In “Bad Company: Private Equity and the Death of the American Dream,” Megan Greenwell takes a swing at the private equity world, painting it as a shadowy powerhouse that’s reshaping industries from healthcare to retail. The book dives into the lives of four folks caught in the crossfire, like a Toys “R” Us manager who sees her job vanish and a Wyoming doctor watching his hospital cut crucial services. The narrative isn’t just about the American dream slipping away but also about the grassroots efforts to push back. Here’s what this really means: private equity isn’t some new villain in the economic saga. We’ve seen this circus before, and it’s not the first time financial engineering has trumped innovation.
A Bloomberg review criticizes Greenwell for cherry-picking sob stories, but these aren’t passive victims. They’re fighting against the tide, showcasing how workers are reclaiming their power. Still, let’s not kid ourselves — private equity firms aren’t losing sleep over a few disgruntled employees.
Greenwell explains the basics: private equity isn’t the same as venture capital. While VCs gamble on the next big thing, private equity buys companies outright, often through leveraged buyouts. The goal? Maximize profit, not necessarily by making the company successful but by extracting value, sometimes at the company’s expense. Here’s the blunt truth: private equity firms are experts at making money even if the companies they buy go under. They pull tricks like selling off a company’s real estate and charging rent back to the company. Debt from buyouts? That’s the portfolio company’s problem, not the firm’s.
The allure for private equity is short-term gains, not the long haul of improving company fundamentals. It’s less about business growth and more about how to squeeze out cash. This isn’t some grand revelation; it’s been the playbook for decades. The model took off in the 1960s with “bootstrap deals” and has ballooned into a behemoth swallowing industries whole.
Private equity surged in the 2010s, riding the wave of cheap money. What changed? Policy shifts and economic trends that made certain sectors ripe for picking. It’s no coincidence that private equity has its claws in everything from veterinary clinics to retail stores.
Workers aren’t just sitting ducks. The book highlights various strategies to combat private equity’s grip. From pushing for regulations to confronting firms head-on, these efforts are commendable but face an uphill battle. One notable tactic? Leveraging public pension funds, which are major backers of private equity, to rally support. Toys “R” Us workers, for instance, appealed directly to pension boards, highlighting the real-world impact of their investments.
Some blame private equity for broader economic woes like income inequality and the housing crisis. While it’s tempting to pin everything on them, it’s not that simple. The industries private equity targets often have pre-existing issues, making them easy prey. Sure, private equity exploits these weaknesses, but they didn’t create them. The book’s first section delves into how housing, hospitals, retail, and local media set the stage for their own downfall long before private equity stepped in.
In the end, private equity is a convenient villain, but they’re just playing the game by the rules they didn’t write. The real question is whether those rules need changing. If history’s any guide, don’t hold your breath.
