When Markets Go Bad

This piece by Malcolm Gladwell is an interesting look at Enron. Gladwell makes the point that it wasn't a Wall Street player that figured out that Enron was a dud, it was a newspaper reporter.

The idea behind free markets is, in part, that you give people massive incentives to get something right and they work very hard to get it right. You need to have these very generous incentives because people will work very hard to attain them. Gladwell writes:

"Reporters were, a group who—at least in theory—you’d think were in the least advantageous position. They aren’t partial to the proceedings. They have no money at stake. (Compared to their Wall Street counterparts, in fact, they barely make any money at all.) They aren’t (relatively speaking) as well-trained as financial intermediaries. They have to serve a general audience, which disposes them against highly technical examination. There are real limits on how much space and time they can devote to a particular story, and their rewards for doing well are almost entirely internal and professional: good reporters are rewarded, largely, by having their status elevated among other reporters. On Wall Street, seeing truth gets you a million dollar bonus. At a newspaper, it gets you a slap on the back."

But why, in this case, did a lowly reporter break this story ahead of the hedge fund types and whoever else is paid millions to know everything about the market?