Summary: Disclosure of conflicts of interest isn’t enough, in fact in may make matter worse. But conflicts of interest may also be inevitable. Integrity is what matters, but that’s hard to measure.

Disclosure: I work for SiliconAngle, a TechCrunch competitor.

I love transparency. I think it’s an important for governments, and institutions like the press, to be as transparent as reasonably possible. I also agree with Jay Rosen that if the “view from nowhere” – the faux-objectivity of the mainstream press – were replaced by “this is where I’m coming from” we’d all be better off. Everyone has biases, and it’s better to get those out of the way than to pretend they don’t exist.

But transparency isn’t a cure-all.

In the debate over Michael Arrington’s “Crunch” branded venture capital fund, many suggest that Arrington if discloses to his potential conflicts of interest, and therefore his biases, that will be good enough. In fact, that might be better than pretending to be objective. But is this the case?

A Little Background

Long story short: Michael Arrington founded the popular tech blog TechCrunch. Other people also write for it, full time. Last year AOL bought TechCrunch. A few months ago Arrington announced he would start making some investments in the same sorts of tech startups that TechCrunch covers. And last week the CrunchFund was announced – a venture capital fund run by Arrington and backed by AOL among others. Arrianna Huffington, who has managed content at AOL since the Huffington Post was acquired, balked at the idea of Arrington staying on as co-editor and contributor at TechCrunch while also running a VC fund. Arrington has apparently been fired, but I’d advise checking Google News and Techmeme for updates, as that may no longer be the case.

Not many people, at least in the articles I’ve seen, point out that another prominent tech blog, Om Malik, also balances tech investing with journalism. Malik is a partner at True Ventures and GigaOM. GigaOM is also funded by True Ventures. Whenever GigaOM covers a True Venture backed company, or a competitor of a True Venture backed company, the article will carry a disclosure along these lines: “Company X is backed by True Ventures, a venture capital firm that is an investor in the parent company of this blog, Giga Omni Media. Om Malik, founder of Giga Omni Media, is also a venture partner at True.”

There’s at least one big difference between True Ventures and CrunchFund, however. The CrunchFund is seeded by several other VCs – it’s practically a who’s who of Silicon Valley funders: Sequoia Capital, Redpoint Ventures, Kleiner Perkins, Greylock Partners, Austin Ventures, Accel Partners, Benchmark Capital, Andreessen Horowitz, Kevin Rose, Yuri Milner and Ron Conway.

That means that Arrington could have more complicated conflicts of interest – he won’t just be investing in companies, he’ll be receiving capital from other VCs which have their own sets of investments.

The Trouble with Disclosure

As Arrington pointed out a while back there are many different types of conflict of interest. For example, Kara Swisher of AllThingsD is married to a Google executive, a fact she is consistent about disclosing. But is this more of a conflict of interest than investing in companies?

And as TechCrunch writer MG Siegler writes in the comments of that post, it isn’t always feasible to disclose everything:

How many tweets by investors making conflicted statements are ever disclosed? Very few, if any. Should they be? Why is that any different than a blog post? Because it’s shorter? That doesn’t really make a lot of sense.

Granted, it would be pretty impossible to regularly do this with Twitter’s 140 character limit, but maybe a follow up tweet should be used? Annotations? But if we start doing that, how far does this have to go?

Does Disclosure Make Things Worse?

At least one study has found that disclosing conflicts of interest leads to worse behavior and worse decisions. That’s only one study, but it should call into question the assumption that transparency, even if it could be achieved, is a cure all. But, given that at the very least almost every professional journalism outfit at the very least has sponsors, no one is free of conflicts, even if all the writers are single, have no friends and no investments.

A Matter of Integrity

One reason I think few people bring up Malik with regards to Arrington’s situation is that, in general, people trust Malik more. I can’t think of any examples of Malik abusing his position at GigaOM to advantage a company he has invested in. Malik has a history as a journalist for Forbes before starting GigaOM. I really don’t know what his reputation from that period is, but I’m guessing he had a good reputation to get where he is today.

So why don’t people feel the same way about Arrington? I can think of one particularly uncomfortable post from Arrington: his post about Flickr and Hunch founder Caterina Fake. Arrington told her he was planning a story about her next startup, and instead of replying to Arrington’s e-mail, she went direct on her own blog. In essence, scooping him on her own story. Arrington lashed out.

Gizmodo’s Mat Honan writes:

Explicitly, it’s clear what he’s saying: If you, Mr. or Ms. Startup founder, don’t play ball with us, we will fuck you over. But the implicit stuff is more insidious to me.

Arrington is acting as if he’s above the mudslinging by not revealing details. But the problem with that stance is that had he not brought up the “sordid situation,” how would anyone have even known there was mud to be slung? Thanks to his word choice (“sordid”) it comes across as old-school slut shaming. Merely by revealing that there is some unspecified scandal, he’s already doing damage to her reputation, even while acting as if he is taking the moral high ground.

And in the act of saying he won’t write about the details, he slyly is letting Fake know that he could. I would take that as an implied threat.

He’s also recently threatened the New York Times.

So yes, Arrington has crossed the line at least a couple times. However, I haven’t seen any evidence of pay for play, or of him black listing companies or anything like that. For the most part I think he gets a lot more flak than he’s earned. And had Arrington not been fired, I don’t think the CrunchFund would have changed much. Arrington’s integrity, or lack thereof, is independent of these potential conflicts.

Update: Former TechCrunch writer Duncan Riley writes that Arrington does indeed maintain a blacklist and play favorites on TechCrunch:

At TechCrunch, Arrington lets you believe you are picking your own posts (and sometimes you do.) But there are other things that don’t quite fit the model. At TechCrunch, it’s made very clear who you are allowed to write about, and not write about. For example, companies that appeared at rival conferences to TechCrunch 50 (now TechCrunch Disrupt) were off limits. I was often given suggestions by Arrington to write about companies based on his friendships, or people who were friendly to him (and at times sponsors.)

Siegler repeats the classic Arrington line that sometimes we criticize our “friends,” but that’s all part of the show. It is, and always has been the veil of legitimacy TechCrunch has traded on. But I know that at my time at TechCrunch, biting friends was only ever ordered, and only when what they were doing was so blatantly bad it needed calling out. I think any time TechCrunch has written a negative post about Loic Le Meur is a classic example. Kevin Rose was never a TechCrunch friend as I saw it, so it’s a touch weird at Siegler brings him up. Robert Scoble is the classic example: Arrington and Scoble were the best of frenimies: one day we’d be backing him, and the next day we’d be putting in the boot. But the orders as to which way we wrote about Scoble always came from the top.

The reality is, as it always has been, is that TechCrunch has traded off favors and back scratching. TechCrunch has always barred or banned people, startups or sites it doesn’t like (for example, we could steal a story from Mashable but NEVER attribute it.) Siegler can scream editorial independence from the rooftop, and maybe he won’t write about a company he really doesn’t like (I hope that I never did) but likewise I’d bet money that he’s written about many a company that Arrington has recommended to him.

Furthermore, it’s entirely possible for writers without any pre-existing conflicts of interest to abuse their positions or otherwise behave unethically.

What Is To Be Done?

Unfortunately, “integrity” is a hard thing to enforce on the Internet. Companies can fire writers and editors, but those individuals can always start new blogs if they can’t find established venues. If this whole this whole thing had happened while TechCrunch was still independent, there would have been no one to fire Arrington. There’s nothing stopping, say, Pete Cashmore from starting a “MashFund” at this point.

I’d like to think that the market would punish deeply unethical writers, but in these days of tabloidification I’m not sure.

One thing I can say is that it’s more important than ever now to call out unethical journalism. Naming and shaming is the best strategy we have right now.