4 ms·

Closing Down the Billionaire Factory

48 points by connor11528 4y ago

mamonster 4y ago
The general rule of thumb with PE(not so true maybe in the last 2-3 years) is that if PE starts showing up en masse to your industry your industry is either half alive and needs an emergency operation that might kill it or it has a lot of excess fat that is obvious by looking at the balance sheet. Not one of the ones he listed (retail, healthcare, defense) are industries where people would look and say "this is working well, fuck PE for fucking it up". Tech and software buyouts by PE only really started happening within the last 5 years, so can't make a judgement on that yet.
- missedthecue 4y ago
  Vista Equity is 22 years old
  - mamonster 4y ago
    Sure but Vista is the exception to the rule. If I told you "algo hedge funds only really took off(on AUM Basis) after 2008" you wouldn't answer that with "Yeah but Rentec exists since 1982" or "D E Shaw exists since 1988".
- panzagl 4y ago
  I assume PE is responsible for the mess in government contracting- the small companies that get shit done are snapped up by larger firms that then do nothing except lobby and hire former officials. To some extent it had always been that way, but now instead of it being a big contractor (say Lockheed or Northrop) preying on a few smaller companies, it's outsiders like KBR buying everyone.
  - htrp 4y ago
    KBR is not a PE shop.... KKR is (but not sure of KKR is big in govt contracting)
- hcmacro 4y ago
  You're right. I looked at the examples he linked and instead said "this isn't working well, f** PE for making it worse." https://www.buzzfeednews.com/article/kendalltaggart/kkr-brightspring-disability-private-equity-abuse https://www.buzzfeednews.com/article/kendalltaggart/kkr-brig...
- connor11528 4y ago
  > Tech and software buyouts by PE only really started happening within the last 5 years, so can't make a judgement on that yet. Might be an isolated case but worth mentioning the Solarwinds hack of America's nuclear industry could have been a result of PE ownership: https://www.scmagazine.com/news/supply-chain/solarwinds-lawsuit-claims-private-equity-owners-sacrificed-cybersecurity-to-boost-short-term-profits https://www.scmagazine.com/news/supply-chain/solarwinds-laws...
- TheCoelacanth 4y ago
  Isn't Dodd-Frank making it much less attractive for companies to go public also a factor in the rise of PE?
gwbrooks 4y ago
The author makes it sound like PE has taken over public pension investments. But while participation is wide (about 85% of public pension funds have some private-equity investments), it's not particularly deep (9% of public pension funds, nationwide, are in private equity). Across a 10-year study released in 2021, PE was the best performing asset class held by public pensions, with an average return of more than 12%. And they need those returns. We can debate whether PE is good or not, but it's not debatable that states, collectively, owe ~$1 trillion in unfunded pension liabilities -- in fact, it's the biggest obligation most states' balance sheets. They need to close that gap via higher returns or higher taxes. Final point: This is an anonymous piece so we have no way to track the credibility of the author, his or her biases, etc. If it's the truth and you stand by it, put your name on it.
- rektide 4y ago
  Putting "making money" as the sole & overriding decision making factor is a recipe for bad things. The article spends a relatively brief amount of time bashing the massive wealth extraction PE does. It barely talks about all the businesses it wrecks as it uses leverage to saddle companies with debt. Does ruining companies justify an additional 1.2% return for a pension? It doesnt dwell overly long on how ridiculous the fees & perposterous expenses seem to be. That money seems needed by the pensions. In all, this article just sets the stage for thr very reasonable thing the FTC seems to be asking for: a little bit of sunlight into where the money goes, what the fees & expenses are. This modest ask isnt trying to turn back what seems all to often to me to be (& gently cited within as) a buch of looting corporate hooligans; an illegitemate Billionaire Factory of no good or real public utility except wealth extraction. Right now there's few indicators it's the pensions that get helped, and both the fees/expenses & cost to society/general economic health are unknownable.
- xrd 4y ago
  The URL includes Matt Stoller, which is his name. He's author of a book about monopolies called Goliath. He's well known, at least to me.
  - aidenn0 4y ago
tmaly 4y ago
It seems like they want to do with fees is quite similar to what they are planning to do in Medicare with regards to the cost of medicine. S&L crisis, that made me think of the Whitewater investigation.

48 points by connor11528 4y ago

The general rule of thumb with PE(not so true maybe in the last 2-3 years) is that if PE starts showing up en masse to your industry your industry is either half alive and needs an emergency operation that might kill it or it has a lot of excess fat that is obvious by looking at the balance sheet. Not one of the ones he listed (retail, healthcare, defense) are industries where people would look and say "this is working well, fuck PE for fucking it up". Tech and software buyouts by PE only really started happening within the last 5 years, so can't make a judgement on that yet.

missedthecue 4y ago
Vista Equity is 22 years old
- mamonster 4y ago
  Sure but Vista is the exception to the rule. If I told you "algo hedge funds only really took off(on AUM Basis) after 2008" you wouldn't answer that with "Yeah but Rentec exists since 1982" or "D E Shaw exists since 1988".
panzagl 4y ago
I assume PE is responsible for the mess in government contracting- the small companies that get shit done are snapped up by larger firms that then do nothing except lobby and hire former officials. To some extent it had always been that way, but now instead of it being a big contractor (say Lockheed or Northrop) preying on a few smaller companies, it's outsiders like KBR buying everyone.
- htrp 4y ago
  KBR is not a PE shop.... KKR is (but not sure of KKR is big in govt contracting)
hcmacro 4y ago
You're right. I looked at the examples he linked and instead said "this isn't working well, f** PE for making it worse." https://www.buzzfeednews.com/article/kendalltaggart/kkr-brightspring-disability-private-equity-abuse https://www.buzzfeednews.com/article/kendalltaggart/kkr-brig...
connor11528 4y ago
> Tech and software buyouts by PE only really started happening within the last 5 years, so can't make a judgement on that yet. Might be an isolated case but worth mentioning the Solarwinds hack of America's nuclear industry could have been a result of PE ownership: https://www.scmagazine.com/news/supply-chain/solarwinds-lawsuit-claims-private-equity-owners-sacrificed-cybersecurity-to-boost-short-term-profits https://www.scmagazine.com/news/supply-chain/solarwinds-laws...
TheCoelacanth 4y ago
Isn't Dodd-Frank making it much less attractive for companies to go public also a factor in the rise of PE?

gwbrooks 4y ago

The author makes it sound like PE has taken over public pension investments. But while participation is wide (about 85% of public pension funds have some private-equity investments), it's not particularly deep (9% of public pension funds, nationwide, are in private equity). Across a 10-year study released in 2021, PE was the best performing asset class held by public pensions, with an average return of more than 12%. And they need those returns. We can debate whether PE is good or not, but it's not debatable that states, collectively, owe ~$1 trillion in unfunded pension liabilities -- in fact, it's the biggest obligation most states' balance sheets. They need to close that gap via higher returns or higher taxes. Final point: This is an anonymous piece so we have no way to track the credibility of the author, his or her biases, etc. If it's the truth and you stand by it, put your name on it.

rektide 4y ago
Putting "making money" as the sole & overriding decision making factor is a recipe for bad things. The article spends a relatively brief amount of time bashing the massive wealth extraction PE does. It barely talks about all the businesses it wrecks as it uses leverage to saddle companies with debt. Does ruining companies justify an additional 1.2% return for a pension? It doesnt dwell overly long on how ridiculous the fees & perposterous expenses seem to be. That money seems needed by the pensions. In all, this article just sets the stage for thr very reasonable thing the FTC seems to be asking for: a little bit of sunlight into where the money goes, what the fees & expenses are. This modest ask isnt trying to turn back what seems all to often to me to be (& gently cited within as) a buch of looting corporate hooligans; an illegitemate Billionaire Factory of no good or real public utility except wealth extraction. Right now there's few indicators it's the pensions that get helped, and both the fees/expenses & cost to society/general economic health are unknownable.
xrd 4y ago
The URL includes Matt Stoller, which is his name. He's author of a book about monopolies called Goliath. He's well known, at least to me.
- aidenn0 4y ago

tmaly 4y ago

It seems like they want to do with fees is quite similar to what they are planning to do in Medicare with regards to the cost of medicine. S&L crisis, that made me think of the Whitewater investigation.