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If you think public markets are bad at creating poor long term incentives (they are) you should see what private equity does. 10x worse.
by dismalpedigree 5y ago
If you think public markets are bad at creating poor long term incentives (they are) you should see what private equity does. 10x worse.
- stingraycharles 5y agoIt highly depends upon who’s behind the private equity. As an anecdotal example that always stuck with me, Google post-public very quickly became a very different company, much less principled and “don’t be evil”. Yet they did have private equity. I think they key difference is that you can choose to a reasonable degree who your private investors are, where there is no such option with public investors, and public markets tend to be more hostile.
- dismalpedigree 5y agoEven benevolent private equity forces companies to operate on a 3-5 year time window where the PE owner needs to maximize returns over the period. Inevitably results in lots of conversations along these lines. “Yes that would be good long term but we are not investing in that because it won’t add value before we flip the company”.