The rush to be first in business journalism

James Surowiecki of the New Yorker writes about the Dow Jones story last week that falsely reported about General Electric’s outlook for 2009, causing its stock to fall, before the story was corrected.

Surowiecki writes, “And it’s a massive move when you consider that the story itself sounded, from the start, improbable. Why, after all, would Immelt have issued that kind of forecast at the end of the trading day? And why would he have felt the need to issue a new, massively downbeat forecast for 2009 when the future remains so uncertain? The answer, of course, is that he wouldn’t. But in this market, traders don’t believe they have the time to wait. When news breaks, they have to act.

“The second and more important point is that this is yet another example of how the cult of the scoop—of making sure your story crosses the wire five minutes ahead of your competitor’s—in business journalism can wreak amazing havoc. Someone at Dow Jones should have paused and asked whether or not this story was really plausible before putting it out there. But if true, it would have been huge, market-moving news, and for the newswires—D.J. and Bloomberg—being able to move markets is central to their business: if you’re in the market, you need to subscribe to these wires because otherwise you’ll be behind the information curve. So the story was published. And it did, in fact, move the market. Job well done.”

Read more here.