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The Dow of Murdoch: Why The Wall Street Journal Should Probably Trust Rupert Murdoch (And Why They Shouldn’t)

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One thing that’s become very clear in the past couple weeks is that a lot of people at Dow Jones don’t trust Rupert Murdoch to preserve the Wall Street Journal’s “journalistic integrity.” Everyone from Pulitzer Prize winners at the Journal, to Journal union representatives, to the Ottaways, to the Bancrofts seem to fear that Murdoch will damage the newspaper. On the face of it, this is rather odd. It almost requires us to accept that the various foes of News Corp’s offer for Dow Jones believe that Murdoch is some kind of monster who wants to acquire Dow Jones in order to destroy it.
It’s very unlikely that Murdoch wants to destroy the journal. And it’s also unlikely that the opposition is motivated by such nonsense. So what’s going on? Well, with a bit of work, we can see that the opposition is not so strange, and we don’t have to believe that his opponents are demonologists. There’s good reason for the friends of the Wall Street Journal to oppose him. They just haven’t done such a good job of spelling it out so far.
Mostly, Murdoch’s foes have pointed to examples which they claim demonstrate his interference with the way News Corp’s properties cover the news. But this evidence is easily countered with examples where Murdoch hasn’t. Indeed, some have said that Murdoch meddles with his low-brow tabloids but leaves the more prestigious titles alone.
“The way I see it, where editorial independence is valuable, Murdoch values it. Where it isn't, he doesn't,” Felix Salmon of Portfolio’s Market Movers blog has written.
And we can thank Salmon for helping us narrow the question of why News Corp’s offer is generating so much opposition—because people don’t trust that the values editorial independence enough to leave the Journal alone. But this brings us back to the question: why don’t they trust him. And to really get to the question, it helps to think of it in terms of Blaise Pascal’s famous wager.

Pascal was an ace mathematician who lived during the seventeenth century and whose work on probability helped set the stage for modern probability theory, influencing game theory, economics and finance. Everyday Wall Street concepts like expected value might not be as familiar to us with Pascal.
Pascal set out what we now call his “wager” in a set of notebooks that were published after his death. The wager attempts to answer the question of whether it is rational to believe in God. It deals with two objective but unknown possibilities—God exists or he doesn’t—and two subjective ones—you believe or you don’t. Since these are independent variables, we end up with four possibilities: Salvation, Damnation, Unexpected Mortality, Expected Mortality. To make things simpler, we can draw out the possible results on a chart.

According to Pascal, this demonstrates the rationality of believing in God. To put it in financial terms, with all other things being neutral, the expected value of believing in God is far greater than the expected value of not believing in God.
What does this have to do with News Corp, Murdoch and the Wall Street Journal? Well, the question of whether Rupert Murdoch intends to preserve the newspaper’s journalistic integrity in part depends, as Salmon indicated, on whether he thinks it is valuable. (As we already agreed, he’s not acquiring the Journal in order to destroy it.) But let’s say Murdoch isn’t quite certain about whether journalistic integrity is valuable. In that case, he’s in a similar position to Pascal wondering about whether he should believe in God. Once again we have two objective and unknown possibilities—Integrity is valuable or integrity isn’t—and two subjective ones—Rupert believes integrity is valuable or he doesn’t. And once again, we end up with four possibilities: Preservation, Damnation, Unexpected Mortality, Expected Mortality.

Once again, it’s clearly obvious that the expected value of believing in the value of journalist integrity or editorial independence is far higher than the expected value of not believing it. So if Murdoch is thinking rationally, he’ll want to live up to the promises he’s been making about the Wall Street Journal.
Unfortunately, we can’t read Murdoch’s mind. We know which choice he should make—and why the friends of the Wall Street Journal should trust him—but we don’t know what he really believes. Perhaps he is irrational. Or he is certain one way or the other. Or he just doesn’t know enough about Pascal’s wager to understand how the game is played.
The friends of the Wall Street Journal find themselves in a position of uncertainty. And this calls for another wager, which we’ll call the “Bancroft’s wager.” Here we are going to look at the possible results—and weigh the expected value—of the choices of the Bancrofts. The two objective but unknown possibilities are that Murdoch believes in journalistic integrity for the Journal and that he doesn’t. The subjective ones are that the Bancrofts (or the newsroom staff, Ottaways, Pulitzer folks from China, or whoever) believe that Murdoch believes and that they believe he doesn’t.

The results, as you can see, are a lot different in this wager than in the previous ones. Whereas it is clearly rational for Murdoch to act as if integrity at the Wall Street Journal is valuable, it is also clearly rational for the Bancrofts not to trust him to act that way. Trusting Murdoch yields even chances for salvation and damnation, while mistrusting him guarantees preserving the journal from damnation at his hands.
So now we can understand why everyone's perfectly rational decisions have can lead to the odd consequence of Murdoch planning to preserve the integrity of the Journal, those opposition refusing to believe him, and no foreseeable way out the dilemma.
* Of course, whether or not a result that leaves the newspaper under the control of the Bancrofts should count as “salvation” is at least open for debate. Many have suggested that the newspaper may be doomed to a slow deterioration under the Bancrofts, who can’t afford to infuse the enterprise with the new money that Murdoch has promised. If they are right, well then the two boxes that assume “Salvation” results from mistrusting Murdoch may need to be re-labeled “damnation.” Which would make trusting Murdoch that only possibility of salvation. But that’s a whole other kind of analysis.