Evan Smith, The Texas Tribune

DAVID STIEPLEMAN: Hello, and welcome to It's Not Magic, a podcast from Sixth Street about business building that strips away the pretense and gets right to the useful stuff. I'm your host, David Stiepleman. We use this show to talk to founders and industry leaders and get them to explain in plain English what they set out to do, and specifically how they do it.

In this episode, we're speaking with the co-founder and CEO of The Texas Tribune, Evan Smith, who alongside his co-founder and venture capitalist, John Thornton, saw a problem, namely the deterioration of local news, and created a solution, a new model for nonpartisan, non-profit journalism, which is now being replicated across the country.

EVAN SMITH: One of the things I've realized over these 13 years is that a lot of people who have great intentions, a lot of them come from the journalism side of journalism, as opposed to the business side of journalism: think that just having a good idea and identifying a need and an unserved audience is enough. It is not. It is the beginning of the conversation.

DAVID STIEPLEMAN: Here's the insane stat. Since 2005, about 2200 of America's local newspapers have gone under. To put that in context, there are about 3000 counties in all of the United States, and when readers consume only national news, they're more polarized and they vote less. Since launching in 2009, The Texas Tribune has raised over 100 million from donors across the political spectrum, including us here at Sixth Street, and has racked up 13 national Edward R. Murrow awards, three general excellence awards from The Online News Association, and a Peabody as well. With the belief that a better-informed public strengthens democracy, Evan set up The Tribune for success with a unique revenue model, top tier reporters, and an unrelenting commitment to foundational values.

In this episode, we'll hear what went right, and what went along the way, and what it's like being a vegetarian New Yorker in Texas for the last 30 years. How did it happen? Why did it work? It's not magic. So, let's find out.

Evan Smith, it's such a pleasure to have you. Thanks for doing this. You led the Texas Monthly Magazine, and you guys won a bunch of national awards. The Washington Post said, “Gee, if local journalism manages to survive, give Evan Smith some credit. You're kind of a legend in journalism. I ran my college newspaper. I feel like we're kind of peers. Do you think that's fair?

EVAN SMITH: Well, I think you've done a little bit better than I have professionally. Listen, I think that we come from the same kind of background and we both really want to do good work in the world. I will tell you that there may be more opportunity to do good work in the world doing what you do than there is doing what I do. Part of the reason that we started The Texas Tribune 13 years ago is because we were alarmed at the lack of good work being done, generally speaking, in the media business. It was a profession in decline. It needed a revival. We've been part of the revival. There's still a lot of work to do.

DAVID STIEPLEMAN: Thanks for going to that moment. I want to talk about that. John Thornton, you should tell us who he is and what that approach was. What was that conversation?

EVAN SMITH: John Thornton's a venture capitalist. He was at one point managing partner then back to lowly general partner of a firm called Austin Ventures, which I know had a significant role to play in investing in early-stage technology software companies here in Austin.

John is a brilliant guy and a public-spirited guy - somebody who made a lot of money, did not have to do anything in the area of helping to revive journalism, but saw an opportunity and a need and came to me. He and I were old personal friends. We'd never worked together, but he came to me at one point in probably 2007. He had been thinking about buying The Austin American Statesman or had investigated on behalf of his firm the idea of The Austin American statesman being acquired - that is, of course, the daily newspaper in Austin. It was owned at the time by the Cox family. It was on the market. They ended up pulling it off the market at the time because they couldn't get the price that they wanted for it, which should have been a tell as they say at the poker tables in Las Vegas.

Thornton came to me and said, “Look, I want to save ‘capital J’ journalism,” by which he meant serious public service journalism. He said, “There's not nearly enough of that in the world. There were fewer places to do it. There were fewer reporters doing it. There's less of an opportunity in the existing media for that kind of stuff to be done. I think we need a new economic model because the for-profit model is not working.” He described it as a market failure. He was absolutely right.

In fact, he didn't know how right he was back in 2007 or 2008. If you fast forward 15 years, you and I are sitting here at the beginning of March, there was a 60 Minutes report on Sunday talking about the decline in local news and how the hedge funds have gotten in the business of buying up these distressed assets and the future on the for-profit side of our business is not bright. John saw that back then and he came to me and said, “I'd like to start something with a nonprofit economic model. And I'd like your help.”

DAVID STIEPLEMAN: Were you already thinking about that? Or were you thinking what is this guy talking about?

EVAN SMITH: I was thinking two things. I was thinking, first of all, we've done the best barbecue restaurants on the cover of Texas Monthly so many times since I got there that I am bored to death. I cannot stare at another piece of brisket on the cover of this magazine ever again.

DAVID STIEPLEMAN: But is Louis Millers your favorite?

EVAN SMITH: I'm going to confess something to you, David, and to the world. I've been a vegetarian since 1984.

DAVID STIEPLEMAN: You could not have said that when you were starting at 1992 at The Texas Monthly Magazine, presumably.

EVAN SMITH: Well, I was quiet about it. I'll say I never lied about it, but I also never wore a sandwich board around and had a bell. I'm a vegetarian, I'm a vegetarian! I will say there's actually one public moment of recognition. Calvin Trillin came down to Austin, the great New Yorker writer, after we pronounced Snow’s Barbecue in Lexington, Texas.

DAVID STIEPLEMAN: He wrote a famous piece.

EVAN SMITH: He wrote a piece. There was a moment where Calvin Trillin and I, and a couple of my colleagues at the magazine, Greg Curtis, the former editor, Steve Harrigan, the great writer and novelist, Paul Berka the political editor - we caravan over to Snow’s and we get in line to get food, and I decline to be served. And Calvin Tillin made a huge deal of this because somebody, maybe Paul Berka, was asked by the server, “Is he not having any?” And Paul Berka said something to the effect of, “Oh, he ate already.” And Calvin Trillin said, “You're embarrassed to admit that your friend is a vegetarian.”

It’s true I never ate that barbecue, but I still knew that as many times as we had done barbecue on the cover, I didn't want to do that again. I had kind of circled the drain at that point. The second thing is I was skeptical of John's idea making as a business. Part of the thing that as I tell the origin story of The Tribune is there was a period of 12 or 15 months where John was trying to convince me to come and join him in this thing. And I was like, “Yeah, dude, I think this is a good idea substantively, but I'm not sure that the economics of this are going to work out. Can you really raise money to support serious journalism philanthropically?”

DAVID STIEPLEMAN: I'm sorry to interrupt you, but that's a super interesting moment because hopefully when people are listening to this, they are either people who have started businesses or are thinking about starting businesses, and they want to know how to do it right. Slow down that moment. How did you dig into that and figure out this could actually work?

EVAN SMITH: Well, part of it was self-interest. I was thinking about leaving Texas Monthly to join this thing. And I wasn't interested in joining something that was not going to succeed or didn't have a chance of success. I was actually concerned enough about it that I said to him, “I'm not going to do this with you until I'm convinced. And I may never be convinced and may never join you, that the economics of this can work out. I'm happy to help you figure out the person who should help you, but I'm not sure that person is me.”

I actually compared myself at the time to Dick Chaney helping George Bush find his Vice President - only to discover that he was the one he was looking for, which is kind of what happened to me. I went through this process of self-discovery and went on meetings with John to see wealthy people in Texas. I'm telling you, David, I've never seen money raised more easily.

DAVID STIEPLEMAN: Well, what was the pitch?

EVAN SMITH: The pitch was: this is not about journalism. This is about democracy. A better Texas is a better-informed Texas, regardless of your party, regardless of your partisanship, regardless of your ideology, we do not have enough informed Texans. We do not have enough thoughtful and productive citizens. The state has checked out. People who live here are not voting. They're not knocking on the doors of their legislators’ offices. They're not writing to their members of Congress. They're not making their voices heard in their communities about issues that affect them because they don't know that those issues are in play. They don't know that there are fights going on waged in their name. They don't know the stakes they have in the outcomes of those fights. We were consistently 48th, 49th, 50th out of 50 states in voter turnout.

Every indicator of our social health, of our civic health, all those indicators were heading in the wrong direction. John saw - and credit him with this - that journalism might be the answer, a new way to revive accountability and explanatory journalism, getting information, reliable, credible information in front of people, would be the answer. I believed in that, again, but I was just skeptical of the economics of it. Eventually I came to believe, you know, the money was probably there.

So, I'll tell you the “aha” moment for me. We had a meeting with a guy who was a biotech entrepreneur. He started a couple different companies, and he sold them, and he made a lot of money. I knew him a little bit because I was the chair of the public television board in Austin, and we kind of passed in the revolving door. He was coming on as I was getting off the board and I didn't really know him well, but I knew who he was. He was a very quiet guy.

One day a meeting pops up on my calendar, Thornton and I are going to go see this guy for a drink at the Four Seasons in Austin at the bar after work on a weekday. I had bought movie tickets that night, my wife and I were going to go to the movies, so I knew that I had about an hour before I had to leave. We go to this meeting. We sit down with the guy, shake hands, John talks. I talk, John talks. I talk. Guy doesn't say very much at all. I'm getting no read on this guy. An hour passes. I've got movie tickets. And so, I get up to leave and I say, “Listen, I'm really sorry. It's been lovely to be with you. I appreciate you listening to us, but I've got movie tickets. I need to go, thank you very much.” The guy gets up and he puts his hand out and he says, “Okay, I'm in for a hundred.” There was a beat. I thought he was going to say dollars. Instead, he said thousand. Then he said, “Go save my democracy.”

That was this big “aha” moment for me. He got it. The message got through. This was not about journalism. This was about democracy. This was about people having the means to be better citizens, better voters, better Texans, better Americans. I made a decision on the way to the movies that I was going to leave Texas Monthly. The kind of cherry on the sundae was, some period of time later, Texas Monthly was up for the National Magazine Award in general excellence, which is like the Pulitzer for the magazine business or the best picture Oscar.

We were at Rose Hall at Lincoln Center at the awards and my friend, Lucy Danziger, who was running one of the big women's magazines at the time was the person presenting the award and she opens the envelope, and she says the winner is Texas Monthly. I get up, everyone's applauding and I walk to the stage to accept the award. And on the way to the stage, I mouth the words “I quit” to myself. I had this idea that I needed to leave when things were going well for the magazine, take a victory lap and go.

If you've ever read the Steve Martin book, Born Standing Up, where he talks about his career, there's a moment where he says, “I was playing all these arena shows as a standup comedian. And then I was in one arena performing, and I look up in the top row of this arena and the seats were empty for the first time. I never realized before that the seats were empty, and I never did stand up again after that.” I didn't want to wait until the seats in the top row were empty.

DAVID STIEPLEMAN: Evan, you're from New York originally. What drew you to Texas back in the early nineties?

EVAN SMITH: I have to tell you that being in New York even after 30 years in Texas is like being an alcoholic. You're never ex, you’re always recovering. Nobody wants to give you a break in Texas if you're from New York. Nobody wants to give you a break if you're not from here, period. People take very seriously the idea that you're from Texas, I've been here more than half my life, and I'm routinely described by people when I give speeches, as they introduce me as the person knows more about Texas than anybody else. And I laugh at that, because I'm not from here and there are still people who play the Lyle Lovett song “That's Right He's Not From Texas” as my walk on music all these years later. And I'm like, really? I've been here 30 years.

Well, you can say you're of Texas, but you can't say you're from. Never really came to Texas to be in Texas, I just passed through in the car. I was in graduate school at Northwestern University in journalism school in a magazine publishing program in 1987 and 88. I read a magazine I'd never read before called Texas Monthly. I read this magazine, and I was like, this is the greatest thing I've ever read. This is a magazine that, for me, is what all magazines should be. It has a sense of its audience, it has a sense of place, they've actually given over real estate page after page after page to long form journalism, narrative, nonfiction storytelling. It was like the old Sports Illustrated or the old Harold Hayes Esquire from the sixties.

So, I said, I have to get a job at this magazine. I literally wrote to the editor in chief, every couple of months for three years begging for any job. It took me until the late part of 91 to actually apply for a job that was open, that I got.

DAVID STIEPLEMAN: Being transparently a New Yorker, did that help or impede your ability to kind of get out there and learn things? Was it more of you were a step removed, so you could be more objective? How did it work?

EVAN SMITH: It was actually great to know that I had to persuade people that I wasn't a transient, that I wasn't just leaving the car running at the curb professionally, but that I really wanted to be here and that I wanted to learn everything I possibly could about Texas. I tried to be a sponge at all times. If I'm interviewing somebody for a television program, I cram like I'm cramming for a test in college. If I move to Texas to work in a magazine that's about Texas and I'm not from Texas, I spend every weekend, as I really did, in the car, driving to this place, driving to that place, talking to this person, getting to know about this thing, doing my homework. You always do the work, always do the work.

I spent a lot of time persuading people of how serious I was, that I was going to actually do the work, get to know the state, never assume that I knew more than anybody else, but at least become as acquainted as I possibly could at that age, at that stage in my life with this place that was now going to be my home, it turns out, now for more than 30 years.

DAVID STIEPLEMAN: Amazing. Back to Texas Tribune. You have that moment where you mouth to yourself, “I quit” as you're going to get the magazine award in New York. So, you're going to do this. You tell Thornton, I'm going to do this, let's do this. And you start recruiting talent. In The Washington Post piece, which Margaret Sullivan wrote - which is a really great piece. People should check it out. Actually, we'll put it up on the site. You were like when this started, people were kind of scoffing at me for doing this and they didn't really take it seriously. And what was the pitch to an aspiring journalist? You wanted to get excellent journalists to come work for you, what do you tell them?

EVAN SMITH: I actually wondered if we'd get anybody to come join us because we didn't have a business plan. We didn't have a mocked-up website to show. We hadn’t done any research or any feasibility studies or focus groups. We just had this idea: that we saw what was happening in the world, and we wanted to be a solution to the problem.

We went to young journalists who were working at the legacy papers, who themselves were watching those papers hollow out from the inside, and we said, “Listen, this is a leap of faith, but it's a leap of faith that has a high probability of success.” Now of course, I'm not sure we would've believed that in the wee small hours talking to ourselves that it had a high probability of success, but we sold it to people on the idea. It's not a guarantee. It's not a certain thing, but it's got a high probability of success, and we have 4 million or so in the bank at that time. We want to give this a shot. We want you to jump over.

And you know what I now think about - I replay this series of moments, David, in my head in retrospect - the greater risk, it turns out to them was not leaving, but staying. And the ones who could see that are the ones who joined. Honestly, I make it sound like there was some who we wanted to get and we couldn't get. The founders of this did essentially a fantasy baseball draft list of every journalist in the Press Corps, who we wanted to hire, and we got every one of the people on that list. So it's not like we had a low success rate at getting people or even a mixed success rate. We were a hundred percent successful.

DAVID STIEPLEMAN: What was in the head? What were you appealing to people? People just knew that whatever they were doing, it wasn't going to last, it was a melting ice cube. They had to do something,

EVAN SMITH: If you worked at big newspaper X, clearly what was happening was there were going to be cutbacks after cutbacks, layoffs after layoffs. They were going to be hollowing out of the reporting resources that they were anticipating that they would have when they got into the business, when they took the job. Look, I want to be very clear about something: I don't root for any newspaper or for the for-profit side of our business to decline. I believe that we're all collaborators, not competitors.

When the Dallas Morning News, Houston Chronicle, Austin American Statesman does good work, no one amplifies it louder than we do. We cheer for them. We want them to do great work. I can't affect the circumstances that relate to their functioning as a business. I can't. I don't want them to fail. They won't ever actually fail, but they would acknowledge themselves - the leaders of those have acknowledged - they can't do as much as they once upon a time could.

So, the young people who were in those reporting jobs at the time saw as we saw that the road ahead was going to be littered with potholes and obstacles. And ultimately the better thing might be come and join this thing that's going to build from an empty lot with the right values and the right goals. We’re going to try to make journalism work again in a way that we all aspire for it to work, to play the public service role that it plays. We were very lucky to get those folks.

One of those early hires was Emily Ramshaw, who started with us as a reporter on healthcare, which she had been doing at the Dallas Morning News, ultimately became the Editor in Chief of The Tribune and then left us in 2019 to start The 19th, which is one of the most successful nonprofit news startups in the country. We have enormous pride. I made a reference at one point, because I'm a certain age David, that we were Maude and she was Rhoda. It was like, she was the spinoff of the original series. And everyone's like, yeah, we have no idea –.

DAVID STIEPLEMAN: I'm not even going to try and explain that to people. But I gotcha.

EVAN SMITH: People say we have no idea what you're even talking about.

DAVID STIEPLEMAN: Let me ask you something: the thing that you make aside from good journalism stories, covering things, picking what to cover, where you want to be. You're supposed to be making nonpartisan product. That's part of what you are selling to people. It's part of your pitch to funders. They want to go someplace where they feel like they're not going to get read a party line. In the way that we, as an investment business at Sixth Street, we make investment returns, that’s what we’re trying to do, that's demonstrable. How do you do that? How do you know that you're doing that? Are you performing it? You stack up the pieces as you write them, you know who's following you? What are the measures of nonpartisan?

EVAN SMITH: The good thing about funding journalism, which is produced every day and is visible to the world on our website is that the proof of concept is right in front of you. If you're a donor, you will see, immediately instant feedback loop, whether the work that we're producing is in fact nonpartisan, as we promised you that it was. Presumably, there are some people who look at what we do and go, you know what? This is not nonpartisan as I defined it. David, reality is subjective these days. We're living in a moment where fact and fiction have switched places. Things happen now in the world that you would never before imagine were going to happen. And we now shrug our shoulders. We've legitimized and normalized the illegitimate and the abnormal consistently in this country for the better part of the last half decade or longer.

There are people who don't agree in this state, people who read The Tribune, some people on left, some people on the right, don't even agree on a common set of facts. We tell our young reporters when they come to work for us, and we hire people who hopefully have not acquired bad habits that they have to unlearn, we tell them “pull no punches, but hit both cheeks.”

If you're only holding one side accountable, you're doing it wrong. There are good people and bad people on the left. And there are good people and bad people on the right, not bad people on the sense of being bad people but being bad actors in the public sphere. You’ve got to cover both sides with equal energy, enthusiasm, and commitment to searching for the truth and telling people what you find. That is the job of journalism.

Being nonpartisan is not hard, I like to joke, because I hate everybody on both sides. It's easy to be nonpartisan when you hate everybody. But the reality is, we don't endorse candidates. We don't editorialize on issues. We don't tell people, generally speaking, what to think, as you said. We tell people to think. That's the difference. And it's a material difference. We're giving people the inputs that they need to formulate their own opinions. Who am I going to vote for? Do I think this is a good bill or a bad bill? Do I support this pivot in an issue? Or do I oppose it? We don't have to give them the conclusion that they arrive at ready made with a bow around it. We have to give them the means to make that decision themselves. And I have no hesitation about providing people with a lot of information that they then decide here's what I think about this.

If you look at our donor wall, we are compulsively transparent, and that's because one foundational value of this business is we don't believe that we should ask things of the people we cover that we're not willing to subject ourselves to as well. So, if we ask transparency of elected officials, we want them to be completely transparent about their sources of campaign funding. We should be transparent about our sources of funding.

So, every single dollar, more than a hundred million raised in 12 years, every dollar donated to The Texas Tribune, going back to the beginning, is on our website - who gave it, how much, when - you can see it. It is the most Republican Republicans and the most Democratic Democrats, David, side by side. People who agree on almost nothing except the value of The Texas Tribune's work. That in some way, to me is a demonstration of our nonpartisan commitment and of our success at realizing it because they would not be supporting us if they felt like the other side was getting a fairer shake.

DAVID STIEPLEMAN: And I should say, Sixth Street is one of those donors. If I called you and said, “Gee, Evan, I'd love you to cover this proposal that the SEC put out, or something that could impact the business.” What would you tell me?

EVAN SMITH: “F*** off. Here's your money back.” You know what? I've written checks back to donors. It hasn't happened very often. And I can tell you that one of the great things is when you establish expectations up front, it's better. People get a tax letter and a handshake and the gratitude of a grateful state, but they get nothing else. And that's if you give $50,000 or $50.

DAVID STIEPLEMAN: So, a hundred million bucks in 12 years is extraordinary and has set The Texas Tribune up and you've had enormous success and great circulation. What happens if it dries up? What's the plan?

EVAN SMITH: Well, I've got six and a half million in the bank as I'm sitting here today. Not all of it is unrestricted, but most of it is. I've got six months cash in the bank at any given time.

DAVID STIEPLEMAN: Wait, what does it mean unrestricted, if there are conditions on the funding?

EVAN SMITH: Well, in some cases like, Facebook gave us some money, the Facebook Journalism Project, for a best practices laboratory for the nonprofit news ecosystem on how to be more creative in terms of generating revenue through the right doors, as opposed to the wrong doors, and that money is expressly for that purpose.

The donor says, I'm giving you this money to support a regional reporting initiative foundation in East Texas gives us money toward a fundraise specifically to create a bureau in East Texas, so we have a reporter covering rural Texas. We have to honor the donor's commitment and intent that money is designated, if not outright restricted. I'm talking about pure unrestricted operating revenue in the bank that we can use just to do anything we want.

We have about six months cash in the bank. As far as I'm concerned, it’s pretty good. It's an in case of emergency break glass, but ideally, I'd like to have 60 months cash in the bank or a mere 12 months cash – it is what it is. My view is that because we have diverse revenue sources, we are in some ways insulated against a day when the economy might go south, and sources might dry up. We are about in a given year 20% major individual donations, wealthy individuals and family offices, about 20% institutional philanthropy, traditional foundations, about 20% corporate support, which is sponsorship, the artist formally known as advertising, about 20% is revenue generated from the many events we do all year long, and then about 20% is traditional membership.

And that actually is helpful to us because if one of those areas is down any given year, another area may well be up any given year and it all levels out. We've managed to be pretty smart about the revenue piece, and we're very disciplined about expenses.

DAVID STIEPLEMAN: The Facebook program. I mean, that's interesting, right? That they’re putting money behind your initiatives and trying to get things right in journalism, was that a tortured decision whether to take that money?

EVAN SMITH: Candidly, it was. And I told them at the time it was, and I also said that when we took it, I was not going to hesitate, if asked the question that you just asked, I would not hesitate to say that I did have some concerns. What Facebook was supporting, again, I'll be totally transparent about it, it’s not like I haven't said this many times before - it was two and a half million dollars they gave us to establish a revenue lab within The Texas Tribune, drawing on the lessons of our success and the lessons of others in the nonprofit news ecosystem and some for profits who had succeeded at diversifying their revenue sources, so that that success could be modeled as best practices for people just starting out.

So, we do coursework that we lead in major giving, in foundation support, in corporate sponsorship, in how to do events, and a number of nonprofit news leaders starting out sign up for these classes and we make them available for free. This is all funded by Facebook. And we do a bunch of other things as well, convenings and stuff, around the idea of, of sustainability and nonprofit news. I have no problem with taking their money for that purpose at all. I'm unapologetic about that.

DAVID STIEPLEMAN: Lest people think, Evan, that this has been just an unobstructed march from idea to success. What went wrong? What didn't work?

EVAN SMITH: Everything, David, everything went wrong.

EVAN SMITH: Everything went wrong. Anybody who tells you that it's perfect is lying or is an idiot in any case like this. I mean, every single startup that you've ever invested in, every single business you've ever been associated with, that I've been associated with, has problems along the way. Some anticipated, some unanticipated, some created by others, and some are just out and out self owns. You think you know more than you do.

I had been basically running Texas Monthly alongside the Editor in Chief for a few years before I became the Editor in Chief myself. And on the first day, July 1st of 2000, when I became the editor of the magazine, I thought I'm the best prepared person for this job of anybody in history. It took me probably 12 months, conservatively, before I felt like I actually knew what the hell I was doing in a job that I thought I knew perfectly on the first day. It so much different than you think it's going to be.

DAVID STIEPLEMAN: Do you remember a moment where it's like, oh, that was awful?

EVAN SMITH: I remember the decision to build a content management system from scratch and a CRM from scratch, as opposed to, you know, shmuck, just buy something off the shelf. I mean, why are you not just leaning into the work that others have done before? Why do you have to reinvent the wheel? We did that. We reinvented the wheel. We saddled ourselves with systems that were behind our website that we insisted upon building because God dammit, we knew better. We were going to make this. And we didn't have any claim on more than knowledge about how to do this than anybody else.

DAVID STIEPLEMAN: It is amazing that, you're a journalist, this is what you do. You need to get smart enough on things that you absolutely have no idea what you're doing. And they really have huge impacts on everybody's day to day life for years.

EVAN SMITH: One of the things I've realized over these 13 years is that a lot of people who have great intentions, a lot of them come from the journalism side of journalism, as opposed to the business side of journalism - think that just having a good idea, and identifying a need, and an unserved audience is enough. It is not, it is the beginning of the conversation, but having a properly functioning technology team, platform team, product team, what have you, and having a properly functioning business side that you've sufficiently invested in is absolutely critical to your success. And if you don't do that, you're going to die on the vine. A good idea and 75 cents gets you a Dr. Pepper, right? You've got to figure out how to make it work on the other side of the business.

DAVID STIEPLEMAN: What's your framework for thinking about that? Because you don't want to over invest in that stuff because you can goal plate something, and you've spent all your resources on that. You can't under invest in it, so there's this balance. What’s your framework for thinking about that?

EVAN SMITH: I had a calculation. It’s a great question because I really did think a lot about this at the beginning. We had 17 people on the first day, November 3rd, 2009, 17 full-time employees. I had enough money for those 17. And I said to myself, at one point before this, I said, we can either have a sufficient investment on the business side and nothing to sell. Or we can have an amazing product that overdelivers, you know, out kicks our coverage. And at that point, we then backfill the business side, backfill the selling function. And I went with the latter.

I was thinking about Howell Raines the former editor of The New York Times saying we need to flood the zone. I wanted to flood the zone. It would've been a Phyrric victory to have a properly functioning business side, but no business. You never forget a second chance to make a first impression. I wanted us out of the gate, not to limp, but to sprint. I wanted people to think on the first day, oh man, they're serious about this because if you just like, you know, “Hey, we've launched.” And then you have like one story, and you have not really very good reporters and you haven't really shown the vision that you have for this place realized, people are not going to give you a second crack of the ball.

DAVID STIEPLEMAN: Yeah. Why are they going to go back? Why are they going to go back and have that second meeting? It’s one hundred percent a very hard balance. I think it's the constant debate that you have to have in your head as you're forming your business.

I want to talk about replicability and, you know, punching above your guys' weight. You mentioned Emily Renshaw, The 19th, that's a wonderful story. Is this replicable, are you starting to see things pop up in various parts of the country that are kind of following the model? Are you helping them? Is that it's going to just have to be local? Like, how do we see this going?

EVAN SMITH: It is replicable. We don't want to be the ones to replicate it. You know, from the very beginning, we said, we're not going to franchise the restaurant. And the reason, David, is a little bit what I said earlier about knowing Texas as well as I do. I will fight anybody for the title of, “I know Texas better than you.” And at this point, I will win every single time.

I do not know Nevada. I do not know California. I do not know Mississippi. People in those places know those places. They know what they need. They know who the players are, who the funders are, what the issues in play are. They should be the ones to solve the news desert problem in those communities. And the reality is that if we showed up on a white horse, “Hey buddy, cavalry’s arrived. We're here to save your journalism.” They would drive us to the state line. They don't want that any more than we want that.

So, our position all along has been, you want to come to our restaurant, you want to look around the kitchen and see what equipment we bought, you want to talk to us about the menu and the pricing, you want to taste our food, great. When you're done, go back and open your own damn restaurant. We're not franchising this thing. And in fact, what's happened over the years is, you're anticipating what happened, is that people came to Texas. You know, there was a time there when it was probably two groups a month would come to Austin, and they would kick our tires. They would say, we want to understand how you did this. We want to talk to your revenue people. We want to talk to your audience team. We want to talk to your technology team. We want to talk to your newsroom people. And they would take from those conversations the things that were relevant to them, for them back home, and they would apply the ones that applied and they would not apply the ones that didn't apply, and they would add to those things, things that they figured out in their communities they needed, and then they would start their own thing.

Well, The Nevada independent in Las Vegas, Mississippi Today in Jackson, Mississippi, which happened because Andy Lack, who used to run NBC News and then was at Bloomberg, native Mississippian, came down by his lonesome, by himself to Austin, spent a couple of days with me, gave a million dollars, I believe, and found other friends of his from childhood who had made money to give millions each, started this incredible state news organization, Mississippi Today in Jackson, Mississippi.

CalMatters in Sacramento, California, the hotel magnate and very wealthy individual Stewart Banham in Baltimore is starting something after he attempted and was unsuccessful, tried to buy The Chicago Tribune and The Baltimore Sun. He said, “I'm going to commit 50 million dollars to starting what is essentially The Texas Tribune of Baltimore.” John and Laura Arnold, Rich and Nancy Kinder in Houston, along with the Houston endowment have committed about 20 million to start what is essentially The Texas Tribune of Houston.

Are these local news organizations that are styling themselves after us using our model as their guide and their inspiration? Not everything that we did. We help everybody. It is in everyone's interest for there to be a healthy ecosystem of news organizations. And it's going to be any and all, not either or. People want to pose this as binary, either newspapers or this innovative stuff. No, it's going to be both. And so it's gratifying to see these folks going forward, standing on our shoulders as we stood on the shoulders of others.

DAVID STIEPLEMAN: Either or - it's interesting because the for-profit papers, I mean, some of them are going to win. I mean, very few of them: The New York Times, The Washington Post, The LA Times whoever else, you know, hopefully. But are they not able to put out quality product? They obviously are, but they're not nonprofit. They have those conflicts, they have different things they’ve got to do. They’ve got to write those headlines that get clicks. I mean, you do too, I guess.

EVAN SMITH: Our clicks are “Congressman steps down after acknowledging affair with ISIS bride”, which honestly is entirely within our wheelhouse to do that journalistically. It's not like, celebrities with six toes, a slideshow, which was literally on The Houston Chronicle’s website some number of years ago. And I was like, really, seriously? This is end of times when that stuff actually is published.

I think The New York Times, Washington Post, Wall Street Journal, I would say, are in a category of their own. I think the local papers, even like The LA Times, Chicago Tribune and Atlanta Journal in the big cities, Dallas, Houston, Austin, we have, as you know, David, five of the 12 largest cities by population here in Texas in the country, more than any other state. Those guys are dealing with a different set of considerations.

The New York Times has been in a quite remarkable way able to pivot the revenue model away from advertiser revenue and toward consumer revenue. The Washington Post has the benefit of Jeff Bezos, and an owner who is willing to spend as much as it takes to put resources toward reporting and all that. The Wall Street Journal has its own financial foundation that it can draw on. You would think that the very wealthy owner of The LA Times would be in the same vein as the Sulzberger family or the Bezos’. There's some good reporting in papers all over the country, in every paper all over the country, but it's not what it was once upon a time, because the number of reporters, they have.

A former editor of the Dallas Morning News confessed to me, his fear some years ago that, he said we had been a newsroom of record. And now we're a newsroom of choice. We can no longer do all the things that we once upon a time could do. We can't cover everything that happens in Dallas. We have to pick and choose. He said, the problem is that people in Dallas who read the morning news, they don't know that, and they don't want that. They want us to still be a newsroom of record. We no longer have the resources to do that or to be that. I really feel for him, and I feel for all the people, my friends at all the papers who are trying as best as they can with good values, big hearts, and a public-spirited sense of their obligation and responsibility to do as much as they possibly can, but they just simply can't do as much as they once upon time could.

DAVID STIEPLEMAN: Before I let you go, you announced at the beginning of the year that you're going to be stepping down at the end of the year. You're staying on as an advisor this year, at The Texas Tribune. Amazing. What's next? I mean, I think you said you’re not done wanting to make the world better through journalism, right? You're still a young guy. What are you thinking about?

EVAN SMITH: I mean, I really don't know what I'm going to do. I know what I'm not going to do. First of all, I'm not going to leave Austin. And second of all, while people have been very nice, I've had a lot of phone calls from people saying, “we'd like you to come do this,” or “we'd like you to think about doing that.” It's much easier to say no to those things than I even thought.

I had this anxiety the night before our news here became public that I was going to step down by the end of the year. I said to my wife, “what if no one calls?” People have called, people have said, “listen, we want to talk to you about what you're going to do next.” I'm in an advantaged position in that I'm going to spend the next six to seven months working my ass off here to do everything I possibly can to set the next person up for success. There's a national search that's begun for the new CEO of The Tribune, the organization’s in great shape, person comes in October or November, I will, at that point, become senior advisor through the end of 2023, advise that person on fundraising, introduce 'em around the state. I'll work about 15 hours a week, beginning January 1st for all of next year here, and I'll pick up some other consulting stuff probably along the way, helping other people in other places, maybe some of the places I mentioned, figure out how they can do a version of what we did, where they are.

I will absolutely tell you that I do not know what the next year looks like, and I've had two jobs in 30 years with a weekend between them. I have never really had head space to think about what I want to do next. I believe the world still needs saving. And I want to be the guy to save it, probably not a hundred percent certain, but probably through journalism.

I'm considering a couple of things. Some big things. You said, I'm not that old. I'm 55, I’ll be 56 this year. I probably got one or two more big things in me. You know, David, we all know in our lives, what we can and cannot do. I cannot cook a steak. I cannot change a tire. Sadly. I am not off the hook on that one, but I can't do that either, but I know how to do this. And I've been very fortunate to get to know a lot of people in power, who, through our journalism, have come to understand the importance of returning my phone calls.

I can get to, and through to, anybody. I know who the players are. I understand the game. I understand where the opportunities and the challenges are. And I want to apply that knowledge, those skills to figuring out another way to help the world be better. People think I'm hiding the ball - “you have something that you're going to do. You're just not telling us” - no. I know it's boring, but I'm a boy scout. And all there is to talk about is square knots. There's nothing else. I've got nothing else to talk about. This is it. And so, I'm going to figure it out over the next year, but I'm not done. There will be a next, I just don't know what the next is.

DAVID STIEPLEMAN: First of all, thank you for doing everything you've done and showing us a path to keeping journalism alive. It's such an essential part of any functioning democracy, which we hope will survive. And thanks for joining us. This is just an awesome conversation. I always love talking to you. Thanks. And we can't thank you enough for your time.

EVAN SMITH: It’s my pleasure, David. Thank you so much.

**

DAVID STIEPLEMAN: Evan Smith joined us for an interview on March 4th, 2022 from his home in Austin, Texas. We're thankful for Evan's candor and shedding light on how you build a business around a new concept in a traditional industry. Here's what I think we learn from him.

One, you have to do the work and be a student of your craft. Two, as you prepare for growth, striking the balance between under and over investing in infrastructure is hard, and you'll get it wrong, but do the thing you're supposed to do and do it well, outsource the stuff you're not supposed to be doing, and be intentional about resetting the balance once you achieve orbit. And three, diversify your revenue sources. And if you take money from social media conglomerates that may act antithetical to healthy dialogue at times, use that money for good and agonize over it.

If you enjoy today's show, please share it and follow @SixthStreetNews for more on the show and our firm.

Thanks to Sixth Street’s production team Patrick Clifford and Kate Hanick for putting this together with sound engineering by Steven Colon and great assistance from Josh Benson at Oldtown Media. Original music by Patrick Dyer Wolf.

Once again, I'm David Stiepleman. Thanks for listening.

The views expressed in this podcast are not necessarily those of Sixth Street and Sixth Street is not providing any financial, economic, legal accounting, or tax advice or recommendations in this podcast. In addition, the receipt of, or listening to this podcast is not to be taken as constituting the giving of investment advice by Sixth Street. Please see additional disclosures on our website for more details.