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Private equity is akin to toxic poison for everyone who isn't one of the (very few) general partners who bask in obscene amounts of scrooge-mcduck money. Think
by metadat 3y ago
Private equity is akin to toxic poison for everyone who isn't one of the (very few) general partners who bask in obscene amounts of scrooge-mcduck money. Think of making a cool $30 million+ a quarter, per partner -- thanks real estate (and apparently, emergency medical services) "investments"! This is a direct funnel to syphon money from the workers to the ruling class. That's even more cash than the top brass at FAAGs make.
How can this phenomenon be reigned in and sorted in the medium to long-term?
It's a loss for everyone (99.9999%) except the miniscule quantity of winners (0.0001%, yes, that's 1 in 1,000,000 - there aren't that many large-scale P/E firms). Housing owned by P/E couldn't be more soul sucking. Scratch that, this applies to every case I'm aware of where P/E firms own a thing.
Anecdote: Last month my dear old dog was suddenly very ill and I spent $12k on emergency surgery to save his sweet life. No regrets, I'm grateful he was fixable. But in the waiting room I did the conservative math for what the SAGE Emergency Veterinary Hospital in Redwood City, CA makes in a year (before the comparatively small overhead, tax-deductible expenses) and they are pulling in at least $30 million in this single location. That's.. a lot, for many 20 total staff. Also they charged me $500 for each follow-up visit, which is way more than my real life surgeon charged me earlier this year! (Even including insurance, he didn't charge much for the follow-ups to make sure I survived.) Damn.
For the dog lovers out there: Doggo is alive and well, can maybe last another year or two we hope.
Btw, who owns SAGE? NVA, a P/E firm.
https://todaysveterinarybusiness.com/sage-veterinary-centers-nva/ https://todaysveterinarybusiness.com/sage-veterinary-centers...
https://www.crunchbase.com/organization/national-veterinary-associates https://www.crunchbase.com/organization/national-veterinary-...
- ryukoposting 3y agoShame.
- deleted 3y ago[deleted]
- hiddencost 3y agoId rather try regulation.
- eddythompson80 3y agoFunnily enough, heavily regulated industries are where PE and large conglomerates shines because they can centralize dealing with all the regulations and paper work. No private vet or dentist is gonna have a legal or accounting department to deal with that, nor do they want to deal with it themselves. It’s easier to outsource that to the major conglomerate that’s handling that for everyone else in the state or country.
- s5300 3y ago[dead]
- kbenson 3y agoIdeally you'd expect the market to deal with it how it normally does, which is to have people open up competing practices to undercut them. I think the problem is that VC has correctly identified this as not only a field where people are willing to pay a lot based on emotion, but it's also regulated enough that their strategy of buying out existing practices leaves them fairly safe from a lot of competition. I wouldn't be surprised if non-competes factor heavily into their strategy either. In that case I would hope the government could at least step in to combat anti-competitive behavior (which I think this definitely is), but that always seems to lag a decade after it's first needed.
- ceejayoz 3y agoLocally, the answer was that the folks who could open up a competing practice were under non-compete agreements if they left the PE-owned place. (We had a local legislator step in to help void them.) https://news.vin.com/default.aspx?pid=210&catId=3115&Id=11865695 https://news.vin.com/default.aspx?pid=210&catId=3115&Id=1186... > Marion said early efforts to enlist former VSES doctors or others in the community to start an ER were discouraging. Some VSES doctors had already left the area, some had signed contracts for new jobs locally, most were worried about the constraints of noncompete agreements they signed with Thrive, and "no one seemed eager to take on the tremendous responsibility of owning, managing and running an emergency hospital even with the help and support of the local veterinary community."
- koolba 3y agoWill be interesting to see how the recent FTC non compete ban plays out in this space. It seems like a prime candidate to promote competition as the key licensing is held by the individual (the vet) as opposed to the company.
- ceejayoz 3y agoYes, I'm hoping that holds up in SCOTUS.
- 3y ago
- Teckla 3y agoHow can this phenomenon be reigned in and sorted in the medium to long-term? Far more aggressive progressive taxation.
- koolba 3y ago> Far more aggressive progressive taxation. Why would increasing taxes lower costs for anything? If anything they’d have to raise prices further to compensate for additional tax payments.
- ceejayoz 3y agoGenuinely progressive taxation would aim to reduce the tax burden on small independent and non-profit vet practices, and increase it dramatically on the profits the big PE firms are taking.
- bongodongobob 3y agoIt increases the risk of turning a profit due to consolidation and lack of competition. Oh you made $20 million off that vet clinic? You owe $19 million in taxes. Makes it harder to gouge people because buying "all the things" becomes far more risky and natural competition has a better chance of doing it's thing.
- koolba 3y ago> Oh you made $20 million off that vet clinic? You owe $19 million in taxes. This type of myopic thinking is how you get asinine policy like the ACA “cap on profits”. Instead of incentivizing an efficient operation, we’ll have some other accounting shenanigans to pass on profits as some other form of income.
- bongodongobob 3y agoIt's an exaggeration of what progressive taxes do. I'm not suggestion 95% of profits should be lost to taxes at 20 mil.
- 3y ago
- MichaelZuo 3y agoThere's the general legal principle that everything not explicitly forbidden in writing is allowed. And often even laws already on the books are half-heartedly enforced.
- metadat 3y agohttps://en.wikipedia.org/wiki/Everything_which_is_not_forbidden_is_allowed https://en.wikipedia.org/wiki/Everything_which_is_not_forbid... This was actually just discussed/linked on HN this past weekend. https://news.ycombinator.com/item?id=40242783 https://news.ycombinator.com/item?id=40242783
- deleted 3y ago[deleted]
- mattmaroon 3y agoThere are a lot of different PE firms that do a lot of different things, but I usually think they get the blame for systems that were broken long before they got there. They only own a small percentage of the real estate market (like sub 2%) but I see ten articles about them buying homes for every one about the real issues that are leading to the housing crisis, such as NIMBYism, other abusive local regulatory schemes, lack of tradespeople, etc. The people who are fucking up the system want you to worry about the PE firms instead. The way to get it sorted is to fix the market dynamics that have lead to ridiculous housing price increases. They’ll move on to greener pastures when homes in good markets aren’t appreciating at high rates. Vet care is increasing in cost pretty rapidly due to lack of supply, so the answer is more vet schools, perhaps government backed loans for people who want to open clinics, etc. Don’t fight the symptom (you can’t) fight the disease.
- shermantanktop 3y ago[flagged]
- mattmaroon 3y ago[flagged]
- toomuchtodo 3y agoCould it be “old HN” was the problem and intelligent people aren’t falling into a trap, but instead see a failing system’s failure points? Intelligent people making informed observations instead of blind nostalgia. Capitalism is broken. It is a tool. Fix the tool. If a bunch of folks connected with YC got wealthy off of a dysfunctional system, it is what it is, congrats on your lottery ticket. 90% of startups fail, 50% of YC startups are alive after five years, only a small minority achieving unicorn status; most fail, that doesn’t mean founders and commoner employees suck, it means they’re unlucky. Certain folks connected to YC have done well regardless of their startup failures. So just be interesting to people who will give you opportunities based on whatever their criteria and belief systems are.
- JumpCrisscross 3y ago> How can this phenomenon be reigned in and sorted in the medium to long-term? Most dentists, veterinarians and such don’t want to deal with administering their businesses. Particularly in heavily-regulated states. Simplifying paperwork and making it easier for juniors to open their own practices (e.g. nullifying non-competed and making commercial leasing smoother) would negate this effect. Private equity, in these situations, is a symptom of an unworkable bureaucratic overhead for small business. It’s not the poison, it’s the ulcer.
- the_real_cher 3y agoNot to mention the government regulations of vet training which keeps vet worker supply low.
- ToucanLoucan 3y agoIt never ceases to amaze me how no matter how clearly and obviously this is just one of those issues that is directly caused by free markets, there is inevitably someone ready to find some damn regulation by the government and blame that instead. Markets have their place. They are not and should not be treated as the default, sole option.
- s1artibartfast 3y agoSeems like vet care is clearly one of those places where markets have a place. I don't think the people will accept socializing the cost of back surgery for someone's dog. I absolutely blame regulation. When my cat was dying I couldn't even by kidney friendly cat food without an prescription from a licensed professional.
- zargon 3y agoMy sincere condolences about your cat. I also had a cat with kidney disease, and the veterinary system was not very helpful about treatment. I had to learn most of it on my own. The "prescription" pet food situation is an example of free market entities subverting regulatory agencies. "Prescription" pet foods exist only through a selective lack of enforcement by the FDA. The manufacturers make claims that the food treats specific medical conditions. That's a drug claim. By law they would be required to test for efficacy and have it approved as a drug. But the FDA chooses to allow manufacturers to sell pet food that makes drug claims without testing or approval so long as they contract with veterinarians to only sell it under "prescription." It's not a prescription (it's not a drug!), it's a way to skirt regulation. For kidney disease you want foods high in moisture, moderate in protein and low in phosphorous. You can buy foods that meet these requirements at your pet food store. There are options that are much higher quality than said "prescription" foods hawked by Hills, Royal Canin and the like. They're just not advertised as treating kidney disease because they don't make inappropriate drug claims!
- nyjah 3y agoHow can this phenomenon be reigned in and sorted in the medium to long-term? I'm not trying to make a political statement. But in my experience, we need to elect the right leaders to ensure we can try to minimize corruption through lobbyists and government officials to get regulation right. And also hold corrupted officials responsible. It's not gonna solve everything, but it does help.
- metadat 3y agoThe P/E orgs are generally working within the confines of all federal and local laws, they never had to lobby or corrupt anything. It's more of a wide open exploit.
- ceejayoz 3y agoLobbying is frequently aimed at preventing new laws that would close such exploits.
- EMCymatics 3y agoThis needs to be talked about more.
- nradov 3y agoPrivate equity per se isn't a problem. Business owners have to be able to sell their equity, and PE firms provide a source of liquidity. Most deals work out well for the seller; it's not just the GPs who benefit. In cases where PE portfolio companies fail it's usually because the business was no longer viable, or they shifted the capital structure too much away from equity and towards debt. The former is just a regular part of the business cycle. I can't imagine how you would reign in the latter. Companies are allowed to issue bonds.
- weaksauce 3y agoevery contraction cycle the PE ghouls swoop in with a large war chest of money and buy up more homes/businesses/anything not tied down. it's a vicious cycle that eventually ends with them holding everything and everyone else is just sent out to pasture. no good way to fix it other than curbing the accumulation of wealth at the very top. it's unsustainable as a society imo.
- seabird 3y agoUntil a few months ago, I worked at a company that was uneventfully owned by various PE firms for the last fifteen years or so. I was shitcanned after the PE owners of my company got their arm twisted into selling my company to a strategic buyer that had previously bought another division of my company and then played dirty under my employer's name. When the buyer was served the inevitable lawsuit, they played even dirtier and effectively goaded the judge into hearing out the weak case made by my employer. After that development, the buyer just threw in a massive offer (likely 4-5x the realistic value, but I wasn't privy to any details), bought us, dropped the suit, terminated any employee that testified against them, terminated any employee that didn't keep the lights on, and have been leaving the business to languish while they sort out multiple other lawsuit-riddled acquisitions they've made in the last year. Whenever an employee of the buyer shows up to a facility that belongs to my previous company, they come with a bodyguard/security, if you need any hints regarding their moral character. Most players in the industry refuse to deal with that buyer, so they just attempt to deceive acquired customers when making an acquisition, and throw a bunch of money and crook lawyers at the (many) lawsuits that pop up. This type of behavior is not strictly limited to private equity. The real issue is that people who pull stunts like the above will never get their teeth punched out for it, and they're a wolf in a henhouse when dealing with a legal system that's largely powerless to say "I know it when I see it". The punishment for being a piece of human dogshit in this manner is effectively nothing, and nearly infinitely less than the reward. I haven't thought of an answer that doesn't give discomforting power to those evaluating these cases, but as long as repeat offenders can paper over every bad-faith action by claiming they're following the letter of (some interpretation of) the law and never get punished for it, it will never stop.
- deleted 3y ago[deleted]
- renewiltord 3y agoHousing being owned by private equity is only feasible because most localities work really hard to ensure that private equity gets good return on investment. They call it "neighbourhood character" and stuff like that.
- giantg2 3y agoSome financial companies are looking to open PE up to more people. I think the floor is still high - around $1M up front and $4M in liquid assets for additional funding (or something like that). I think there are some regulator restrictions on accredited investors. I would bet there's a legal loophole where you could group people into a mutual fund type structure but for private equity using some sort of legal entity.
- tadfisher 3y agoThe restriction is one of: $1 million net worth (excluding primary residence), or $250k/yr income. You meet that floor, you can buy private shares on secondary markets. I don't think it's a loophole to pool accredited investors into a company, it's called a private equity firm :)
- nradov 3y agoThe loophole is that regular people can become "accredited investors" by simply lying. In most cases no one actually checks the numbers they write down for assets and income. I am not recommending committing fraud here, but this is extremely common.
- immibis 2y agoThat's why you either die the hero or live long enough to become the villain: villain tactics *work* - that's why they do them!
- hinkley 3y agoIn the 80’s you had corporate raiders disassembling companies when their hard assets were worth more at auction than the purchase price of the company. It was violent and people didn’t like it. PE is a slower, less obvious strategy, working on a larger pool of companies. But I strongly suspect the same kind of human worked for both company types.
- snapetom 3y agoI work for a PE-owned company in another industry. My wife is a veterinarian, and I wrote my thoughts on those who complain about veterinary costs in another comment. You can't possibly accurately estimate how much SAGE is pulling in at that location. Not even other vets can do this. There are too many variables. As far as PE goes, thank fucking God PE is cleaning up my company and industry. This has been a good ol' boy network, full off incompetence, favoritism, and nepotism. PE are buying players and it's crashing down. Long time execs who haven't have an original thought in 20 years are being forced to retire. A female VP in my company left because a consultant called her "too emotional" recently, and the idiot CEO listened. He's close to getting canned, too. We're losing customers left and right because his old school, "feed 'em hookers and blow" playbook (dead serious) doesn't work any more.
- withinboredom 3y agoMy sister is an emergency vet at a hospital like this. She’s on call, usually sleeping in one of their little sleeping rooms above the hospital floor. She makes a ridiculous amount of money doing random surgeries like pulling pine needles out of dogs stomachs at 3am because the owner didn’t realize the dog ate half the Christmas tree before going to bed.
- krageon 3y ago> How can this phenomenon be reigned in and sorted in the medium to long-term? This is a valid question, but one that has a historical and clear answer already: Guillotines. Pretending this behaviour is anything short of deserving of immediate execution is frankly doing yourself and everyone around you a huge disservice. These are people that exploit others at scale. They know what they're doing isn't right and is extremely exploitative, but they'll keep doing it anyway because it lets them live like modern kings and queens. They're the worst of what humanity has to offer and they should summarily be fired into the sun.
- nojvek 3y agoI had no idea how expensive owning a dog was. Vet and dog food prices have all shot up. Before I used to say you should get a pet, now I don’t. Same with kids. It’s insanely expensive to have kids. You wanna stick it to P/E and capitalism? Reduce spending. Live like you’re making half the income.