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Is the recent trend of private equity buying literally every business going - down to your local plumber - a sign of wealth inequality? Or would it have happene

Is the recent trend of private equity buying literally every business going - down to your local plumber - a sign of wealth inequality? Or would it have happened regardless?

DangitBobby 2y ago
I wish I could remember where I heard this, it's from some NPR podcast like Freakonimics or This American Life. Dentists would normally sell their private practice to an up-and-coming dentist that they know, but recent graduates are so mired in debt that they can't really afford the loan to buy a practice, so PE firms end up buying instead. Edit: > DUBNER: We did a series on private-equity consolidation in the pet-care industry, and we found a lot of problems there for employees and consumers. But we also learned something that seems to apply to a lot of the human healthcare industry. If you look at nursing homes, doctor’s offices, dentists offices, what we heard is that the founders of these offices and companies, when it’s time to retire, they might prefer to sell to one of their junior partners. That’s what often happened before private equity was around. But now those junior partners have so much debt from medical school or veterinary school or whatever that they can’t afford to buy the practice. So the only likely buyer is an outside investor like a private-equity firm. The P.E. firm is satisfying a real need there, but the resulting roll-ups or consolidations are often worse for existing employees and worse for consumers. Do you have any thoughts for how that might work differently? https://freakonomics.com/podcast/the-biden-policy-that-trump-hasnt-touched/ https://freakonomics.com/podcast/the-biden-policy-that-trump...
danaris 2y ago
Yes, it's definitely a sign of increasing inequality, on at least three fronts. On the high side, there's loads of money sloshing around with—especially since the end of ZIRP—no "safe" place to put it. They "need" ways to guarantee high returns over relatively short periods in order to justify their continued access to a never-ending supply of yachts that have other yachts docked inside them; vulture capitalism is a reliable way to do that for people with absolutely no scruples or understanding of (or care about) long-term effects. On the low side, much like DangitBobby noted, there's much less money available to either buy the business of someone interested in retiring and passing it along, or to start your own. The third side is that moneyed interests have captured government to an unprecedented degree—even before the current administration came in, with its "burn down everything that helps people and hand the ashes to the wealthy to sift through for loose change" policies. All the protections that should be stopping private equity from doing these things are reliant on government to step in and actually impose meaningful penalties for harming people and small businesses, and it has been systemically incapable of doing so for far too long.

Is the recent trend of private equity buying literally every business going - down to your local plumber - a sign of wealth inequality? Or would it have happened regardless?

DangitBobby 2y ago

I wish I could remember where I heard this, it's from some NPR podcast like Freakonimics or This American Life. Dentists would normally sell their private practice to an up-and-coming dentist that they know, but recent graduates are so mired in debt that they can't really afford the loan to buy a practice, so PE firms end up buying instead. Edit: > DUBNER: We did a series on private-equity consolidation in the pet-care industry, and we found a lot of problems there for employees and consumers. But we also learned something that seems to apply to a lot of the human healthcare industry. If you look at nursing homes, doctor’s offices, dentists offices, what we heard is that the founders of these offices and companies, when it’s time to retire, they might prefer to sell to one of their junior partners. That’s what often happened before private equity was around. But now those junior partners have so much debt from medical school or veterinary school or whatever that they can’t afford to buy the practice. So the only likely buyer is an outside investor like a private-equity firm. The P.E. firm is satisfying a real need there, but the resulting roll-ups or consolidations are often worse for existing employees and worse for consumers. Do you have any thoughts for how that might work differently? https://freakonomics.com/podcast/the-biden-policy-that-trump-hasnt-touched/ https://freakonomics.com/podcast/the-biden-policy-that-trump...

danaris 2y ago

Yes, it's definitely a sign of increasing inequality, on at least three fronts. On the high side, there's loads of money sloshing around with—especially since the end of ZIRP—no "safe" place to put it. They "need" ways to guarantee high returns over relatively short periods in order to justify their continued access to a never-ending supply of yachts that have other yachts docked inside them; vulture capitalism is a reliable way to do that for people with absolutely no scruples or understanding of (or care about) long-term effects. On the low side, much like DangitBobby noted, there's much less money available to either buy the business of someone interested in retiring and passing it along, or to start your own. The third side is that moneyed interests have captured government to an unprecedented degree—even before the current administration came in, with its "burn down everything that helps people and hand the ashes to the wealthy to sift through for loose change" policies. All the protections that should be stopping private equity from doing these things are reliant on government to step in and actually impose meaningful penalties for harming people and small businesses, and it has been systemically incapable of doing so for far too long.