The Overpaid Jokers at

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I've metCramer twice now, and I don't know, I kind of like him. It's true he's not asuave Master of the Universe type?he plays up his Jersey-by-way-of-Philly bumpkinside, the rumpled shirts, the wife and kids back home, the humble offices ofhis Wall St. hedge fund Cramer, Berkowitz & Co. It's true he's an odd combo,part media guy (he edited the Crimson at Harvard, worked as a daily newspaperreporter for a while, became a financial columnist, which he still does at,tv talking?often shouting?head), part stock maven who's been investing, as hislegend has it, since grade school. Yes, there was some boilerplate and someshtick in the interview, but a lot of people who are getting interviewed toomuch fall into that. And, yes, the image he's parading lately?poor, aggrievedJimmy Cramer, feelings terribly bruised by all the beatings he's taken in themedia?wears awfully thin when you remind yourself he's worth tens of millionsof dollars now. That buys a lot of hankies.

I met withhim and Dave Kansas, the 32-year-old editor-in-chief at Kansas,who also made paper millions from the IPO, had been a reporter at TheWall Street Journal for five years when Cramer came calling. Althoughhe's as quiet as Cramer is loud, they seem a good match, both workaholics, both"new media" boosters. Regarding Kansas, even among envious colleaguesthe consensus has been it couldn't have happened to, etc. Although it has lostmoney each year since 1996, despite a large infusion of venture capital in '98and the larger bundle from the recent public stock offering, hasgrown to where it has, Kansas says, a staff of 150, including 65 people full-timeon the editorial side, with branches here and on the West Coast and a few deskscovering overseas markets. Plus new linkages online (a new partnership withSalon) and on tv (the new show on Fox).

You're bothjournalists, but nobody ever asks you journalism questions. They just want toknow about your money.

JC: I surewish they would. I'm so much more interested in that. You'd be the first. Daveand I have struggled mightily since 1996 to explain to people that what we weretrying to do was create a better form, a more interesting, more compelling,more accurate, more accountable, more hard-hitting form of journalism. And noone has ever point-blank asked us, 'Were you in it for the money?' 'Cause ifthey had, they would have known that for three years that was comical. I'veread seven months' worth of what a creep I am because we made some money, andwe haven't made any money, and I thought what we'd done before that was prettygood. The IPO really took away a lot of the excitement of what I regard as whatwe're doing.

Come on.

How so?

JC: Becauseit changed the whole focus. It didn't change the focus internally. Dave is thefocus internally. Dave knows that the focus is good editorial. I feel grievedby the IPO. When I think about the IPO I think about [the cover illustrationof] the big puffed-up head of mine in The New York Observer [andan article] saying I'm worth $200 million. It makes me sick.

You writefor them. I thought you were buddies with [editor] Peter Kaplan.

JC: I'mbuddies, I'm buddies, it doesn't matter. People make fun of buddies in thisworld. I just wish people had looked at what we've accomplished. Who sets upa newsroom anymore? We're like the first bona fide employer of journalists inAmerica since like P.M., and the crap we get is that we're swashbucklingopportunists.

DK: I thinkit's entertaining to watch people react to what we've done. We've worked reallyhard for three years to build something from scratch, basically. Before we werepublic everyone pissed all over us. (Cramer laughs) Now we go public and everyone'slike, "They're too successful." Overnight we went from being the jokersto the overpaid jokers.

JC: Thisis a capitalist country. People perceive us as winners, whether we've cashedout or not. I think that's nice. It's great to be alive in the 90s. But it'snot what this is about. It tends to be brought up particularly by people who'venever read

DK: Peoplewho are critical of us, it's always the same thing in different clothing, differenttimes: How dare some organization come and ruin the status quo. Whether it'sWall Street brokers or The New York Times. I mean, TheNew York Times is our partner [the Times, and Rupert Murdoch'sNews Corp., both made significant investments in], and in TheNew York Times Magazine Max Frankel writes on Sunday that we're justa bunch of "buzz merchants." You know, Max Frankel thinks that televisionshould not have been invented. And another thing, he's writing in TheNew York Times Magazine, which ran a big article on Kubrick, and?shockingly!?there'sall these big ads for...Kubrick's new movie.

JC: Buzzmerchant. I don't despise the ground that the Tina Browns walk on, but I'm notgoing to be at the Statue of Liberty [for Tina's Talk party]. If I wereinvited I wouldn't go, but I won't be, because I'm a schlubby guy who goes hometo his wife and kids in New Jersey. To be a buzz merchant repulses me.

You're noton the invitation list? Multimillionaire media personality? You're a celebrity.(Kansas laughs) You've written that you think she should have started up talk.cominstead of Talk.

JC: Definitely.It's perfect for the Net. Short pieces that have very little shelf life.

DK: Chatter.

JC: It makesno sense to do Talk. It's silly. It's a big waste of money and trees.

DK: (grinning)We're all environmentalists here.

JC: Butthat's a different world over there. That's a world that's based on a levelof glamour that I am not comfortable with.

Is it trulynew media versus old media?

JC: It'sactually worse than that. Old media is a group of [editorial] guys sitting aroundpissing on the business side, because the people on the business side, who aremaking three times as much, they play a lot of golf, they go golfing a lot,and not only that, I don't know if I've mentioned that they golf. The journalistswork really hard, and they're the "content," but their lot in lifeis to be really miserable while the other guys go to Canoe Brook or Wing Footand Piping Rock. That's old media. And the reason it works like that is becausemost of old media is designed to bring it to your door. It ships here and thenit ships there and then it's bundled here and then it's boxed there and thenit's unboxed here and then it's unbundled there and then it's delivered to youby hand, or maybe it's postal. Like diapers were done before Pampers, like milkbefore the supermarket. That's the way it is.

New media,content is everything. The people who write the content get paid. I can tellyou from my Communist days, Marx and Engels make a lot more sense in understandingold versus the new media than Adam Smith does...because the old media guys areso liking their chains. I find them looking at us and saying, "Look atthose stupid free people making that money. Those morons. Don't they know theyshould be in fetters watching the business side play golf?" Stalin saidthe peasants truly like their chains.

Then whyare they investing in you?

DK: That'sthe business side. The business side is getting wise. These big media companiesare trying to figure out how to play in the new space. They laughed at Internetjournalism for a long time. It's like Bloomberg. They figured they'd ignorehim and he'd go away. Well, they ignored him and he put Dow Jones right outof business, basically. All the media did that with new media on the large scale,They ignored it, ignored it, ignored it, and now it's not going to go away.

JC: Intel,Cisco, Motorola, Lucent, Microsoft?these are powerful companies. Versus Knight-Ridder,Gannett, New York Times, Washington Post?these are not powerful companies. Themarket capitalization of Intel, Microsoft, Cisco is dependent upon newspapersgoing out of business. Those guys are vicious competitors, and if they haveto put newspapers out of business, they will. And we will be the beneficiary.

There doesseem to be a fair amount of envy among other journalists who aren't suddenlymillionaires like you two.

JC: Youknow, when I started this I said, for the first time in my life, after making...[He pulls out his wallet, fishes in it, removes a very old, crumpled, torn paycheckstub.] I always look at this to remind me of the proletariat days. You takea look at what I made at the Tallahassee Democrat, which was $240?butlook, that's with four hours overtime?so that's 200 bucks a week.

How oldis that paystub?

JC (examinesit): This is from 3/15/78. This is the salad days.

You weremaking $7.50 an hour.

JC: Youbet I was. And I said, "You know what? I'm gonna devise a business modelso that this never happens again." I wanted the journalists all to havean equal stake in the business.

How manyof the 65 people in editorial have a piece of the company?

DK: Everybody.

So everybodymade something.

DK: Oh yeah.Due to the technicalities of IPOs it's locked up for six months?

JC: Buteverybody got stock... And not like The Wall Street Journal, whereeverybody got like 57 shares... But everything gets lost in the translationto my blown-up head on the cover of the Observer.

And whatwas up with that Suzanna Andrews piece in the June Vanity Fair?

JC: Thatwas bad. Sheesh.

You and[editor] Graydon Carter aren't buddies? Not through Kurt [Andersen]?

JC: I'venever met Graydon Carter. No, that was a skein of bad luck, bad press.

You reallydid get a run of terrible articles.

JC: Thatwasn't just a pothole, that was the old Miller Highway before they tore it down.That was nasty.

Still, youcan't feel that bad, given the way things have turned out for you. Some badpress, so what?

JC: No,but I would lie to you if I told you that I am so tough... If I were an actorand I got these terrible reviews it would crush me... I read that [VanityFair piece] and it was, "He's a hack. He's a hack. He's a hack. Well,people say he's despicable, but he's really just a hack." And you know,I spent my whole life trying not to be a hack. That's the essence of why I getup at 3 in the morning and work till 11 at night. Everybody in my family tellsme I work too hard and I'm like, listen, I never wanna be a hack, never wannabe a hack, never wanna be a hack. Didn't want to be a hack in high school, college,law school, American Lawyer, Goldman Sachs, blah blah blah. And thereit is, the 8000-word Cramer is a Hack. There's no coming back from that. Itstung. Let's find the meanest thing we can call Cramer. Let's call him a hack...I did love that blind quote, "He's despicable, but he loves his wife."... The Jim Cramer as Goebbels thing was kind of disappointing. You know, heis not Himmler, he is Goebbels. That was okay. Thank you very much, GraydonCarter. I'm glad you managed to pin me down...

My friendMarty [Peretz] was portrayed as being my enemy. I've only talked to him likea billion times since the article.

Really?I came away from that article thinking you guys were over, finished, kaput.

JC: (toKansas) I've spoken to him how many times today? As I said to her repeatedlyafter she came to us, "Listen, we patched it up." She was like, "Yeah,uh-huh." I think she'll have to live with that piece for the rest of herlife. I asked the photographer when he called, "What do you think? ShouldI sit for this?" He said, "What, are you kidding? It's a total hatchetjob." I asked the factchecker when she called, "Well, how is it?"She said, "Oh, you don't come out too good." I'm like, this is great.This is a goddamn 18-wheeler coming down the pike. Graydon Carter?I am so notowned by Paramount or Disney, or Tina Brown, or Si, or Morton?I'm so not ownedby that constituency. I'm somebody from Philadelphia, you know? I'm so provinces.I'm so boonies to them that you can run me over with your 18-wheeler and therewon't be a single Barry Diller call to defend me. There won't be a single callfrom the people at the Four Seasons saying why did you do this to my friendJim Cramer. 'Cause those aren't my friends.

Where areyour friends?

JC: My friendsare all out in Summit, NJ, playing with my kids like I should be. My friendsyou will see as I coach soccer in the suburbs. I'm going up against Graydon'steam. He's coaching third grade. He and Liz Smith are co-coaching. With Mort.He's coaching Peewees.

How manysubscribers do you have now?

JC: It'slike McDonald's, millions and millions served.

DK: Surfed.

JC: (laughing)Surfed.

DK: Roughly60,000. We have to be careful what we report, because we're in the [second quarter]earnings period right now.

JC: I usedto talk about this with Kurt Andersen. Like when we were 18,000, he'd say, "Jim,you know..." And I'd say, "But on the Net that's..." And he'dbe like, "Well, you can't use that dog year-people year thing." Butit's a big deal to get people to pay.

DK: Andwe have a great retention rate. Once they convert they stay.

JC: Ourbusiness model is like HBO. You get a premium product on top of your ISP, andpeople don't cancel. They take it and renew...

Everybodywho's free says to us, "When are you going to go free?" And I sayto them, "When are you going to go paid?" We have proved that youcan go paid if you offer 10 times the value. I find that people who want usto go free are already free and desperate to see us fail. We're making too muchmoney paid to go free. It would be a colossal mistake. We think everybody who'ssubsidizing their webs will eventually lose, so much because their website?likeThe Washington Post or The New York Times?is somuch better than the paper. The next generation?and it is a generational thing?likemy daughter doesn't understand why I go down to the end of the drive to getthe paper?and I've cut out two that I was having delivered?when it's on thePC and faster and better. As soon as we have the syntax where you can ask [anonline] paper where the best fireworks are or where the best movies are, I don'tthink the paper document will hold any more weight in the family firmament thanthe cloth diaper does.

(Kansas'cell phones buzzes him. He flips it to his ear.)

JC: Thiscould be Bob Rubin. (to Kansas) Is it Rubin or is it Greenspan?

DK: It'smy mom. (laughter)

Your subscribersare like the ones for The Wall Street Journal's site?they cometo you for the instant, up-to-the-second market figures they don't get fromprint, right?

JC: Sure.You can charge for business. It's much harder to charge for something like?let'stake the case of Slate. If there was a print Slate, I probablywould read it. But I'm used to receiving... (He points over his shoulder ata computer screen scrolling market data) Before there was the Net, I paid tohave an individual pipe come into my place to give me the financial news scrolled.Now I have it, it's just not an individual pipe. There's no difference. It'sjust as fast. But Bloomberg charges you $1500 for what we charge 10 bucks. Insteadof why shouldn't we go free, I think why shouldn't Bloomberg charge 10 bucks?

But thenwhy are people willing to pay so much more?

JC: Becausethey [Bloomberg] have a huge infrastructure and they gotta pay for it.

No, butwhy do their subscribers pay more?

JC: Whywere the dinosaurs so big? Those people haven't seen Fantasia. I knowhow it ends. Hey, they were tough sons of bitches, those dinosaurs, and it tooksome ice ages to bring them down, but they came down.

With allthe capital you've raised, you still lose money, right?

JC: Thedecision to lose money, so to speak, is a decision to be big. There was an articlein Forbes recently about versus us, and it portrayed meas the hare. It was so galling, because it wrapped up all the negative thinkingabout what we're up to. On a revenue base, based on our original business model,we could have been in the black last year. But we'd be nothing, we'd be nobody.

Becauseyou originally planned for smaller staff, fewer expenditures?

JC: Yeah.What did we have in revenues last year, $5 million? Well, $5 million, in myback of the envelope that I did with Marty Peretz back at the start, we'd bemaking money hand over fist. But we'd have no scale. We'd be nothing. We wouldbe?(He pauses theatrically, then he and Kansas say simultaneously)?!(They both laugh) The venture capitalists come in and they say, "Listen,you gotta spend some money." And I said no no no, because I'm a mom andpop guy. And they asked me, "You wanna be big? Or you just want to be asmall newsletter?" And we said, "We want to be as big as you can be."We think we have a template to take over the world here.

Explainto me how could have a market value of $2 billion.

JC: Forone day.

Granted,for that one day [the first day of the IPO, when the stock price skyrocketed220 percent]. But it's still, what, $850 million? Explain that to me. How isthat value calculated?

JC: It'sa present value of something that seems to me very exciting, but I don't wantto engage in hype or say this is what you have to buy right now in order torealize the $50 billion dream Dave and I are concocting in our heads. It's anon-the-come situation. You're betting that we can continue to execute. I cansay broadly, for most Net stocks. was at a billion. Yahoo was ata billion. Those were crazy valuations?if they didn't execute. But they executedand it turned out to be they were cheap.

DK: Thebasic thing is, a Net stock is going down a Montana highway 100 miles per hour.The person is making a bet that they go from point A to B at that speed. Butthe Net case is, a single pebble in the road could change the whole trajectory.So everyone's betting that it's a straight road. It's all on the come.

It wouldseem to me that all you online financial sites started with the advantage thatyour core audience were, as you said, already conditioned to look to the screenfor information.

DK: Butonly 20 percent of our readership is institutional. There's a big chunk of peoplein Texas and Montana and California who are?

JC: We caughta wave of people who decided to take care of their own finances. We should havebeen out of business if people had not adopted a different model of how to runtheir own money. There's no reason for us to exist if the business model whenI worked at Goldman Sachs still existed. It doesn't. People trust themselvesmore than they trust brokers now, and they'd rather trade off news that theybelieve is vetted and written fairly than off of research, which they believeis corrupt and on the take by investment banking.

Which bringsup another complaint that's often written about, that Cramer talks about stocksthat he's got a position in, he's pumping stocks to make himself money?

JC: Oh God,I disclose, I disclose, I disclose... I can't win. People say I shouldn't havea position, but even when I don't have a position I get in trouble. I got introuble for WavePhore [he said on CNBC that speculators were shorting the stock,and the next day the stock price plummeted]. I wasn't shorted. The stock wentfrom 12 to 5, and people accused me of being shorted. There's no way you cantalk about stocks according to some people's rules. If you're long it you can'ttalk about it, if you're short it you can't talk about it, if you're not long,if you're not short?it sounds like we're the North Korean parliament, and that'swhy I live in America and they can all go to North Korea!

DK: Thesepeople who think that only pristine journalists should write about stocks, that'sjust stupid... If you have a philosophical belief that people outside journalismshould not write about the stock market I think that's a severe disservice toinvestors and readers. They don't believe that people inside the arena can provideexpert opinion the way people in politics or sports can? There's a simple answer:Have them all disclose where they're coming from.

JC: We haveboth. We have reporters, who are not allowed to hold any stocks, and we havecommentators like me. When I read a negative article about Skechers by reporterSuzanne Kapner, I don't want to think, "Say, is she short that thing? Isthat why she wrote that?" But if I read a negative commentary about SunMicrosystems by Jim Cramer, and at the bottom [is the disclosure that] he's short it, I can take it with a grain of salt. That's how disclosure works, andthat's why you don't want your reporters either hiding behind it or taking positions.They're supposed to be out there finding the facts. I'm a commentator, for God'ssake.

All right,now I'll ask you about the money. Explain to me how it works. You, Jim, wereworth $200 million the day after the IPO, now it's around $90 million. Dave,you were at $9 million, now it's like $4 million?

JC: Oh God...

I left ittill the end.

DK: Here'sthe deal. We'd have to wait six months. But take Jim Cramer, to sell?he's adirector of the company, he'd have to register with the SEC and say he's sellinghis stock. The truth of the matter is, the value of those shares would be suchif he tried to sell that he can never sell [because if he dumped all his sharesonto the market the value would plummet].

Me, my entirenet worth in the world is with Literally. I have no diversification.Not even a car.

But on paperyou're both filthy rich. Can you borrow against it? Get a mortgage or a carloan?

JC: No.You absolutely cannot. We bought a car last night. A Volkswagen Cabriolet. Verynice. It'll take three weeks. But I wouldn't even bring up the stock. "Couldyou sell that?" No. It's not a factor.

DK: If Iwanted to get an apartment in Manhattan I couldn't. I can't use the stock.

The consensusis that the Net market bubble has burst, that you guys were one of the lastbig winners.

JC: Well,but the market's still very vibrant for Net... There was one today that washuge.... The issue is, if you have a Net company, it's more easily would still get the money. With all that buzz, with that Navy Yardthing? Oh, man, it woulda been so big! Instead, International Paper's the bigwinner. And Harvey Weinstein.

Last question:When's the big market correction coming? The Economist has beenpredicting it for what, a year now?

JC: Yeahwell, and what's their circulation like? It's like Barron's has beenpredicting the big correction since 700, and what are their numbers like? Single-digitgrowth. My take is that you're in a benign environment... I'm not looking foranything big. I could see it going down a couple hundred, 300, 400, 500, butI don't think it's going to be thermonuclear war.

You've writtenthat there's plenty of froth at the top end of the market. Will that be thecorrection?a few hundred points of froth off the top?

JC: Sure,that's the 300 or 400. But it wouldn't even make the front page of TheNew York Times. [pause] Those buzz merchants.

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