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The Bloomberg 'snooping scandal' is completely overblown The Bloomberg 'snooping scandal' is completely overblown
(4 months later)
Bloomberg News has been accused of violating the privacy of its users by collecting their personal contact information and usage practices to fuel its stream of financial news. After a few days of controversy, the news company has backed down, calling its practices both, in origin, "as old as Bloomberg itself" and, in the present day, "inexcusable".Bloomberg News has been accused of violating the privacy of its users by collecting their personal contact information and usage practices to fuel its stream of financial news. After a few days of controversy, the news company has backed down, calling its practices both, in origin, "as old as Bloomberg itself" and, in the present day, "inexcusable".
The reaction from Wall Street traders is more often along the lines of "meh". One trader, as an example, noted, "[The journalists] are doing functions that any other Bloomberg users would do." Few people predict that any users will leave Bloomberg over this.The reaction from Wall Street traders is more often along the lines of "meh". One trader, as an example, noted, "[The journalists] are doing functions that any other Bloomberg users would do." Few people predict that any users will leave Bloomberg over this.
Still, among the chattering classes, as far as journalism stories go, this seems like a juicy one. Bloomberg is an industry leader in financial news and its consistent scoops are the frustration of rivals like Dow Jones and Reuters who struggle to lure financial clients in the same way that Bloomberg does, lining up nearly all of Wall Street to pay $20,000 a year for each of its trading terminals. Its rivals haven't succeeded nearly as well.Still, among the chattering classes, as far as journalism stories go, this seems like a juicy one. Bloomberg is an industry leader in financial news and its consistent scoops are the frustration of rivals like Dow Jones and Reuters who struggle to lure financial clients in the same way that Bloomberg does, lining up nearly all of Wall Street to pay $20,000 a year for each of its trading terminals. Its rivals haven't succeeded nearly as well.
Bloomberg is also, importantly, something of a frustration to financial firms, whose public relations teams delight in complaining about the aggressiveness of Bloomberg reporters, including Goldman Sachs. Bloomberg has also moved onto the turf of some of these financial firms, providing research and opinion that can often compete with the daily punditry that those firms sell. It also has a service, Bloomberg Tradebook, that acts as a broker for trades.Bloomberg is also, importantly, something of a frustration to financial firms, whose public relations teams delight in complaining about the aggressiveness of Bloomberg reporters, including Goldman Sachs. Bloomberg has also moved onto the turf of some of these financial firms, providing research and opinion that can often compete with the daily punditry that those firms sell. It also has a service, Bloomberg Tradebook, that acts as a broker for trades.
It is the height of irony that those financial firms, who make their living by collecting and slicing data on client trades, are complaining that Bloomberg was making use of some data on their traders.It is the height of irony that those financial firms, who make their living by collecting and slicing data on client trades, are complaining that Bloomberg was making use of some data on their traders.
So what did Bloomberg reporters do? Reporters allegedly had enough access to see a client's contact information, and the last time they logged into a Bloomberg terminal. This could, in turn, allow them to call sources at home or suspect that an important Wall Street figure had been fired.So what did Bloomberg reporters do? Reporters allegedly had enough access to see a client's contact information, and the last time they logged into a Bloomberg terminal. This could, in turn, allow them to call sources at home or suspect that an important Wall Street figure had been fired.
To a consumer, this seems like a violation. Many of us are able to conduct our lives with little realization of how much Big Data has on us, and that's a good thing: if we knew how much information we were giving away, we may end up too paralyzed to do much of anything at all.To a consumer, this seems like a violation. Many of us are able to conduct our lives with little realization of how much Big Data has on us, and that's a good thing: if we knew how much information we were giving away, we may end up too paralyzed to do much of anything at all.
Yet we know, on some level, that our privacy is an illusion. Facebook collects your searches, as you tap in the names of everyone from frenemies to exes; Google tracks your YouTube viewing to trace every cat video that crosses your screen; when you give your zip code to a cashier, you're actually giving his company the path to your home address and personal mailbox. Your phone calls are at the disposal of the federal government as are your emails.Yet we know, on some level, that our privacy is an illusion. Facebook collects your searches, as you tap in the names of everyone from frenemies to exes; Google tracks your YouTube viewing to trace every cat video that crosses your screen; when you give your zip code to a cashier, you're actually giving his company the path to your home address and personal mailbox. Your phone calls are at the disposal of the federal government as are your emails.
On Wall Street, this scrutiny is magnified. The "data" aspect of Wall Street is married to its "social" aspect. In simple terms, this means two things: the first is that people talk, and will always talk, no matter what regulators do to prevent them. Talking is a way of getting information, both on Wall Street and in reporting. The second aspect is that the goal of working in finance is to amass as much information as possible and then use it to make money.

It's hard out there for investors. In a world where 85% of hedge funds and 65% of mutual funds underperform the market, data – and talk – provides an edge. The ability to collect and slice data is what makes financial companies useful to their clients. This data can come in the form of research, or it can come through an analysis of trading activity.		On Wall Street, this scrutiny is magnified. The "data" aspect of Wall Street is married to its "social" aspect. In simple terms, this means two things: the first is that people talk, and will always talk, no matter what regulators do to prevent them. Talking is a way of getting information, both on Wall Street and in reporting. The second aspect is that the goal of working in finance is to amass as much information as possible and then use it to make money.

It's hard out there for investors. In a world where 85% of hedge funds and 65% of mutual funds underperform the market, data – and talk – provides an edge. The ability to collect and slice data is what makes financial companies useful to their clients. This data can come in the form of research, or it can come through an analysis of trading activity.
But many at Bloomberg didn't feel as if they were doing anything particularly wrong when they were, in the company's lingo, "harnessing the power of the terminal". In this sense, Bloomberg reporters acted like traders – albeit traders of information rather than stocks or bonds.But many at Bloomberg didn't feel as if they were doing anything particularly wrong when they were, in the company's lingo, "harnessing the power of the terminal". In this sense, Bloomberg reporters acted like traders – albeit traders of information rather than stocks or bonds.
So it's important to separate some key points, around this: were Bloomberg reporters illegally or unethically using the information available to them? And if so, did it drive their journalism? What is the pragmatic effect of the terminal quasi-scandal?So it's important to separate some key points, around this: were Bloomberg reporters illegally or unethically using the information available to them? And if so, did it drive their journalism? What is the pragmatic effect of the terminal quasi-scandal?
On the first point, there seems to be no evidence of unethical behavior from reporters, at least. It's easy to see that if the information was made available to Bloomberg reporters as part of their work tools, they wouldn't question its use. Wall Street, which uses every available bit of information itself, understands this. As one Wall Street trader put it to me: "it's not difficult to understand why someone with access to that information would use it. Bloomberg captures everything."On the first point, there seems to be no evidence of unethical behavior from reporters, at least. It's easy to see that if the information was made available to Bloomberg reporters as part of their work tools, they wouldn't question its use. Wall Street, which uses every available bit of information itself, understands this. As one Wall Street trader put it to me: "it's not difficult to understand why someone with access to that information would use it. Bloomberg captures everything."
On the second point – that of driving journalism – it's likely that the claims of a Bloombergian information monopoly are highly overblown. Any decent financial reporter would be dubious that Bloomberg reporters could have gained much high-quality journalism from the terminal alone. There's no evidence that really valuable scoops – such as those on mergers and acquisitions – could have come from mining terminal information. Despite the hype, the information available from the terminal was poor relative to what a reporter would need to actually construct any kind of useful story. It could provide leads, perhaps, but not replace the hard work of reporting.On the second point – that of driving journalism – it's likely that the claims of a Bloombergian information monopoly are highly overblown. Any decent financial reporter would be dubious that Bloomberg reporters could have gained much high-quality journalism from the terminal alone. There's no evidence that really valuable scoops – such as those on mergers and acquisitions – could have come from mining terminal information. Despite the hype, the information available from the terminal was poor relative to what a reporter would need to actually construct any kind of useful story. It could provide leads, perhaps, but not replace the hard work of reporting.
Bloomberg's genuinely award-winning journalistic work – on health reform and other issues – was based on shoe-leather reporting and did not and could not have come through mining the terminal. Amusingly, JP Morgan complained that Bloomberg reporters used terminal information to judge that some traders had been let go after the London Whale debacle. Bloomberg also first reported that the multibillion-dollar London Whale trade even existed, which is a much bigger and more important story, and was clearly not information that could be gathered from a terminal.Bloomberg's genuinely award-winning journalistic work – on health reform and other issues – was based on shoe-leather reporting and did not and could not have come through mining the terminal. Amusingly, JP Morgan complained that Bloomberg reporters used terminal information to judge that some traders had been let go after the London Whale debacle. Bloomberg also first reported that the multibillion-dollar London Whale trade even existed, which is a much bigger and more important story, and was clearly not information that could be gathered from a terminal.
So why did Bloomberg apologize? The key was in Winkler's message about the "appearance of impropriety". Bloomberg started out as a sales business, with a small sideline in news. Winkler joined to create a full-fledged news business, and Bloomberg, over the past five years, has transitioned to embracing a full news operation complete with veterans from The Wall Street Journal and the New York Times. For a sales business, access to customer information is essential. For a news business, it looks like prying.So why did Bloomberg apologize? The key was in Winkler's message about the "appearance of impropriety". Bloomberg started out as a sales business, with a small sideline in news. Winkler joined to create a full-fledged news business, and Bloomberg, over the past five years, has transitioned to embracing a full news operation complete with veterans from The Wall Street Journal and the New York Times. For a sales business, access to customer information is essential. For a news business, it looks like prying.
Bloomberg is, however, above all a data company. There is something that Bloomberg does differently than news organizations.Bloomberg is, however, above all a data company. There is something that Bloomberg does differently than news organizations.
Customers of Bloomberg sign up specifically to make money by trading. They know they are living in a Big Data world, where their usage is tracked, because they use the Bloomberg terminal for just that purpose: to track the markets and each other. They are endlessly interested in obscure uses of the terminal. Every month, Bloomberg Markets, the company's magazine for the financial industry, includes features on little-known terminal commands. Bloomberg mines every kind of data, and that is why customers are willing to fork over the money for a terminal. They also know that they themselves become a kind of Soylent Green to provide data to others. This is largely fine to them because Bloomberg cannot interfere with their trades. Banks have far more to fear from the prying of other financial companies than they do from any data provider.Customers of Bloomberg sign up specifically to make money by trading. They know they are living in a Big Data world, where their usage is tracked, because they use the Bloomberg terminal for just that purpose: to track the markets and each other. They are endlessly interested in obscure uses of the terminal. Every month, Bloomberg Markets, the company's magazine for the financial industry, includes features on little-known terminal commands. Bloomberg mines every kind of data, and that is why customers are willing to fork over the money for a terminal. They also know that they themselves become a kind of Soylent Green to provide data to others. This is largely fine to them because Bloomberg cannot interfere with their trades. Banks have far more to fear from the prying of other financial companies than they do from any data provider.
Then there is the other aspect: the social one.Then there is the other aspect: the social one.
What makes the terminals so popular on Wall Street is not just their comprehensive data, but their social value. The Bloomberg terminal is like the Facebook of Wall Street; a social tool that connects the financial world. The trading terminal has one major advantage: Bloomberg Instant, a widely popular chat/messaging system that Bloomberg sells as instant access to important people, and logs 200m messages – or 15m to 20m chats a day among 310,000 subscribers. Here's the ad copy on it, which gives you a sense of what Bloomberg is really selling through its terminals: influence.What makes the terminals so popular on Wall Street is not just their comprehensive data, but their social value. The Bloomberg terminal is like the Facebook of Wall Street; a social tool that connects the financial world. The trading terminal has one major advantage: Bloomberg Instant, a widely popular chat/messaging system that Bloomberg sells as instant access to important people, and logs 200m messages – or 15m to 20m chats a day among 310,000 subscribers. Here's the ad copy on it, which gives you a sense of what Bloomberg is really selling through its terminals: influence.
"Your Bloomberg Professional service account gives you immediate membership in a community of 310,000 of the world's most influential decision makers. We connect you with this robust network spanning finance, business and government – for a distinct advantage when generating ideas, conducting research and finding trading partners.""Your Bloomberg Professional service account gives you immediate membership in a community of 310,000 of the world's most influential decision makers. We connect you with this robust network spanning finance, business and government – for a distinct advantage when generating ideas, conducting research and finding trading partners."
Bloomberg reporters, as well as Bloomberg clients, could make use of chat. Because of this, it's easy to see why Bloomberg reporters would use login or contact information: because largely, they understood the terminal as a social tool as well as an analytical one. If Facebook tells you the last time your friends logged in, why is it wrong for a Bloomberg terminal to tell you when your contacts last logged in? Many would say it is not.Bloomberg reporters, as well as Bloomberg clients, could make use of chat. Because of this, it's easy to see why Bloomberg reporters would use login or contact information: because largely, they understood the terminal as a social tool as well as an analytical one. If Facebook tells you the last time your friends logged in, why is it wrong for a Bloomberg terminal to tell you when your contacts last logged in? Many would say it is not.
Either way, it is unlikely that this quasi-scandal, while it keeps media pundits busy, will ever really impact Bloomberg's business.
Wall Street never stops doing business with you because you know too much; in fact, it's quite the opposite. The more you know, the more like the all-knowing Borg that you seem, the more people will flock to your door hoping to get some of the information you hold. This is why Goldman Sachs' "vampire squid" years, in which it became famous for knowing everything about every business, only helped the firm's profits.		Either way, it is unlikely that this quasi-scandal, while it keeps media pundits busy, will ever really impact Bloomberg's business.
Wall Street never stops doing business with you because you know too much; in fact, it's quite the opposite. The more you know, the more like the all-knowing Borg that you seem, the more people will flock to your door hoping to get some of the information you hold. This is why Goldman Sachs' "vampire squid" years, in which it became famous for knowing everything about every business, only helped the firm's profits.
Bloomberg has made its service an inevitability on Wall Street; and if its rivals are honest, they will admit that they are kicking themselves for not having done the same.Bloomberg has made its service an inevitability on Wall Street; and if its rivals are honest, they will admit that they are kicking themselves for not having done the same.
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