5 ms·

> we now have such concentration of wealth thatthe big PE firms can buy alot of what used to be small businesses and roll them up. If only those small business

> we now have such concentration of wealth thatthe big PE firms can buy alot of what used to be small businesses and roll them up. If only those small businesses could just refuse and continue operating on their own... alas.

scarface_74 3y ago
Exactly. No one forces these businesses to sell. It’s the owners easiest retirement plan instead of passing them down to their kids who may not want to or have the skill set to run the family business.
- TeMPOraL 3y ago
  Sure, no one is blaming any individual business for selling. Nor would you blame any particular drop of water for flowing downhill. Still, too much water will make a dam burst and most of the water will flood the land; too much business owners realizing their retirement plan by selling out to PEs, and everyone suffers - including those retirees.
  - scarface_74 3y ago
    Are you going to tell these mom and pop shops they can’t sell?
    - TeMPOraL 3y ago
      Of course not. The problem aren't the mom and pop shops. The problem are the PE companies making those offers. These are the ones to go after.
      - scarface_74 3y ago
        How is that any different? You’re still trying to stop mom and pop shops from selling out to PE’s. Are you also going to stop startups from getting acquired to? Seeing that only 6 of the hundreds of companies that YC has invested in have ever gone public, acquisitions is the most likely exit
        TeMPOraL 3y ago
        The difference is that PE is just one of many kinds of buyers, but the one that has a particular tendency of doing trades with nasty externalities. It's this pattern of buying that is a problem, and I don't see fighting it any different than fighting factories dumping toxic waste into rivers. Factories, in general, are not a problem. Actions that have destructive impact on people at scale are a problem. Startups are a bad example because I absolutely would stop startups from being acquired as a general phenomenon. The pattern of startups seeking an exit is one of the worst economic innovations that happened to the world. They at best just waste time of their users/ customers before inevitable rugpull, and at worst, they actively disrupt whole market segments - not creatively disrupt, just in the "blow the whole thing up with VC money, disappear when it's clear the business was never sustainable" kind of way. And again, it's not the acquisitions as a concept that are the problem - it's the pattern of startups being created with acquisition as the goal that is a problem.
        scarface_74 3y ago
        All startups have acquisition as a goal. If not, they aren’t paying attention to statistics. This very site you are on is funded via VCs where only 6 of the hundreds of companies that have been funded have gone public. Who is going to buy these mom and pop shops? Are you going to say that startups can’t be acquired and either have to go public or go out of business when the large companies just put a few people on a clone of their project and crush them?
        TeMPOraL 3y ago
        > All startups have acquisition as a goal. If not, they aren’t paying attention to statistics. That's a problem, though. I'm under no illusion that startups are founded for purely altruistic reasons, but there used to be more focus on creating an actual business, one that makes money by delivering value to customers. Nowadays, the focus is on exit - and the main strategy is to hype up a shitty MVP to force rapid growth, and then either trick some incumbent corporation into acquiring the startup, or go public and run away with the profit before people figure out the company is just hot air. I'm looking at this from the POV of a customer and a member of society, and as such, I see contemporary startups as wasting everyone's time and hopes, at scale. A perpetual flashy mediocrity that slows progress by starving would-be legitimate businesses for oxygen, and occasionally destroys a random market segment in the process. Once again, the pattern is a problem. Startups are fine, acquisitions are fine, keeping an eye for an exit is fine. The issue is that the entire startup ecosystem - founders and investors alike, and increasingly even acquirers - found a way to game the system, and is busy printing money without doing anything of lasting value, while still burning resources and dumping externalities on the rest of the economy.
- ryandrake 3y ago
  Why would a PE firm be buying (for example) a doctor's office if the doctor-owner was retiring? The doctor is why the business exists in the first place. Without him, it's no longer a doctor's office, it's a charming little suite with front desk people and a few nurses running around. We had a local machine shop (that I used to go to for welding) sadly go out of business because the owner was retiring. I asked him if he considered selling it instead so it could stay open and he said "Who would buy it? I am this shop and I'm retiring. In 5 days it's just going to be a pile of tools."
  - scarface_74 3y ago
    For the patients and as a slow “exit”
  - delfinom 3y ago
    Yea I don't see PEs buying a doctor's office. I have seen "mergers". A doctor will join up with another doctor and then disappear in a year or two. That let's them legally sell the practice while weening patients over. I have had a CPA start that process recently too. Suddenly announced he's joined up with this new CPA firm . Not to worry, he'll still be here to take care of our corporate needs and has transferred everything over (he's late 60s and snowbirding already) A PE may buy up a already larger medical practice chain or something, but never individual practices. The machine shop example is rough, he could do a merger retirement as well, but he needs to have consistent clients that he can bring over to another shop before slowly phasing himself out. Which may not have been scenario unfortunately.
peteradio 3y ago
If only each individual bond could try a little bit harder to resist the acid.
- starcraft2wol 3y ago
  the point is the owners have a positive exit that they choose. And yes people are agents
  - peteradio 3y ago
    Right America is governed by individual incentives.
    - starcraft2wol 3y ago
      There are more kinds of incentives than money.
      - peteradio 3y ago
        Doing what's morally responsible in spite of everyone else is a losers game these days.
justrealist 3y ago
It's partly that, but in medicine (dentistry, fertility, etc) a lot of clinics are being rolled into PE conglomerates because the bureaucratic overhead in medicine has skyrocketed in the past 20 years, and clinic chains have better support for doing all the paperwork and legal side of things.
plagiarist 3y ago
What a convenient way to completely ignore the macro effects, well done.
gmd63 3y ago
You joke but it's not benign. The reason economic regulations exist is to ensure we maintain the economy as a crucible for rewarding the smartest and hardest workers in society. When private money can grow cancerously via pump and dump crypto schemes, overhyping IPO's that peaked during the series A round, and strong arming small branches of independently owned practices (all to later enable milk mode and reap monopolistic profits), the general public and society is left with overlords who do not build, they eat.
- fnimick 3y ago
  When have the smartest and hardest workers ever been the richest?
  - Applejinx 3y ago
    It's easy for me to believe it's not always been (and doesn't have to be) THIS bad. There's functional value in a capitalist system. It just requires ongoing maintenance, to avoid situations like we're currently in. It's not self-repairing. Operated properly, it makes market conditions self-repairing, but this is at the expense of the potential market capturers.
    - ToucanLoucan 3y ago
      It was better when corporate tax rates and income taxes for the incredibly wealthy were much, much higher. My favorite hobby is putting Thatcher and Reagan's faces on economic graphs to show what year they were elected is almost universally either the same year or just about when the global economic system went bugfuck by basically every metric we measure. But, thanks to those two and the larger political milieu they so well represent, those entities are now rich beyond all reason and in a capitalist system that permits things like Citizen's United, money more or less equals political power so the odds of getting any of this addressed are basically nil, along side other issues that would demand corporations make less money: like climate change, crumbling infrastructure, socialized healthcare for the US, better socialized healthcare elsewhere, the vanishing middle class, etc. Private Equity is going to get us all killed in a very real sense.
techdmn 3y ago
They could, but my opinion is that this is putting personal responsibility front and center on what is a systemic problem. If our economic systems encourage the consolidation of wealth, we should change the systems, rather than blaming individuals.
chollida1 3y ago
Well think this through. There are 10 vet practices in your city. 7-8 get rolled up into one uber practice by a PE firm. They now have far less overhead per patient. Billing, equipment and even vets can be amortized over far more patients. You, the hold out clinic, are now more expensive, or have a far smaller profit ratio, thus you are operating at a big disadvantage to the other clinics in your city. You can hold out but what is your edge in this case where your competitor is now bigger and can handle things like a vet quitting as they have a bunch that roam from practice to practice. Or they can handle buying a new machine for millions while the bank won't lend to you due to your shrinking margins. Economies of scale are a thing and can be a very real competitive differentiator. You the hold out are now getting crushed by your competitors while you look around and see your fellow vets taking weekends off to take their new boat to the lake because they sold their practice and you're working your 11th weekend in a row because your other vet quit to work for your competitor that can now pay more than you. I've had friends live this and its not fun.
- 1980phipsi 3y ago
  If the government increases regulations, then it tends to place a bigger burden on small businesses than big businesses for the same reasons you highlighted about overhead.
- Joker_vD 3y ago
  Ah, so the overall economic efficiency improves and then everyone's better off. Wait, what's wrong with that?
  - deleted 3y ago
    [deleted]
  - gmd63 3y ago
    Think of Comcast but for puppies' health
  - jprete 3y ago
    The actual problem is that the unmonetizable value gets tossed out by PE. E.g. customer service will take a massive dive because everyone working for the clinic or whatever else will be time-pressured out of good service. Generally the problem with treating everything via pure financial models is that some things are valuable but hard to measure financially and those are inevitably destroyed by PE and other entropy-maximizers.
TeMPOraL 3y ago
If what's good for an individual short-term was also always good for them long-term, the world would've been an utopia.
twobitshifter 3y ago
Usually what happens is that 60 something year-old founders have retained control and not shared profits with their employees. Looking to sell, the employees can’t buy out the founder, and the founder finds PE with deep pockets. The fork in the road for keeping the company out of PE was passed long before the founder got to retirement age.

scarface_74 3y ago

Exactly. No one forces these businesses to sell. It’s the owners easiest retirement plan instead of passing them down to their kids who may not want to or have the skill set to run the family business.

TeMPOraL 3y ago
Sure, no one is blaming any individual business for selling. Nor would you blame any particular drop of water for flowing downhill. Still, too much water will make a dam burst and most of the water will flood the land; too much business owners realizing their retirement plan by selling out to PEs, and everyone suffers - including those retirees.
- scarface_74 3y ago
  Are you going to tell these mom and pop shops they can’t sell?
  - TeMPOraL 3y ago
    Of course not. The problem aren't the mom and pop shops. The problem are the PE companies making those offers. These are the ones to go after.
    - scarface_74 3y ago
      How is that any different? You’re still trying to stop mom and pop shops from selling out to PE’s. Are you also going to stop startups from getting acquired to? Seeing that only 6 of the hundreds of companies that YC has invested in have ever gone public, acquisitions is the most likely exit
      - TeMPOraL 3y ago
        The difference is that PE is just one of many kinds of buyers, but the one that has a particular tendency of doing trades with nasty externalities. It's this pattern of buying that is a problem, and I don't see fighting it any different than fighting factories dumping toxic waste into rivers. Factories, in general, are not a problem. Actions that have destructive impact on people at scale are a problem. Startups are a bad example because I absolutely would stop startups from being acquired as a general phenomenon. The pattern of startups seeking an exit is one of the worst economic innovations that happened to the world. They at best just waste time of their users/ customers before inevitable rugpull, and at worst, they actively disrupt whole market segments - not creatively disrupt, just in the "blow the whole thing up with VC money, disappear when it's clear the business was never sustainable" kind of way. And again, it's not the acquisitions as a concept that are the problem - it's the pattern of startups being created with acquisition as the goal that is a problem.
        scarface_74 3y ago
        All startups have acquisition as a goal. If not, they aren’t paying attention to statistics. This very site you are on is funded via VCs where only 6 of the hundreds of companies that have been funded have gone public. Who is going to buy these mom and pop shops? Are you going to say that startups can’t be acquired and either have to go public or go out of business when the large companies just put a few people on a clone of their project and crush them?
        TeMPOraL 3y ago
        > All startups have acquisition as a goal. If not, they aren’t paying attention to statistics. That's a problem, though. I'm under no illusion that startups are founded for purely altruistic reasons, but there used to be more focus on creating an actual business, one that makes money by delivering value to customers. Nowadays, the focus is on exit - and the main strategy is to hype up a shitty MVP to force rapid growth, and then either trick some incumbent corporation into acquiring the startup, or go public and run away with the profit before people figure out the company is just hot air. I'm looking at this from the POV of a customer and a member of society, and as such, I see contemporary startups as wasting everyone's time and hopes, at scale. A perpetual flashy mediocrity that slows progress by starving would-be legitimate businesses for oxygen, and occasionally destroys a random market segment in the process. Once again, the pattern is a problem. Startups are fine, acquisitions are fine, keeping an eye for an exit is fine. The issue is that the entire startup ecosystem - founders and investors alike, and increasingly even acquirers - found a way to game the system, and is busy printing money without doing anything of lasting value, while still burning resources and dumping externalities on the rest of the economy.
ryandrake 3y ago
Why would a PE firm be buying (for example) a doctor's office if the doctor-owner was retiring? The doctor is why the business exists in the first place. Without him, it's no longer a doctor's office, it's a charming little suite with front desk people and a few nurses running around. We had a local machine shop (that I used to go to for welding) sadly go out of business because the owner was retiring. I asked him if he considered selling it instead so it could stay open and he said "Who would buy it? I am this shop and I'm retiring. In 5 days it's just going to be a pile of tools."
- scarface_74 3y ago
  For the patients and as a slow “exit”
- delfinom 3y ago
  Yea I don't see PEs buying a doctor's office. I have seen "mergers". A doctor will join up with another doctor and then disappear in a year or two. That let's them legally sell the practice while weening patients over. I have had a CPA start that process recently too. Suddenly announced he's joined up with this new CPA firm . Not to worry, he'll still be here to take care of our corporate needs and has transferred everything over (he's late 60s and snowbirding already) A PE may buy up a already larger medical practice chain or something, but never individual practices. The machine shop example is rough, he could do a merger retirement as well, but he needs to have consistent clients that he can bring over to another shop before slowly phasing himself out. Which may not have been scenario unfortunately.

peteradio 3y ago

If only each individual bond could try a little bit harder to resist the acid.

starcraft2wol 3y ago
the point is the owners have a positive exit that they choose. And yes people are agents
- peteradio 3y ago
  Right America is governed by individual incentives.
  - starcraft2wol 3y ago
    There are more kinds of incentives than money.
    - peteradio 3y ago
      Doing what's morally responsible in spite of everyone else is a losers game these days.

justrealist 3y ago

It's partly that, but in medicine (dentistry, fertility, etc) a lot of clinics are being rolled into PE conglomerates because the bureaucratic overhead in medicine has skyrocketed in the past 20 years, and clinic chains have better support for doing all the paperwork and legal side of things.

plagiarist 3y ago

What a convenient way to completely ignore the macro effects, well done.

gmd63 3y ago

You joke but it's not benign. The reason economic regulations exist is to ensure we maintain the economy as a crucible for rewarding the smartest and hardest workers in society. When private money can grow cancerously via pump and dump crypto schemes, overhyping IPO's that peaked during the series A round, and strong arming small branches of independently owned practices (all to later enable milk mode and reap monopolistic profits), the general public and society is left with overlords who do not build, they eat.

fnimick 3y ago
When have the smartest and hardest workers ever been the richest?
- Applejinx 3y ago
  It's easy for me to believe it's not always been (and doesn't have to be) THIS bad. There's functional value in a capitalist system. It just requires ongoing maintenance, to avoid situations like we're currently in. It's not self-repairing. Operated properly, it makes market conditions self-repairing, but this is at the expense of the potential market capturers.
  - ToucanLoucan 3y ago
    It was better when corporate tax rates and income taxes for the incredibly wealthy were much, much higher. My favorite hobby is putting Thatcher and Reagan's faces on economic graphs to show what year they were elected is almost universally either the same year or just about when the global economic system went bugfuck by basically every metric we measure. But, thanks to those two and the larger political milieu they so well represent, those entities are now rich beyond all reason and in a capitalist system that permits things like Citizen's United, money more or less equals political power so the odds of getting any of this addressed are basically nil, along side other issues that would demand corporations make less money: like climate change, crumbling infrastructure, socialized healthcare for the US, better socialized healthcare elsewhere, the vanishing middle class, etc. Private Equity is going to get us all killed in a very real sense.

techdmn 3y ago

They could, but my opinion is that this is putting personal responsibility front and center on what is a systemic problem. If our economic systems encourage the consolidation of wealth, we should change the systems, rather than blaming individuals.

chollida1 3y ago

Well think this through. There are 10 vet practices in your city. 7-8 get rolled up into one uber practice by a PE firm. They now have far less overhead per patient. Billing, equipment and even vets can be amortized over far more patients. You, the hold out clinic, are now more expensive, or have a far smaller profit ratio, thus you are operating at a big disadvantage to the other clinics in your city. You can hold out but what is your edge in this case where your competitor is now bigger and can handle things like a vet quitting as they have a bunch that roam from practice to practice. Or they can handle buying a new machine for millions while the bank won't lend to you due to your shrinking margins. Economies of scale are a thing and can be a very real competitive differentiator. You the hold out are now getting crushed by your competitors while you look around and see your fellow vets taking weekends off to take their new boat to the lake because they sold their practice and you're working your 11th weekend in a row because your other vet quit to work for your competitor that can now pay more than you. I've had friends live this and its not fun.

1980phipsi 3y ago
If the government increases regulations, then it tends to place a bigger burden on small businesses than big businesses for the same reasons you highlighted about overhead.
Joker_vD 3y ago
Ah, so the overall economic efficiency improves and then everyone's better off. Wait, what's wrong with that?
- deleted 3y ago
  [deleted]
- gmd63 3y ago
  Think of Comcast but for puppies' health
- jprete 3y ago
  The actual problem is that the unmonetizable value gets tossed out by PE. E.g. customer service will take a massive dive because everyone working for the clinic or whatever else will be time-pressured out of good service. Generally the problem with treating everything via pure financial models is that some things are valuable but hard to measure financially and those are inevitably destroyed by PE and other entropy-maximizers.

TeMPOraL 3y ago

If what's good for an individual short-term was also always good for them long-term, the world would've been an utopia.

twobitshifter 3y ago

Usually what happens is that 60 something year-old founders have retained control and not shared profits with their employees. Looking to sell, the employees can’t buy out the founder, and the founder finds PE with deep pockets. The fork in the road for keeping the company out of PE was passed long before the founder got to retirement age.