To quote from Alex Blasdel’s article in The Guardian,
“Unsurprisingly, practitioners of private equity see their industry differently. Yes, they admit, there have been a few bad actors, and yes, a handful of bad deals, but by and large private equity firms are not full of profiteering sociopaths merrily making the world a crappier place.
Rather, they’re the necessary fertilizers of growth and innovation, using their superior talents to rid companies of bad management, rejuvenate sluggish businesses and grow the economic pie so we can all continue to enjoy the relative prosperity of our developed societies.
It’s just capitalism doing what capitalism does best. They call it “value creation”.
Christmas is coming, and with that, one can go out and “deck the halls with boughs of holly.”
A preferred quotation of mine comes from the billionaire, Warren Buffett, who knows a thing or two about finance, and financiers. On private-equity return calculations, he says
“they’re not calculated in a manner that I would regard as honest.”
He was referring to proposals Berkshire had received—not every private-equity fund. And yet, Warren is a careful man in his pronouncements, and it’s worthwhile sometimes to peek behind careful language.
But, getting back to ‘relative prosperity depending upon who your relatives are,’ we might take a glance at the Ellison family.
I choose to call the Paramount Skydance handoff from father Larry to son David a case of nepotism because that is my opinion, and opinions have some legal cover. David Ellison was hardly sucking at the family breast, being 43 years old and having some actual background and experience in media.
Perhaps ‘dynastic corporate control’ is less caustic than ‘nepotism,’ as it brings to mind sports dynasties, such as Brady’s Patriots and Mahomes’ Kansas City Chiefs. The super-rich usually prefer the down-home sports metaphors.
In any event, Larry Ellison had the $billions and son, David, the need. I am told the Paramount Skydance deal tapped Larry for $6 billion and a private equity partner called RedBird for another $2 billion. That landed David the dual title of Chairman and Chief Executive, leaving dad another $250 billion or so to putz around with.
What the hell, if you can’t give your kid a boost when needed, what kind of father are you?
But it essentially calls attention to the future of who owns America, as the billionaire class acquires assets that multiply all by themselves, and their founders approach the end we all face at the hands of the Grim Reaper.
In the last ten years the richest 10% gained about $67.5 trillion, more than twice the $31.7 trillion gained by the other Americans 90%, combined.
Whoa now, better grab that horse by the bridle before it runs off with what’s left of the disappearing middle class.
My head spins at trying to get a grip on that.
When 10% of billionaires already had the equal those of us 90% below them, and in a single decade gained twice that advantage, when do we lesser beings simply put coolie hats on and go out to tend the rice-paddies?
In the wider context, our economic overlords swept up America’s industrial base and shipped it across the globe (remember as a kid, thinking if you dug straight down from Chicago, you’d come out in China?).
Nixon and Kissinger remembered that.
And I cheered them on back in 1972, because I was of the belief that one doesn’t go to war with one’s best customer. But, foolish me, I didn’t realize that the millionaires I’d grown up with hankered to be billionaires. And cheap Chinese labor made it all happen.
That entailed a major pause in the time-machine.
We’re going back now to the fifties and sixties.
Most of you weren’t alive then, but those were my business days, and millionaires were my clients.
They paid their taxes, had nice homes and sent their kids to private schools. They didn’t hunger for more. One home with a Cadillac and a Packard in the garage was enough. We lived on Lake Michigan, so maybe they had a motor yacht, but forty feet was enough. One golf club, one swimming pool, and one horse for a daughter was enough.
No millionaire I knew could even conceive of a thousand times as much, and now that’s the very smallest ticket to the Billionaire Club.
Then, somehow, Ronnie Reagan in America, and Margaret Thatcher in Great Britain, made them hungry.
Money became a game. Winning was the goal, and doing well was for suckers. Was it their kids? I lived through it, but I don’t know. They were nice people. Does anyone know Jeff Bezos, Mark Zuckerberg, or Elon Musk, and think they are nice people?
They want it all.
Warren Buffett is that last nice guy standing in the billionaire community, and he doesn’t hang out with them. Warren lives in Omaha, in a house he bought 68 years ago for $31,500. He plays bridge, and plays hands with local bridge club players and peers, claiming to have hooked Bill Gates on the game.
Private Equity is coming after healthcare, buying up hospitals, doctors’ groups, handicapped facilities, insurance companies, and retirement homes. Costs are off the walls, care is down, and many are closing, or conglomerating. I’m told that rather than investing in highly cyclical or asset-heavy businesses, modern private equity (the newest and most highly profitable version) goes after high-margin industries with predictable recurring revenue and opportunities for ‘buy-and-build’ consolidation.
Prisons fit that bill.
So does ghetto housing.
It’s just capitalism doing what capitalism does best. They call it “value creation.”
Private Equity is going to get it all, too.
The idea is, for no place the public can hide.
Sports is next, then leisure, then auto loans, banks, credit cards and student loans.
Then, perhaps government itself, but only the parts they don’t already own…