter how good the game actually is, 38 Studios probably needs to get lucky for the game to become a smash hit. There is no guarantee. And in an election season where everyone and their Virgin Mary statue wants to preach fiscal responsibility, it seems like taking a chance on a video game company ran by a guy whose credentials essentially amount to being really good at World of Warcraft is far too risky.

$75 million for a couple hundred jobs and we’re left to be the mop up men if Schilling can’t deliver. Let’s just hope the EDC holds on to those autographs.

Can't you just feel the love?

Posted by: Russ at June 15, 2012 12:35 PM

"Fact is, no one at RIF supported that deal when it was proposed"

The article to which you link is a post-mortem analysis of the debacle by Bob Plain trying to lay the blame exclusively at the feet of Don Carcieri (and nobody in the GA, oddly). There were a number of self-identified "progressive" RIFuture contributors and commenters who supported the 38 Studios loan when it was proposed or during its implementation over the subsequent year. Are you going to be so cruel as to make me name them by name? I'm sure your economy with the truth this time around pertains to the technicality that the two major RIFuture contributors only supported the loan during its implementation (which makes it okay?), but there were progressive RIFuture commenters who supported it during the proposal period as well, and there are archives of the site verifying this, so your statement that "no one" on the site supported it is not accurate or exaggeration. At best, you could say it was a mixed bag of support, ambivalence, and opposition among the progressive RIFuture crowd.

To my knowledge, none of the conservatives or libertarians on this site, contributors or commenters, supported the 38 Studios Loan. Correct me if I'm wrong on that. I do like to be accurate.

Posted by: Dan at June 15, 2012 1:43 PM

"The article to which you link is a post-mortem analysis of the debacle by Bob Plain trying to lay the blame exclusively at the feet of Don Carcieri."

No, it's not. It's from an article written on RIFuture by Dan McGowan on July 27, 2010 titled "Schilling Had EDC At Hello". The RIF link is no longer up, but it looks like Dan posted it here as well...


There were others (unanimously against btw), including one of my that I could pull later if you like. On the other hand, I can't find a single post on this site objecting to the deal when it was proposed.

As near as I can tell, AR developed 20-20 hindsight this spring and retroactively started trying to blame progressives, the GA, the weather, and anything else that wasn't connected to the Governor's office, who championed the scheme in the first place.

Posted by: Russ at June 15, 2012 2:18 PM

"To my knowledge, none of the conservatives or libertarians on this site, contributors or commenters, supported the 38 Studios Loan. Correct me if I'm wrong on that. I do like to be accurate."

Maybe not publicly. However, I'll do it, I'll step up and admit I was in support of this from the first mention of it until the day the bottom fell out. I was wrong. I trusted that the EDC did the necessary research and thought the intent was good. However in hindsight, it's very easy to say it was a bad idea. The part that irritates me now is when people come out and say they were against it from the beginning, however they're not on the record anywhere as being against it, as some in the GA have tried recently.

Posted by: Patrick at June 15, 2012 2:18 PM

btw, I don't doubt many conservatives were against the deal. I actually quoted Saul Kaplan and Angus Davis, who were both quite critical and vocal when it mattered.

Over here though, you wouldn't have known there was anyone, right or left, who was opposed to the Carcieri scheme until last month or so.

Posted by: Russ at June 15, 2012 2:41 PM

Russ - Excuse me, I misidentified the source. A good reason for you to cite your sources in the future.

Why are you pretending that supporting a policy at any point after its proposal stage is meaningless? The loan could have been modified, cut short, or more heavily scrutinized during its implementation, and support after the fact has ramifications for future actions.

Mach was a self-identified progressive commenter on RIFuture who supported the loan in the comments section of the very McGowan article you quote, so it wasn't literally "no one" supporting it. There's one, and there were others at that time. Contributors Brian Hull and John Speck authored supportive articles and comments during the implementation phase of the loan. Speck was also a consultant for the EDC at the time, and said no less than twice that the EDC would have been fools to pass on it. Rhody Towny characterized the loan as a good bet. PinkHatLib didn't explicitly support the loan, but countered my objections to the loan with examples of supposedly successful "state capitalism" in China. There are other examples.

This blog has actually been very good about acknowledging Carcieri's role in the loan and giving him an appropriate amount of blame for it. Your claim that this blog has attempted to whitewash his role is totally false, although RIFuture was guilty of the what you describe regarding the GA and Gordon Fox until very recently. Bob Plain authored approximately a dozen articles solely blaming Carcieri and Stokes after the deal collapsed, without even acknowledging that a single other person was involved, which is grossly irresponsible. The Speaker of the House was directly involved in setting up the loan, as were other members of the GA.

"Over here though, you wouldn't have known there was anyone, right or left, who was opposed to the Carcieri scheme until last month or so."

I've been shouting from the rooftops about this deal from Day 1. Where have you been? See all those RightToWork comments dated early 2012, arguing with Hull and Speck about what a horrible idea this was and predicting 38 Studios's bankruptcy? That was me.

Posted by: Dan at June 15, 2012 2:59 PM

btw, Patrick, I agree that headline was over the top. Those types of warnings are pretty standard language in early stage private placement documents, hardly the bombshell GoLocal would have you believe.

And what company wouldn't want to keep confidential, excuse me, keep "secret" documents with details on their financial position and business plan?

Posted by: Russ at June 15, 2012 3:00 PM

"A good reason for you to cite your sources in the future."

I tried to post the link from archive.org but the spam filter over here wouldn't take it.

I don't contest that a couple progressives offered what could be construed as support for the deal earlier this year after the release of Kindoms of Amalur and notably long after the loan was a done deal, but that doesn't make this a progressive plan as much as you seem to wish it were.

"Where have you been?"

I posted about how dumb this was in early 2011 ("Funding Cuts Impact RI Tech/Science Ranking"). My objection was to the amount of the loan to a single company while cutting funding to the Slater Technology Fund. I don't object on principle to the idea of early stage venture funding. I actually found reference to it here in the comments. For a second, I thought I might have to eat my words, but no that was just me!


Posted by: Russ at June 15, 2012 3:30 PM

Oh, and no question you were against this one before the s--t hit the fan (I made that connection).

Posted by: Russ at June 15, 2012 3:31 PM

For the record, when I wrote that original piece, I probably placed too much blame on the Governor and no enough on others.

Obviously we now know that there was a lot to the story.

Posted by: Dan McGowan at June 15, 2012 3:42 PM

"when I wrote that original piece, I probably placed too much blame on the Governor and no enough on others."

Maybe, maybe not. We don't know if the Gov or the Speaker or anyone else told Stokes and others, "Pass this or you're fired". Maybe he didn't and they were all (other than the 1 "no" vote) dingbats. We might never know what degree of pressure was put on the board.

Posted by: Patrick at June 15, 2012 3:51 PM

I'm not saying it was a progressive plan, although in the broader sense, state-funded venture capitalism is much more of a "progressive" idea than it is conservative or libertarian, particularly when the target is something gimmicky and unobjectionable, such as video games, or associated with environmental or social justice causes, such as Solyndra and Evergreen were. The loan was championed by the Republican Governor, passed by the heavily Democratic General Assembly, and set up by the EDC which had business leaders, political insiders, union leaders, and other types of representatives on it. Plenty of blame to go around.

What troubles me now is how the focus is so often on the fact that it was "one company" or the "risks were too great" instead of the fundamentally folly of an "economic development board" picking companies in which to invest public money. That is not a legitimate function of government in my opinion, and these situations rarely, if ever, turn out well. Investing in multiple companies or smaller companies would only mask the extent of the inefficiency and make it less readily apparent. It doesn't change the fundamental issues in my mind at all. If people could take one lesson away from it, I would hope that it would be that central economic planning is fundamentally inefficient because it utilizes top-down decision making instead of localized knowledge and expertise, and the incentives of the planners and recipients of the funding are all wrong. But if people take some hard lessons about crony capitalism instead, I'd still view it as a plus. The wrong lesson is "The Don and Big Schill screwed us out of money. Let's tar and feather them, restock the EDC, and roll the dice again."

Posted by: Dan at June 15, 2012 3:53 PM

See all those RightToWork comments dated early 2012, arguing with Hull and Speck about what a horrible idea this was and predicting 38 Studios's bankruptcy? That was me.
Posted by Dan at June 15, 2012 2:59 PM

Did anyone not know this?

Posted by: Phil at June 15, 2012 8:28 PM

Never hid it Phil, but Russ might not have known. What is your RIFuture handle? And with which teachers union are you affiliated?

Posted by: Dan at June 15, 2012 9:28 PM

I don't have a "handle", nickname, alias, or sobriquet. If you don't believe me you can go to the East Greenwich, Apponaug, Oakland Beach, or Allen Harbor working waterfront and ask for Phil. Run your mouth will that crowd and see where it gets you.

Posted by: Phil at June 16, 2012 1:15 PM

I enjoy reading RI Future but do not post there. Their content is very good but the comments are mostly tedious, the reverse of that takes place here.

Posted by: Phil at June 16, 2012 1:21 PM

I don't know what you're smoking if you think RIFuture content is good, Phil. You must think McDonald's food is "good." I just see that blog as low-quality entertainment. Half of their articles aren't even really articles - they're fluff pieces for progressive candidates, or lame satire against people viewed as union opponents. Having anonymous commenters is fine, but having anonymous contributors is a joke. Besides, a lot of their contributors need to go back to high school to learn basic grammar and organization principles. Comparing RIFuture articles to Anchorrising Articles is like comparing night to day. Even if you don't agree with them, most of the contributors here put in a lot of effort and are very talented writers.

Posted by: Dan at June 16, 2012 5:52 PM
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