5 ms·
The article is fine but the title is misleading; the Instant Pot is indeed a fantastic product, but the reason why it "failed" (note: it didn't as a product; on
by bambax 3y ago
The article is fine but the title is misleading; the Instant Pot is indeed a fantastic product, but the reason why it "failed" (note: it didn't as a product; only its parent company did) is because some private-equity firm raided it and tried to milk it for more than it was worth.
Private equity is very much like cancer: they grow and grow onto sane products until they kill the host.
Meanwhile, I absolutely can't do without my Instant Pot.
- robertlagrant 3y agoPE can be good or bad. People are involved, so sometimes it's good and sometimes it's bad.
- dymk 3y agoHow insightful
- dmix 3y agoCompanies rarely ever get PE because the people running it were doing a good job, it’s usually a bad option among bad options, so it’s not surprising PE is associated with vultures looking to “ruin” a good thing. Most people aren’t privy to how shitty the finances are at some companies, that could put it in such a position. Usually employees are oblivious to it because the executives hide it then all of a sudden a new owner is chopping it up for parts. That said apparently the track record for companies that succeed after getting PE is higher than the straight up losses where it gets sold for assets. At least that’s what I remember reading in some pop business/finance book I read long ago. Maybe someone could correct me here.
- agentgumshoe 3y agoYeah, exactly, the PE vultures come in to a bad company, carve it up (sell and refinance their assets, debt-raise to pay themselves, cut staff), extract a bunch of money and then sell and leave them for dead with no accountability.
- dmix 3y agoBut usually only if they can’t turn it into something better. Anyone betting millions on a company goes in aiming a bit higher than selling off real estate or whatever asset. That’s usually the back up plan after a short play to turn the company around. It’s just not pretty when it doesn’t and people who care about the business naturally see them as shortsighted opportunists.
- JumpCrisscross 3y ago“Private equity catalyzes the creative destructive process in the labor market, with only a modest net impact on employment” [1]. (Service and retail do worst, in terms of employment.) https://www.nber.org/system/files/working_papers/w17399/w17399.pdf https://www.nber.org/system/files/working_papers/w17399/w173...
- robertlagrant 3y agoA friend does business turnaround. He's seen both: a predatory buying of a company with a semi-fake promise of investment from one guy who just accelerated it into the ground charging management fees, but also a PE firm that airdropped my friend in to analyse it, and he turned a dying business into a profitable one that they decided to keep on the books as it's doing well.
- ipython 3y agoCurious to hear success stories you can share from leveraged buyouts.
- JumpCrisscross 3y agoSee AxleTech [1]. Broadly, buy-out comes in three flavours: vulture, where you buy a failing business and try to turn it around or get a last puff out (Toys ‘R’ Us); unlevered, where you provide convenient exit (Berkshire Hathaway); and growth, basically beefed-up VC (Silverlake). Vulture gets paid for creative destruction. The company was going down, they come in with capital and try something crazy, it probably doesn’t work, in which case they get bad headlines and keep the asset value. Unlevered gets paid to help steady-state businesses exit. Growth gets paid to provide capital so existing management can focus on their plan. The latter two get less press than the first. (Read the story. Do you want one on an aerospace components manufacturer or Fresno-area cold-rolled steel roll-up next? This doesn’t sell clicks.) Put another way: vulture is value investing, growth is growth investing and unlevered is dividend chasing. [1] https://www.npr.org/templates/story/story.php?storyId=12571719 https://www.npr.org/templates/story/story.php?storyId=125717...
- plagiarist 3y agoSome examples of good ones?
- agentgumshoe 3y agoMaybe Hilton hotels and Dell? There's not many, that's for sure. Unless you count 'success' as the PE firm raking in cash regardless of ourcome
- Ekaros 3y agoDell is still alive for example. It did went private at one point. Not sure if there was net increase in value, but at least it is not entirely dead.
- robertlagrant 3y agoI remember being surprised at it going very well at the time. I don't know if that was accurate, but I can imagine not having the public markets constantly pressuring to be a big benefit.
- JumpCrisscross 3y agoBroadly speaking, buyout performance deteriorates with scale [1]. (Aside: buyout has, overall, a negligible effect on employment [2].) Private equity’s success stories are in the no-name middle market. You know how people are shocked American manufacturing is usually at an all-time high [3]? That’s [4] private equity’s playground. Put another way, headline consumer PE deals tend to be nonsense. [1] https://academic.oup.com/rof/article/16/3/799/1590806 https://academic.oup.com/rof/article/16/3/799/1590806 Figure 2 [2] https://www.nber.org/system/files/working_papers/w17399/w17399.pdf https://www.nber.org/system/files/working_papers/w17399/w173... [3] https://fredblog.stlouisfed.org/2018/02/hows-manufacturing/ https://fredblog.stlouisfed.org/2018/02/hows-manufacturing/ [4] https://www.npr.org/templates/story/story.php?storyId=12571719 https://www.npr.org/templates/story/story.php?storyId=125717...
- agentgumshoe 3y agoTrue, PE can be good when it takes a long term investment proposition. But mostly they take short term ones and everyone except them suffers.
- Ekaros 3y agoI think the reality is that we don't just hear about reasonably run private companies. They might have had bad trajectory and now do reasonably well generating reasonable profits.
- robertlagrant 3y agoI think this depends on media sources. If one consumes media that exists to let people doomscroll capitalism (or their narrow, worst case view of capitalism) then that is indeed what they will hear about. If they read the Financial Times and local business news they probably have a much more balanced viewpoint.
- tcmptn 3y agoWho thought an instant pot air purifier was necessary?
- citizenkeen 3y agoEvery time a company I like and am a fan of announces they've accepted PE I just pour one out. They're dead. It will take a few years, but they're dead.
- thefz 3y ago> Meanwhile, I absolutely can't do without my Instant Pot. Gutted to say the least. I used my slow cooker for years and now I need to hoard replacements (mainly the silicone ring) because of this. Fantastic product.
- xtracto 3y agoWe just recently bought our first one at home. It's a godsend! It's amazing and makes cooking so easy.