Bloomberg's box

His machine owns Wall Street, but the rest of the world has been resistant.


David Carr
April 10, 2001 11:30PM (UTC)

Michael Bloomberg, who built a massive gated community in the financial information business and has $4 billion to show for it, may soon trade his rarefied perch for the chance to run a revenue-hungry New York City in a down cycle. It's odd market timing for a former Salomon Brothers man, but ego is never far away when you're talking about Bloomberg. His desk may be nominally out on the floor, amid his troops on Park Avenue, but it's framed by one of the most lovingly tended walls of fame in all of titandom. If he were the mayor of New York, he'd have dozens more newspaper clips to choose from every day.

Still, Bloomberg's interest in public service is pretty hard-core. He has served on a raft of important boards and has been giving away fistfuls of money from the very beginning of his career. He is a magnificent Alger-esque cliché the American entrepreneur with a single idea so powerful that it laid its own tracks to dominance. But his autonomy in an age of publicly traded, vertically (and horizontally) integrated behemoths has left him unable to grow much beyond providing financial data. And that's not enough for Bloomberg: The real reason he's looking toward the public sector is that he's on the verge of being bored stiff.

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You could tell as much when he appeared in a chat with Charlie Rose at the Reality Bytes Television/Internet conference last month in New York. He was vivid and almost statesmanlike every time he showed a little leg concerning his nascent -- albeit still unannounced -- mayoral campaign. And even though he did a great job of representing the corporate brand, the fiery entrepreneur eager to slay all comers was not much in evidence. "I believe in term limits, not just for people in government, but for everybody," he told the audience.

That's because he won the battle and doesn't have the assets to fight the war. Domestically, his core business is still soaring. Bloomberg L.P.'s terminals -- the first truly convergent devices to provide financial analytics, marketing, value-added news and transactability in one idiosyncratic but user-friendly machine -- cost Dow Jones & Co. hundreds of millions as it invested in a competitor, the black hole formerly known as Telerate. True, in the financial world, the company still competes with global leader Reuters, but it dominates in the U.S., where more than half of its 155,000 terminals are installed. Charging $1,285 per terminal per month, the company has revenues growing at 15 percent per year. They're now approaching $2.3 billion a year, with margins in the high teens. Bloomberg told Rose that the biggest mistake he has made was not hiring enough new people; the company has brought on 1,000 employees over the past year, bringing its workforce to 7,000.

So is Michael Bloomberg fleeing the bear? Not likely. The utility of his terminals goes up as the market becomes more complicated, even though the proprietary "Bloomberg" seems an anomaly in a post-Web age. "Inertia," he told me at the conference, now favors his company. "We are in a business where the bigger my installed base, the more attractive it is to the next customer." That's a truism that has turned his data terminals into a closed loop in the financial community akin to America Online's stranglehold on the consumer market. But just as AOL felt a need to reach out and merge into a multiplatformed future, Bloomberg can't achieve his broader ambitions without selling or merging his company, both of which he says he's loath to do.

He made a good run at it. In order to expand his company -- and keep himself engaged -- Bloomberg decided to build out his media empire back in the early '90s. He now owns and operates a news service with 79 bureaus and 1,000 reporters worldwide; a New York radio station, with attendant nationally distributed financial programming; a slew of magazines, including Bloomberg Personal Finance; and a cable television network. But the media franchise still functions more as a marketing arm for the core business than as a separate enterprise. According to industry sources, 90 percent of the revenues and 95 percent of the profits still come from the low-bandwidth boxes. And an aggregating radio market and an increasingly monolithic cable, broadcast and satellite television industry mean that Bloomberg can't get the kind of carriage that's going to allow him to become anything more than a boutique player in the info-space.

A friend of mine who was also a very successful player as a data provider got out a few years ago when he saw the writing on a very big wall. "After a while, you begin to see that scale is all that's going to matter in the end. You can go very fast and build really smart, but you can't beat scale. I'm sure Mike is frustrated that there are other, bigger companies that control the pipes, but there is really no way to beat them other than joining them."

Thus cornered, Bloomberg appears to be planning his endgame. He has already taken himself off the board of his company; on the dais with Rose, he spoke openly of letting go of operational control as well. He recently reassigned all of his top lieutenants for a month so that they could get a look at different sides of the business and introduce a little controlled chaos into the organization to test-drive his absence. After his presentation, he talked about why Bloomberg the company could survive without Bloomberg the man.

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"If you want to walk out, rather than be carried out, you have to leave at a time when people are saying, How can you walk away? Well, I'm not leaving the company, unless I ran for mayor and won, yes, I suppose. But you have to be willing to turn things over to others."

Of course, no one can kick Bloomberg out of his shop. Merrill Lynch owns 20 percent, and small chunks are divided among the half-dozen people who were involved in the start-up. The rest is his. And that autocratic status brings with it certain risks. Several sexual-harassment suits alleged that working at Bloomberg L.P. combined the least charming attributes of the trading floor and the locker room. And while the relentless work ethic seems normal when you're there, several refugees compare life at Bloomberg to a digital gulag, with constant pressure to produce and update stories for which deadlines are sometimes measured in seconds.

But most of the employees pledge fealty to their "Uncle Mike," and the turnover rate is less than 10 percent. "They turn down the lights during the orientation, and the chip gets embedded pretty deep," says one reporter, by way of explaining her happiness. Walking around one of 22 floors on Park Avenue, it's hard not to be affected by the osmotics of the place. The fish in the gorgeously appointed aquariums in the lobby are not the only species at Bloomberg that have come to see their little world as a beginning and end. Flat hierarchy, ample snacks and good money keep people pounding away deep into the night.

Bloomberg's corporate benevolence gives him levers he would never have in the public sector. He probably can't make a quarter-million municipal employees work harder, and he isn't going to be able to pay them more at a time when tax revenues will likely be declining. The political life means a level of accountability that Bloomberg has never endured. When the boss pops off about this or that at a private company, which Bloomberg is wont to do, there are no public shareholders calling for his head.

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It would be dumb to count him out, because he's made a career out of making his skeptics look like fools. He's a man who, in spite of his bluster, seems to understand his limits and manage around them with surprising deftness. You can bet that he won't run if he doesn't think he can win -- he's not that bored, and a few more things have to fall into place before he becomes convinced. A "Bloomberg" is a have-to-have for financial players because it's as close as you can get to predicting the future. Unfortunately for its creator, there isn't such a device for politics. Bloomberg told the audience that there isn't a single job in business that he wants beyond the one he has, so he can either hunker down or take a flyer. Even though 75 percent of New Yorkers don't even know who he is, look for him to take the Bloomberg brand to the one place -- politics -- where it has little salience.


David Carr

David Carr is editor of Washington City Paper, an alternative newspaper owned by the Chicago Reader, which has competed with Leonard Stern to buy weekly newspapers. He has no stock options that he is aware of.

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