The GOP's Creative Destruction

Venture socialism is certainly empathetic. Venture capitalism, on the other hand, happens to be useful.

Yes, it's true that unlike some Republicans, Democrats don't "enjoy firing people." They enjoy "investing" your money in exploding electric vehicles, bullet trains, and other highly unprofitable but morally satisfying economic misadventures. Venture socialism is certainly empathetic.

Venture capitalism, on the other hand, happens to be useful.

And until the presidential aspirations of Newt Gingrich were dashed by this starch-shirted RINO, there existed a target-rich environment for conservatives—namely Mitt Romney's elastic record on policy. Yet for reasons well-known, Newt and other Republicans have chosen to make Barack Obama's populist case by attacking Romney's record at Bain Capital.

To the un-cynical independent voter, it may sound as if some conservatives are buying the fable of "unfettered capitalism" rather than concentrating on unfettered government. Now, Gingrich points out that criticism of a single institution is not an attack on the entire free market. This is true enough. Yet when Newt claims that Romney has operated in a "flawed system" wherein "a handful of rich people … manipulate the lives of thousands of other people and walk off with the money," he is only a couple of pup tents removed from a Zuccotti Park mob or an Obama stump speech.

Hey, the plutocracy is a downer. So, is there a particular episode of nefariousness that Bain engaged in or some suspect or illegal deal we should know about, or was the company merely profiting from creative destruction, the sometimes painful but necessary function of capitalism that progressives and jilted presidential candidates find so distasteful? Or is being a filthy-rich dude enough evidence for a conviction?

According to The Wall Street Journal, Bain produced about $2.5 billion in gains for its investors in nearly 80 deals on $1 billion invested during Romney's tenure. (Just to be clear, these were voluntary "investments" with risk and consequences attached, not a Solyndra-style "investment.") "Bain recorded roughly 50 percent to 80 percent annual gains in this period," says the Journal, "which experts said was among the best track records for buyout firms in that era."

That is what fellow Republican candidate Rick Perry describes as "vultures" who wait "for companies to get sick and then … swoop in (and) eat the carcass."

…Or maybe turn companies around by finding efficiencies and cutting waste. Or perhaps they extract whatever worth they can from a dying company (dying long before Bain ever got its talons into them) and reinvest those profits in a new venture. Or maybe they keep the profits and buy stuff. Whatever the case, what they do is a lot more useful than a lifetime of Texas politics.

No doubt you've heard that Romney hasn't helped his cause. He said, "I like being able to fire people." Though, less mentioned is the rest of the sentence: "…who provide services to me. You know, if someone doesn't give me the good service I need, I want to say, you know, that 'I'm going to go get somebody else to provide that service to me.'"

Terrible, is it not? The rich are not only crushing the middle class but also sadists about it. Naturally, Newt, Perry and Jon Huntsman all jumped on the "gaffe" even though they knew well that Romney was (ironically, considering his support of an individual mandate) making an argument for economic choice.

Now, to be fair, left-wing economic populism is, for the most part, only being employed by a gaggle of egomaniacs running for president and doesn't seem to stem from any grass-roots pressure.

But what happens if the attacks work? How many other Republicans will start bemoaning the evils of greed for political expediency? Unlike investment banking, politics is about risk-aversion. Though Americans are fond of economic freedom in the abstract, they also value a stability that healthy capitalism can't always provide. Macroeconomic truths are not easily synthesized into political talking points, nor are they the sort of thing that can emotionally connect a candidate to his constituents. Plying class envy is seductive. And destructive.

Comments

[np]

OT: Netherlands Urged to Repatriate Gold Reserves

Notwithstanding how good current relations may be between the Netherlands and the U.S., once global investor confidence waned on the American dollar, the Dutch could still lose the gold reserves it placed in full trust in various strategic vaults in the US. Call it perhaps survivor’s instinct.

[Scruffy Nerfherder]

I think it’s because they’re going to need it sooner than we will.

[cynical]

Maybe Austin Powers should investigate.

[Suki]

Great, now the government will be regulating venture capitalists so that they won’t have an unfair advantage over government as soon as Obama reads this.

[BakedPenguin]

Venture socialism is certainly empathetic.

[o3]

but vulture capitalism isnt?

[anon]

Define “vulture capitalism.”

[o3]

i didnt invent that moniker but believe it to be akin to predatory capitalism in usage

[anon]

So you define a made up term with another made up term. Brilliant!

[o3]

aren’t all words “made-up” at some point?

[anon]

I’m trying to get you to see that you’re applying random adjectives to the front of capitalism in an attempt to demonize it, where there’s no such foundation.

With “vulture capitalism,” for example, you imply that there are people that buy companies specifically to destroy jobs and liquidate the company. It completely leaves off the other half where the acquisition entity invests the money from the proceeds into more profitable (and generally more efficient) investments, thus reducing waste in the economy.

It’s the classic socialist tactic of arguing for only what’s immediately apparent with no regard for the consequences of actions.

[Pulseguy]

If I ever get flesh-eating disease in my leg I hope a doctor cuts my diseased limb off in order to save the rest of me.

If a company is doing well it won’t be bought up. Weakened companies, those that are on the verge of going belly-up, are targets. In those case it might be better to lose 3,000 jobs and save 7,000 rather than lose all 10,000.

There is nothing wrong with this. And, often these companies are old established companies as those are the types of companies that are likely to actually be dead men walking. Everyone cries about the horrible changes in XYZ corp, that has been a mainstay of an area for 100 years, without getting that without the changes XYZ Corp will close its doors and EVERYONE gets hurt.

[Live Free or Diet]

Swipe! I will be using that. Expect 25?… maybe on the pavement in front of you.

[BakedPenguin]

I don’t get why “corporate raiders” don’t simply say “those jobs were going to be lost anyway when the company went out of business”.

[Scruffy Nerfherder]

My objection to corporate raiders has more to do with the destruction of otherwise financially sound firms. They will buy the company by acquiring a crapload of debt, hold it for a couple of years, then spin it public ladened with that debt on it’s books. Basically they raid it for it’s cash value and destroy its long term viability.

Of course, this couldn’t happen if the stock market weren’t so freaking dumb like it has been over the last 15 years. Thank you, Federal Reserve. I look forward to the days when they have to buy and hold the company in order to turn a profit on it.

[shrike]

You were doing great until you got into the Federal Reserve whack-doodle crazy shit.

[Scruffy Nerfherder]

Under pricing risk is the domain of the Fed. When money is too cheap, stupid shit happens because people don’t exhibit sufficient caution. Simple enough?

[BakedPenguin]

Good point. Also, a good reason to make sure your company owns 50.1% of voting shares.

[Mo]

Treasury Stock has no voting rights. The company can’t “own” any voting shares. Only investors, which may or may not include company employees and management, can.

[BakedPenguin]

Not a well thought out comment on my part. In addition to your point, there could be several reasons why someone might prefer a company where short-term value was being maximized.

[Bean Counter]

+10 to Baked Penguin!! Imagine a Hit & Run poster actually admitting to not being perfect!!! I expect the apocalypse or Obama apologizing to GM bondholders next.

[PS]

I had an econ prof who attributed this to the corporate income tax.

His idea was that firms hide assets and don’t pay out dividends because of taxes, which make them undervalued and targets for corporate raiders.

[anon]

Of course, this couldn’t happen if the stock market weren’t so freaking dumb like it has been over the last 15 years. Thank you, Federal Reserve. I look forward to the days when they have to buy and hold the company in order to turn a profit on it.

Yes, it would be nice to actually have to have value to be able to profit, rather than simply hide your money from inflation.

[R C Dean]

The whole vulture capitalism thing puzzles me.

Under the first step, where the VC firm buys up a company, well, the owners cash out, and a new owner steps in. I got no problem there.

The second step seems to be where the company gets leveraged, that is, the new owners pledge its assets to borrow. I guess they run off with the loan proceeds, so its kind of a slow-motion liquidation.

Why shouldn’t owners be able to liquidate, via leverage or outright sale, their company?

If the company is viable as a going concern, well, where’s the global loss after liquidation? Somebody will still be doing those jobs, using those assets, etc.

If its not viable, well, those jobs/assets were toast anyway.

Where is the problem in all this?

[anon]

The problem is it lets those EVIL VULTURE CAPITALISTS invest the proceeds of the sale in a company that is growing! Try to keep up!
/sic

[Bill]

It’s bad because it’s evil, don’t you see?

[Pulseguy]

I think the company was Stone Containers. Stone Containers went around buying up Mom and Pop commercial dumpster operations. Stone bought them up at 2-4x net income. To do this it borrowed tons of money. It then went public and sold the shares at 15-20x net, thereby making a killing.

Stone containers went broke because it was a cash flow business being run by locals who really knew their business which then was turned over to corporate types who couldn’t run a kool-aid stand, in day to day operations.

Everyone fumed that corporate raiders, vulture capitalists caused the destruction of hundreds of very viable companies.

What really happened though was nothing. A bunch of people who were tired as anything got out of the garbage collection business, a bunch of other people bought something for $20 they should have paid $4 for. Stone and his buddies made a bunch of money off the stupid investors. And, the garbage continued to be picked up through all of this just the same. When Stone went broke, locals bought the assets for 10 cents on the dollar and main street did its thing.

Good businesses that are viable don’t get bought up and when they do, as in the case of Stone, they continue to operate exactly the same.

NOBODY SHUTS DOWN A VIABLE MONEY-MAKING BUSINESS!

[steve walsh]

Examples?

[Scruffy Nerfherder]

Rental service corporation – ticker RRR

[Scruffy Nerfherder]

Was a viable business unit sold to private equity firm which proceeded to load it down with debt incurred from the sale and spunit public. Company has never recovered and was recently acquired.

I fail to see the benefit. It’s legal, but not rational. The real blame lies with a distorted stock market that would buy into a company laden with so much debt.

[shrike]

I have no issue with Bain’s business model but they are seedy compared to a Berkshire Hathaway or a Fairfax Financial. The latter has compounded BV 25% and share price 21% annually over the last 25 years without dismantling companies like Bain did.

http://en.wikipedia.org/wiki/Fairfax_Financial

[Tak Kak]

How does that make them “seedy?”

[shrike]

Buy a young growth company like Apple in 1980 or buy a dying dinosaur like Data General and fire people, suck the cash off the balance sheet, cut customer service, screw suppliers, outsource assembly, run the engineers off, and sell the patents.

Which one is seedy?

[mike]

Neither? Unless there’s any fraudulent or illegal behavior implicit in your characterizations?

[Dave Anthony]

I still don’t understand. How does that make them seedy?

[R C Dean]

fire people,

Who aren’t entitled to their jobs.

suck the cash off the balance sheet,

Its their cash, why not take it? I thought one of the beefs with corporate governance was that they were hoarding cash rather than paying dividends.

cut customer service,

Either customers put up with it, in which case its an increase in efficiency, or they leave, in which case some other company gets their business. I’m not seeing the global loss here.

screw suppliers,

Potentially a problem, granted.

outsource assembly,

Efficiency? Creative destruction? Hello?

run the engineers off,

Not entitled to jobs, can be reemployed, etc.

and sell the patents.

So, somebody else takes over that business line. Global loss? Still not seeing it.

[anon]

But the wagon wheel production MUST CONTINUE!

[Francisco d Anconia]

Think of the wagon wheel manufacturer’s CHILRENZZZZ!

[Mo]

My beef is with LBOs. The LBO shop borrows money, with the firm as collateral, buys the company, cashes out and leaves the company with all of the debt.

IMHO, the LBO shop should be on the hook for the debt.

[Bill]

If the firm is viable at all, why would they just destroy it instead of trying to get the profits from those areas that do work? Why would they drive off customers? That makes NO F*&^% sense. Sounds like another progressive strawman to me.

[Pulseguy]

They can. Companies not listed on the stock exchange sell for a fraction of the multiple that the same company would sell for listed. Buying up a viable company at 2-5x net is commonplace. Assemble enough of them and then go public. It is possible to sell that stuff you bought at 4x net for 20x net. To buy it up and run your own glitzy wall street shop you might saddle a 4x net company with 6x net debt.

Eventually the company goes broke. But, the individual portions of the company don’t go broke. They get bought up by other companies, or they go back to being companies not part of a listed stock exchange company. If the department is viable it continues to operate. If it doesn’t instantly another company will fill its space.

The people who lose are the dummies who invest in stocks like that.

If a company is viable it remains viable despite the ownership change. If it isn’t viable, it won’t be, unless the ‘vulture capitalist’ actually instituted some good management practices, laid off the dead weight, and made it viable again.

In other words, either nothing happens except Wall street types make money off of dentists from Iowa, or something good actually happened and a once viable company is re-made viable.

[yonemoto]

what’s wrong with dismantling companies? If a for-profit business is unprofitable, it’s burning resources just existing. It’s an albatross on society.

Why not resell its assets so that it can be put to use doing something people actually care about or need?

[shrike]

Its a completely legit form of free enterprise. I have no issue as I noted.

Its also indicative of the kind of person Willard is and a valid political topic.

Run Chainsaw Al Dunlap – I don’t care.

[R C Dean]

Its also indicative of the kind of person Willard is

I think the kind of person Willard is shows up more in his evasions and refusals to defend capitalism, than his enthusiastic participation in it.

[P Brooks]

Apparently Newt has concocted a definition of “crony capitalism” which excludes himself, and will now pursue a vigorous attack on Romney with it.

Economic Populism; it’s what’s for dinner.

[shrike]

Freddie Mac – Newt may disclose contract.

http://www.businessweek.com/ne…..tract.html

Newt shot that idea down quickly.

[Hazel Meade]

How can Romney’s business at Bain Capital be consider “crony capitalism” at all?

Did Bain benefit from special tax breaks, subsidies, or regulatory clauses? Did Bain have any special inside political connections to obtain such benefits?

[P Brooks]

a good reason to make sure your company owns 50.1% of voting shares.

Wait, what? So management can always say, “FUCK YOU!” to the shareholders (you know, the people they putatively work for)?

[anon]

And then you can in turn sell your shares and say “FUCK YOU!” to management.

[R C Dean]

Technically, companies can’t own/vote their own shares. These used to be called “treasury shares”, but these days they are just “authorized by unissued.” If they’re not issued, they’re can’t be voted.

[BakedPenguin]

P Brooks: If they work to decrease the value of the shares, they’ll suffer as well.

[Anonymous Coward]

Barack’s venture capitalism: Solyndra.

Romney’s venture capitalism: Staples.

But fawk’em both and vote Ron Paul.

[P Brooks]

Rick Perry describes as “vultures” who wait “for companies to get sick and then … swoop in (and) eat the carcass.”

“Worms gotta eat. Buzzards, too.”

[Bill]

Is that the guy who got 0.7% of the vote?

[Francisco d Anconia]

I reckon so.

[Francisco d Anconia]

http://www.youtube.com/watch?v=ML6oLuLecQ4

[Mike M.]

When you can’t fire people, you end up with Hostess: a bankrupt company.

But sometimes I think liberals would rather see a company run completely into the ground than allowed to survive by becoming more efficient.

[Liberals]

Not just a company. We feel that way about countries, too.

[Pulseguy]

It is much better to look as though one is doing the right thing, even if it isn’t, than actually do the right thing, if it appears you will look like a Republican.

[P Brooks]

There are a lot of problems in corporate governance, these days, many of which can be traced to regulatory capture by management, at the expense of owners.

Having the government set compensation won’t help.

[P Brooks]

And- if you, as a manager, want to run “your” company by fiat, don’t go public or work for a public company.

[Hat Trick]

The idea that all of these companies were maximizing their performance in the market is ludicrous. Have you ever looked at the P&L of a $50mm privately held company? The expenses are often loaded with owners’ perks (cars, vacation homes, $100K salary for spouses/children, etc).

PE often (though not always) comes in, fixes the expense structure, and puts new capital into the business to grow it. Often, owners/management makes $ on the first transaction AND the second transaction (when the PE firm “flips” the deal years later).

This company made a former dog groomer a multi-millionaire thanks to sound PE investment:

http://www.furminator.com/

There are bad actors out there for sure (dividend recaps can be especially egregious) but overall PE is healthy. Romney should highlight this a lot more than he is doing.

[R C Dean]

This company made a former dog groomer a multi-millionaire thanks to sound PE investment:

I think you mean “thanks to heavy investment in patent lawyers.” That guy made millions by ferociously defending a patent that consists of attaching a groomer blade to a stick. That’s his “innovation”, and that his business plan.

[Hat Trick]

I have plenty of contempt for our current patent system (especially when it comes to software) but that’s kind of beside the point. You may hate that, but the additional resources and expertise came from PE. They bought the firm when it was small and was in danger of getting crushed by larger suppliers. The patent protection enabled the firm to scale. We’ll never know, but there’s a reasonable case to be made that without PE, PetSmart (or someone else) would have copied the product and the firm would have gone out of business.

[Hat Trick]

By the way, have you ever used one? I have a yellow lab and the Furminator really does work amazingly better than anything else I’ve ever tried.

[Expat to Be]

It does work better than any other dog grooming tool I’ve ever used. Thanks to that evil company named Amazon, which has stolen countless jobs from–who knows, everyone?–I got it really, really cheap, too.

[R C Dean]

Fair enough on the private equity point. As a poster child for the benefits of PE, though, Furminator Inc. wouldn’t be my first choice.

No furminator here. I use an angle grinder on my dogs when they get crusty.

[anon]

I have found Tony’s website:
http://www.hermes-press.com/vulture.htm
“America has always suffered under a capitalist economy that exploits and murders workers.”

[anon]

” In actuality, capitalism has always included both the manufacturing and the finance aspects and has always worked to the long-range impoverishment and ultimate murdering of workers worldwide”

[R C Dean]

Ah, yes. Nothing says “long-range impoverishment” like the arc of economics since capitalism took hold.

[anon]

You’d think that would be case in point. But alas, there’s still the entire website devoted to this bullshit.

[Pulseguy]

An entire website!! There are entire universities devoted to it, too.

[Francisco d Anconia]

Thanks, I need a shower.

[AlmightyJb]

If we don’t have trains, how can we make them run on time to the camps?

[BakedPenguin]

National debt video.

[Francisco d Anconia]

“To the un-cynical independent voter, it may sound as if some conservatives are buying the fable of “unfettered capitalism” rather than concentrating on unfettered government.”

Yet more evidence that politicians are TRULY without principles. Whatever it takes to obtain and keep power.

Why do voters tolerate this shit when the answer is right under their nose?

[Yet Another Dave]

I’m not convinced that Romney should be the GOP candidate, but he and I share one thing in common – we both enjoy being able to fire people.

If you ever wondered if there actually is a media bias, the legs this story has gotten should be proof. The media has been working overtime to paint Romney as a sadist that gets pleasure out of putting people out of work, but that was not what he said (though I do give credit that he could have said what he said a whole helluva lot better). He said he likes “being able to” fire people.

We should all be able to fire people. If someone isn’t pulling their weight, if they aren’t providing the services they’re supposed to, be they a person or a company, they need to be canned. Frankly, I believe one of the reasons our public educational system and the government itself has gotten so bad is because there are so many protections in place that those employees have no more incentive to do a good job. If they were at risk of losing those cushy jobs, they might actually *do* their jobs for a change.

[Tony]

The other Republican candidates maybe… at least on MSNBC they’ve made sure to put the quote in context. While perhaps expressing a little amusement over the fact that Romney had an ad that deliberately lied about something Obama said. Sauce for the goose, I believe were Romney’s words.

[Hazel Meade]

The rreasponse to this should really be “yes, I like having choices. Not being able to fire people means having fewer choices.”

[Yet Another Dave]

Well, in terms of what they were discussing, which happened to be ObamaCare, you’re right that his emphasis should have been on having choice. As for the “being able to fire people” part, that should have been more along the lines of “we’re better off when we can change our providers whenever we like” or something to that effect.

Doesn’t change the truth of his ultimate point that he spoke it poorly.

[Azathoth]

“wherein “a handful of rich people … manipulate the lives of thousands of other people and walk off with the money,”

There was a book that had people in it like this….now what was it called?

Oh, yes, Atlas Shrugged.

There are people who are nominally ‘captialists’ who do things that are fundamentally anti-capitalist. Soros, Buffet, and Romney. What else casn Masscare be called if not anti-capitalist?

Worse, the laws these people back or pass ‘for the little guy’ always seem to screw ‘the little guy’ and put money in their pockets and power in their hands.

[Strawman]

The reason “laws passed for ‘the little guy’ end up screwing ‘the little guy’ is because corporations have pretty much taken over the government. And not, as many libertarians claim, the government intervenes too much into business.

Congress passes laws to regulate bank fees. Banks create new fees. Fortunately, enough people walked away from BOA and they got rid of that fee…which they’ll bring back in some other form.

IF YOU DON’T WANT MOTHER to come into the room and TAKE AWAY the TOYS, the children should behave.

Regulations and Government Intervention happen after consumer out-cries…NOT BEFORE.

Libertarians are assholes. They prefer that we SUE a company that poisons us afterwards that to have policies and regulations that stop poisoning us in the first place.

[Isaiah]

Regulation is a complicated thing. The problem with government regulations is their incentive structure. They are incentivized to not screw up. This risk aversion is different than the theoretical optimal deterrence created by product liability.

Furthermore, ex ante regulation fails to accurately capture after-market usage and the incorporation of new data. Liability encourages the cheapest cost avoider — the business likely posses the most information — to prevent the loss.

In short, there are many reasons to believe ex post regulation through lawsuits leads to the cheapest and optimal deterrence level. Ex ante regulation suffers from multiple harms.

[Pulseguy]

Isaiah….that is so dumb. Libertarian stuff like this drives me nuts.

Some bad actions take a long time to come to light. Many can’t be discerned beforehand by the party who is about to be negatively affected.

If an apartment building has been built without seismic supports it looks identical to one that was built with seismic support. If I claim my non-supported building was built with seismic support and sell it a bit cheaper than the one with the support actually in it no one will find out until the next shaker comes along and everyone dies.

The market place will definitely not buy any product from that company, but since ownership is also not obvious, the same unscrupulous builders can build something else somewhere else exactly the same, make money, and kill people.

Not only this could happen if there were no regs, but this would happen if there were no regs.

And, for the record, I’m a real estate developer.

Make the regulations reasonable and easy to follow and have the bureaucracy respond quickly. Good operators want that.

[Strawman]

Do we have have the FREE MARKET to thank for the following?:

– Roads (libertarians favorite)
– Air Planes
– Automobiles
– Telephones
– Computers
– Televisions
– Space Technology
– Trains

THE ANSWER IS NO. ALL of these innovations pretty much came from WAR.

War is funded by public tax dollars.

I will admit though, the free market did make all of these products better and more readily available. However, the initial inventions were funded by the thing u libertarians hate most … THE GOVERNMENT…Because you are a bunch of children…and get MAD when mother comes in and takes away your toys…after misbehaving.

[T]

Here’s a zippo, strawboy, Go play instead of bothering the adults.

[WarMonger]

I suppose we should stay in both Iraq and Afghanistan. Can you imagine the innovation that would result if we remain for another century?

[Pulseguy]

Roads are paid for by developers. The developers build the roads and give them to the highways department or the municipality who then in turn taxes people to raise funds to keep them operating.

Everything else you mentioned, with the possible exception of Space Technology, (whatever that is), was created by individuals, not by government.

Have you heard about the Wright Brothers?

And, Roads? You think roads came from war?

[anon]

I will admit though, the free market did make all of these products better and more readily available. However, the initial inventions were funded by the thing u libertarians hate most … THE GOVERNMENT…Because you are a bunch of children…and get MAD when mother comes in and takes away your toys…after misbehaving.

I really hope that you’re trolling, because your list is wildly inaccurate if you aren’t.

Also, isn’t your premise really that war is the mother of all innovation, and not tax dollars? I find that a bit untenable of a position.

[Strawman]

I’m a dipshit who believes the government is my mommy.

[Strawman]

I LOVE WAR! ROAAAADZ!

[Strawman]

War is the catalyst to innovation which could ONLY be funded by tax dollars.

[Blackwater aka Xe]

You wanna bet…?

[Strawman]

I’m a dipshit who believes the government is my mommy.

Yes, the government acts as the MOMMY when the bullies (whether rich, strong, powerful in influence/numbers) get things taken away from them when they don’t behave.

[Jeff]

More like, government is the biggest bully around who takes stuff from other, smaller kids (bullies and non-bullies alike) and distributes the loot among itself and its friends while deluded fucks like you cheer them on and make them feel all warm and pious about their theft.

[Hazel Meade]

P Brooks brings up an interesting point.

Compare Bain Capital to the crony capitalism of Solyndra, or the AIG bailout. Which is honestly healthier for society? Private equity firms putting unprofitable companies out of business? Or government officials funneling public money to unprofitable first to keep them in it?

[0x90]

i.e. vulture capitalism vs. parasite capitalism. Capitalism: anthropomorphic all the way down.

[0x90]

hmm, maybe not anthro — what am I looking for here?

[Hazel Meade]

Hey at least they’ve moved on from thinking of it as a machine, to thinking of it as a living organism.

[Yet Another Dave]

I agree, and add that companies like Bain Capital don’t usually put unprofitable companies out of business. More often than not, their re-organization efforts save the company, and most of the jobs. Granted, it’s not great that 25 percent of the employees get laid off, but isn’t that better than 100 percent of the employees, which would be the case if the crippled company were allowed to continue on its downward slope?

And though corporate raiders aren’t great, they’re still better than government bailouts that prop up ailing companies, delay the inevitable, and spread the cost out to all us taxpayers. Look at Government Motors – all of that government infusion of funds just meant that they continued on with nothing changing, and they’re still hamstrung by the crippling agreements they’ve got with their unions; had they been able to collapse, they might have survived via bankruptcy or buyout by a raider company, either way they would have been reorganized and been back on the road to a new, healthier company. But the government can’t resist using their anti-Midas touch that turns everything to shit.

[Hazel Meade]

I’m betting their success rate at generating profiable enterprises is much higher than the government’s. Maybe somone should compile some statistics.

[Derivative]

Why do you say “corporate raiders aren’t great”?

What part of risking your own money in productive assets is “raiding”?

Or did you say that because you thought you’d join the zeitgeist?

[Pulseguy]

As soon as you use the term “corporate raider” you place your mindset in a negative space. The term itself is pejorative.

If they were called ‘Resource re-allocators’ it would be more accurate, but that lacks any zing when you want to slag rich people.

[16th amendment]

My conspiracy theory of the day is that Newt actually wants Mitt to win. Everyone says he’s a smart guy, and I’d say manipulative too. He knows he’s not going to win. He’s bringing this Bain stuff because he wants to get it over with before Obama brings it up in September.

Now, he can explain himself — see the post above where someone wrote “I agree, and add that companies like Bain Capital don’t usually put unprofitable companies out of business. More often than not, their re-organization efforts save the company, and most of the jobs. Granted, it’s not great that 25 percent of the employees get laid off, but isn’t that better than 100 percent of the employees, which would be the case if the crippled company were allowed to continue on its downward slope”. And besides, in 2 months voters will have forgotten about it.

His remaining problems are going to be Romneycare and Mormon. I have no idea why in the 21st century being a Mormon should be a problem, but several articles and people have told me this.

[Yet Another Dave]

His remaining problems are going to be Romneycare and Mormon. I have no idea why in the 21st century being a Mormon should be a problem, but several articles and people have told me this.

Yeah, I don’t get why his Mormonism is an issue, either. I don’t really like Romney – can’t explain why, but the guy turns me off. But it has nothing to do with his religion. In my experience, Mormons as a whole are fairly devout and upstanding people, qualities I wouldn’t mind it at all if our president actually had for a change.

[kirk]

Creative socialism gives us, to pick an banal example, highways that cost less to build each year and will last longer using common design principles. As for the rest of the TL;DR. Don’t start stupid and I will read on. Same for rockets to space for 40 years when no one else could pull it off.

[Derivative]

You always have to ask, “at what cost?”

How much wealth did the government destroy in order to build one decent rocket?

All of that squandered wealth equals productive capacity taken out of the economy and diminished standard of living.

Eventually, you can accomplish anything with enough money. But what could have been doing instead?

[Derivative]

Case in point: without NASA, we might never have the SHAW-WOW.

–WHO CARES IF WE NEVER GOT THE SHAM-WOW?

[Pulseguy]

I doubt very much highways did anything about inventing good designs and better products for people to drive on. Individual companies would have worked on inventing products that stand up over years of wear and then sell that to the government.

[Derivative]

These “raiding” ideas don’t make any sense. Here is why: if the investor idles assets, there is a depreciation cost & an opporunity cost in addition to a cost of capital.

If the asset gets idled and not sold, the asset must be an economic destroyer. Destroy wealth, and you destroy jobs.

Companies don’t get “raided/looted” if there is value left in running them. If they get broken up, it is because the current management is running good assets into the ground; that productive capacity needs to go somewhere else before the assets wear out.

At the new company, a new person gets to use that asset. Conversely without the “raiding” the asset would have been slowly destroyed and the associated jobs lost forever.

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