'Dumb Money's' Smart Gamble on Allure of E-Books

By Bob Thompson
Washington Post Staff Writer
Tuesday, April 14, 2009

Here's a publishing riddle for you, not to mention a sign of the times:

Daniel Gross has had a book out for almost two months now, but you couldn't buy it in your local bookstore until this week.

How can that be?

Well, if you guessed that "Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation" came out first as an e-book, give yourself points for having your head out of the non-digital sand.

E-book exclusives -- as opposed to e-books published as spinoffs of a printed version -- remain rare, because the market is still too small to sustain them. But Gross's book offers a revealing window on how such exclusives could reshape "p-book" publishing. The decision to bring "Dumb Money" out in paperback, for example, was made only after the e-book's appeal had been established.

Perhaps the most revealing thing about the "Dumb Money" story, in fact, is that everyone involved -- author, agent and publisher -- saw it as an experiment, the kind of small-scale trial run that a late-adopting industry needs to do a lot more of.

It started with the biggest bankruptcy case in U.S. history.

On Sept. 15, the giant financial services firm Lehman Brothers filed for Chapter 11. Not long afterward, Gross, who had been tracking the economic implosion as a financial columnist at Newsweek and Slate, sent an e-mail to his agent, Sloan Harris of International Creative Management.

"Literally at the same time, he called me," Gross recalls. They agreed that "we should do something."

But what? Gross didn't want to write a standard boardroom narrative. It's not what he's good at, he says, and he's watched too many writers spend years writing books that didn't sell.

"If I could do something quickly, get out before all the people who are doing doorstoppers," he thought, "then I will have had my say, got a book out, everyone will have to account for me or ignore me -- and I'll move on."

Harris knew publishers were looking to experiment with e-books, and he suggested an e-book exclusive. The need for speed was an obvious factor, but the agent had another reason as well:

"There's a kind of writing, 25,000 to 50,000 words, that no longer fits in magazines," he says, yet isn't long enough to package as a traditional book. So "there's an opportunity to grow a business that didn't previously exist."

Harris called "a small handful" of publishers to pitch the book and the e-book exclusive notion. The most enthusiastic response came from the Free Press, an imprint of Simon & Schuster. Free Press executives Dominick Anfuso and Martha Levin, in turn, scheduled a meeting with Simon & Schuster CEO Carolyn Reidy to seek her blessing.

How long did it take before she gave it?

"I don't know -- one second?" Reidy says.

She'd been looking for "a serious writer who was interested in experimenting using the digital form." The problem was that "good writers want to be paid, and there's not a huge market yet" for e-books. So finding someone "willing to take the financial risk with us" (by not demanding too much money up front) was key.

Gross wasn't expecting to break the bank.

"I wanted to get paid something," he says. But he knew that "a couple of good speaking engagements" -- which "Dumb Money," of course, might help generate -- could pull in as much as his low five-figure advance.

Besides, he was writing only 30,000 words. He had most of his material in his notebook already, so he could keep his day job. Most important, he could avoid the traditional, tortoiselike book publication schedule -- and with it, months of anxiety about "Dumb Money" being overtaken by events.

"We all know what can happen to the market in a week," he says.

Gross and Harris did a handshake deal with the Free Press in October, though the paperwork took longer. By December, Gross was turning in chapters. He filed the last one in late January. By Feb. 9, he had an edited book to approve.

Two weeks later, "Dumb Money" went on sale, priced at $11.99 -- and the advantages of being an e-book exclusive kicked in.

"We got an enormous amount of support, especially from Sony and Amazon, because it was an e-book original," says Free Press associate publisher Suzanne Donahue. Amazon's Kindle, Sony's Reader and digital audiobook purveyor Audible plugged it on their home pages.

With the appropriate application, you can also get "Dumb Money" on an iPhone. That's what Gross did to check out his own digital work.

The e-book outlets don't make sales figures available. (Heck, Amazon won't even say how many Kindles it has sold.) But the Free Press's Anfuso says sales have been "in the thousands."

Sounds like time for an e-book reality check.

Anfuso says he's been happy with the "Dumb Money" sales, given the limited number of potential customers equipped with the technology to acquire and read it. But he's also "really pleased" that with the paperback edition, "we get to sort of publish it again."

Translation: Success for an e-book exclusive, at least for now, means doing well enough that your publisher decides to sell physical books.

The Association of American Publishers reports that January 2009 sales of e-books rose more than 170 percent over the January 2008 total. Yet 170 percent of not very much is still not very much: Those sales represented just $8.8 million of the $785 million in overall book sales.

The tipping point for e-books may be coming -- "we really are close," Reidy says -- but it's not quite here yet.

Something else to consider about the "Dumb Money" experiment is how fundamentally conservative it was.

Yes, the format allowed Gross to get time-sensitive material to market quickly, but otherwise, the e-version doesn't look that different from an ink-and-paper book. It is searchable, of course, and thus requires no index, but it is not enhanced with background material, explanations of financial arcana or any of the myriad bells and whistles digital publication theoretically makes possible.

And it certainly doesn't meet the revised definition of a "book" proposed by new-media futurists like Jeff Jarvis.

Jarvis came through Washington recently to promote his own new book, "What Would Google Do?" -- but he calls himself "an utter and complete hypocrite" for putting out a printed text at all. "If I had eaten my own dog food," he says, "I would have put out a digital book that was searchable and linkable and clickable and correctable and discussable. Why didn't I? I got an advance. The system still pays."

But for how long?

Books are fated to become "less of a product and more of a process," Jarvis says. He's talking about the mutually advantageous exchange of information and ideas between authors and the community of readers that is made possible online (though not on proprietary e-book devices). There's only one drawback, he notes: Authors will have to figure out new ways to get paid.

Details, details.

If there's one point on which everyone involved agrees, however, it's that the change digital books represent -- whatever form or forms they eventually take -- is long past inevitable.

"I have come to believe that all variations of this model are possible," Harris says.

"It is definitely a new economy for our industry," Anfuso says, "and I can't imagine it doing anything but grow."

As for Dan Gross, whose modest experiment hints at an earthquake of dislocation for the people who write and publish books, he's not looking back.

"There are a lot of people in our industry who are resistant to change," Gross says. "And there are some people in our industry who have 30-year mortgages and kids and families we love, and we love what we do -- and we're trying our darnedest to figure out how we can keep doing this as things change."

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