To their new book, Bad Company: Private Equity and the Death of the American DreamJournalist and Cable Student Megan Greenwell It chronifies the devastating impacts of one of the most powerful but not understanding forces of modern American capitalism. Flush with cash, largely not regulated and relentlessly focused on profit, private capital companies They have quietly remodeled the United States economy, assuming large pieces of industries ranging from healthcare to retail trade, often leaving financial ruin in turn.
Twelve million people in the United States are now working for private -owned companies, Greenwell writes, or about 8 percent of the total population. His book focuses on the stories of four of these individuals, including a “R” toy supervisor who loses the best job he has had and a Wyoming doctor looking at his rural hospital cuts the essential services. His collective experiences are a cursed story of how innovation is being replaced by financial engineering and the ways that all changes are paid by everyone, except those at the top.
In a review of Bad company For Bloomberg, a private capital executive of a long time accused Greenwell of searching for sad stories inevitably “sad ending. “But the Greenwell selected characters are not achieved and look at their private capital devastates their communities.
Greenwell spoke with Wired at the end of last month about what is and is not private capital, as it has transformed different industries and what workers do to regain their power.
This interview has been published for clarity and length.
Wired: What is private capital? How is the business model different from, for example, risky capital?
Megan Greenwell: People confuse private capital and venture capital all the time, but it is totally reasonable that normal people do not understand the difference. Basically, the easiest way to explain the difference is that venture capital companies invest money, usually in startups. It is essentially about the company and expect some kind of returns over time. They are usually also playing a significantly longer game than private capital.
But the way private capital works, especially with lever purchases, where I focus on the book, is that they buy companies directly. In Capital Venture, put your money, trust a CEO and probably have a board seat. But in the palante -based purchase model, the private capital firm is really the owner and control of the portfolio company.
How do private capital companies define success? What types of companies or companies are attractive?
In venture capital, VCs are evaluating if an agreement is based only on whether they think that the company will be successful. They look for unicorns. Will this company be next Uber? Private capital seeks to make money with companies in ways that really do not require the same company to make money. This is like the largest.
So it’s less at the game.
It is very difficult for private capital companies to lose money in offers. They have a 2 percent management fee, even if they are running the company in the land. They are also able to remove all these tricks, such as selling the company’s real estate and then collecting the company’s rent on the same land. When private capital companies take loans to buy companies, the debt of these loans is assigned not to the private capital company but to the portfolio company.
