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They extract value in a nonsustainable way, probabalistically, while creating a moral hazard. Lets look at Vetinarians. They are buying up huge numbers of vet

They extract value in a nonsustainable way, probabalistically, while creating a moral hazard. Lets look at Vetinarians. They are buying up huge numbers of vet clinics. The owners retire and they bring in H1B or other lower cost vets, and increase prices 3x. My dog got sick and it cost $7k for then to figure out she had Addison's disease. The POC was some business person trained to extract money from you using guilt. They would give cost estimates and thrn ask for triple that every 24 hours. "she is such a sweet dog, I know its a lot of money but it costs so much to run a pet urgent care, we could just put her to sleep" was a paraphrase of every conversation. In the end it cost 2 cents to give her a pill that is the first thing they should have tried and she recovered. More than $7k for a dog to be at the vet for 3 days. This is not sustainable. I will never take another pet to a facility like this, its impossible to afford it. In the meantime they have several years of burning customers and fantastic financials, plenty to get a massive loan for a second PE firm to buy the business, that PE firm gambling they can extract enough management fees to make back the small % of equity they actually had to pay themselves before it goes bankrupt. If you made PE firms responsible for even a fraction of the debt of the businesses they operate they would disappear inside of 3 months. They are purely a hack on our laws around corporate debt and too much dumb money flooding the market due to privatization of retirement accounts.

SoftTalker 1y ago
So there should be a great opportunity for young vets to open their own practices and undercut the PE-owned clinics. Why don't they?
- pphysch 1y ago
  The problem with "enshittification" of this sort is that the shitty solution doesn't just go away. It lingers and aggressively defends its territory, possibly in unfair ways. There are network effects. These zombie businesses should get outcompeted, but it's easier said than done.
- OkayPhysicist 1y ago
  There's the rub: Private Equity represents the decomposers of business world. Healthy, thriving industries don't sell out to PE, in the same way most healthy, thriving animals don't get colonized by fungi. In the case of vets and dentists, historically the practice owner would sell to some young practitioner, and the cycle would continue. But what happens when the businesses are worth too much for the next generation to afford (or the next generation's too broke)? Enter PE. They buy out the old practitioner, hire the young one that would have ideally bought the place themselves, then proceed to gradually dismantle the business. Divest all the capital assets, fire all the institutional knowledge, and even convert the business's accumulated customer good will into cold hard cash by exploiting the hell out of them. Then it's just a matter of running the hollowed-out shell of business until a stiff breeze leads to complete bankruptcy.
  - xnx 1y ago
    > Healthy, thriving industries don't sell out to PE Sometimes the owners want to cash in and retire after decades of operating their business. Selling to PE is one way to do that.
    - ltbarcly3 1y ago
      PE carves out industries and runs them into the ground. That IS their business model. Of course the vet will sell to the highest bidder, but the PE bid is higher based on an economic pattern that is destructive and created by legal loopholes, not free market forces.
    - OkayPhysicist 1y ago
      In theory, a business should be worth more alive than dead, so a young dentist looking to start their own practice should be willing to pay more than a PE that plans to break the bones and suck out the marrow. On an individual business scale, that's hit or miss. When entire industries start getting swallowed up? It's because something fundamental is wrong with the industry. For example, Family Dining restaurants (i.e, relatively cheap sit down restaurants where the appeal is more the service than the food like Red Lobster, Chili's, Applebees, etc) are doomed, and have been for a while. Millennials and younger, on average, value table service less than their parents did, preferring fast casual restaurants (restaurants where you order at the counter, but are a step up from fast food) with better food in the same price bracket. This trend is widely known, so there's a shortage of people willing to buy up family dining franchises. But there's a lot of capital tied up in these restaurants. So in swoops PE, to basically bet that they can make more money killing the business than its current owners are able/willing to.

SoftTalker 1y ago

So there should be a great opportunity for young vets to open their own practices and undercut the PE-owned clinics. Why don't they?

pphysch 1y ago
The problem with "enshittification" of this sort is that the shitty solution doesn't just go away. It lingers and aggressively defends its territory, possibly in unfair ways. There are network effects. These zombie businesses should get outcompeted, but it's easier said than done.
OkayPhysicist 1y ago
There's the rub: Private Equity represents the decomposers of business world. Healthy, thriving industries don't sell out to PE, in the same way most healthy, thriving animals don't get colonized by fungi. In the case of vets and dentists, historically the practice owner would sell to some young practitioner, and the cycle would continue. But what happens when the businesses are worth too much for the next generation to afford (or the next generation's too broke)? Enter PE. They buy out the old practitioner, hire the young one that would have ideally bought the place themselves, then proceed to gradually dismantle the business. Divest all the capital assets, fire all the institutional knowledge, and even convert the business's accumulated customer good will into cold hard cash by exploiting the hell out of them. Then it's just a matter of running the hollowed-out shell of business until a stiff breeze leads to complete bankruptcy.
- xnx 1y ago
  > Healthy, thriving industries don't sell out to PE Sometimes the owners want to cash in and retire after decades of operating their business. Selling to PE is one way to do that.
  - ltbarcly3 1y ago
    PE carves out industries and runs them into the ground. That IS their business model. Of course the vet will sell to the highest bidder, but the PE bid is higher based on an economic pattern that is destructive and created by legal loopholes, not free market forces.
  - OkayPhysicist 1y ago
    In theory, a business should be worth more alive than dead, so a young dentist looking to start their own practice should be willing to pay more than a PE that plans to break the bones and suck out the marrow. On an individual business scale, that's hit or miss. When entire industries start getting swallowed up? It's because something fundamental is wrong with the industry. For example, Family Dining restaurants (i.e, relatively cheap sit down restaurants where the appeal is more the service than the food like Red Lobster, Chili's, Applebees, etc) are doomed, and have been for a while. Millennials and younger, on average, value table service less than their parents did, preferring fast casual restaurants (restaurants where you order at the counter, but are a step up from fast food) with better food in the same price bracket. This trend is widely known, so there's a shortage of people willing to buy up family dining franchises. But there's a lot of capital tied up in these restaurants. So in swoops PE, to basically bet that they can make more money killing the business than its current owners are able/willing to.