The White House is in overdrive promoting former press secretary Scott McClellan's What Happened. That promotion has helped drive it to the number one selling position on Amazon.com (NASDAQ: AMZN). While Amazon will benefit from the sales of the book, the stock is more than fairly valued.
The White House's promotion is based on its passionate response to the confirmation bias it demonstrated in the run up to the Iraq war. As I wrote in this Business Strategy Review article, confirmation bias is when facing a major decision, one exhibits an unwillingness to admit conflicting data – no matter how salient – to influence a closed point of view. Mclellan points out that the White House decided to go to war against Iraq a year before its start and manufactured a false "case" to sell it.
McClellan pointing this out is hardly news. But I thought his comments about George W. Bush's cocaine use, as reported by 6abc.com, were more revealing. Recalling a 1999 conversation with Bush, McClellan writes: "'The media won't let go of these ridiculous cocaine rumors,' I heard Bush say. 'You know, the truth is I honestly don't remember whether I tried it or not. We had some pretty wild parties back in the day, and I just don't remember.'
And yet, McClellan concludes, "I think he meant what he said in that conversation about cocaine. It's the first time when I felt I was witnessing Bush convincing himself to believe something that probably was not true, and that, deep down, he knew was not true. And his reason for doing so is fairly obvious political convenience."
The White House is helping McClellan tremendously. By attacking him personally -- making remarks about how "sad" it is to see this book from "not the Scott I know" -- it reinforces the fundamental truth of McClellan's text. After all, if the book was wrong, there would be ample grounds for a slander lawsuit and the White House would release information that would handily disprove what McClellan is saying. But its personal attacks on McClellan reveal the weakness of its position.
And with McClellan's book at the top of Amazon's list it made me wonder whether investors can share in McClellan's good fortune by buying Amazon stock. Its shares have risen 18% in the last year. But it trades at a Price/Earnings to Growth ratio (PEG) of 1.7 -- with a P/E of 67.5 on earnings forecast to grow 41% to $2.12 in 2009.
This is a very successful company that will be made even more successful thanks to McClellan's book. But it looks like its stock price reflects that future growth -- and then some.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Amazon stock.
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