“Slash and burn: is private equity out of control?” The Guardian
By Alex Blasdel, 10 Oct 2024, London
From football clubs to water companies, music catalogues to care homes, private equity has infiltrated almost every facet of modern life in its endless search to maximise profits
Illustration: Pig Meat/The Guardian
Whenever I ponder the enormity of the multitrillion-dollar industry known as private equity, I picture the lavish parties thrown by Stephen Schwarzman – and then I think of the root canals. Schwarzman is the billionaire impresario of Blackstone, the world’s most colossal private equity firm. In August, he hosted a 200-person housewarming party at his $27m (£21m) French neoclassical mansion in Newport, Rhode Island. It was a modest affair compared to the grand soiree he threw himself at his Palm Beach, Florida, estate for his 70th birthday, in 2017. That black-tie bash was itself a sequel to his multimillion-dollar 60th, in 2007, which became a symbol of the sort of Wall Street excess that led to the global financial crisis. The Palm Beach party, which some reports say cost more than $10m, featured Venetian gondolas, Arabian camels, Mongolian acrobats and a giant cake in the shape of a Chinese temple. “Brilliantly stimulating” was the billionaire industrialist David Koch’s review. Gwen Stefani serenaded Schwarzman as Jared Kushner, Ivanka Trump and several members of her father’s cabinet looked on. It was a world in miniature, ruled over by a modern Croesus – the perfect symbol for a form of money-making that has infiltrated almost every facet of modern life.
Preschools and funeral homes, car washes and copper mines, dermatologists and datacentres – private equity is anywhere and everywhere that money changes hands. If it can in any way be marketed or monetised, private equity firms have bought it – from municipal water supplies to European football clubs to the music catalogue of the rock group Queen. By some estimates, these firms now control more than $13tn invested in more than 50,000 companies worldwide. “We cannot overestimate the reach of private equity across the global economy,” Sachin Khajuria, a former partner at Apollo Global Management, which manages half a trillion dollars in assets, wrote in 2022.
It’s not just that hundreds of millions of us interact with at least one private equity-owned business every day. More and more people, especially the relatively poor, may live almost their entire lives in systems owned by one or another private equity firm: financiers are their landlords, their electricity providers, their ride to work, their employers, their doctors, their debt collectors. Private equity firms and related asset managers “increasingly own the physical as well as financial world around us,” the scholar Brett Christophers writes. “All of our lives are now part of their investment portfolios.” This is true not only in the US, where private equity has been on a spree since the late 1970s, but increasingly in the rest of the world, too. In recent years, private equity firms have spent hundreds of billions of dollars snaffling up businesses from Canada to Cambodia, Australia to the UK.
As private equity has spread, so have dire warnings about its effects. The vultures and vampires of the industry have been decried almost everywherein the media that isn’t already owned by private equity. In the span of a single week last year, two major and almost identically titled books were published in the US – Plunder: Private Equity’s Plan to Pillage America and These Are the Plunderers: How Private Equity Runs – and Wrecks – America. Private equity is “greed wrapped in the American flag of efficiency, looting justified by solid investment returns”, the authors of Plunderers write. “The marauders answer to almost no one.”
This is where the baby root canals come in, as a grotesque epitome of the industry’s modus operandi. According to multiple media investigations and a US Senate inquiry, in order to drive up profits, private equity-controlled dental chains have induced children to undergo multiple unnecessary root canals. “I have watched them drilling perfectly healthy teeth multiple times a day every day,” a dental assistant in a private equity-owned practice told reporters. One child even died as a result. To its many critics, private equity is a shining example of “asshole capitalism”, but baby root canals make one feel even that label is a touch too kind.
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 fertilisers 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”.
What’s more, they say they’re providing amazing returns to their investors, who might well include you, dear reader, if you happen to have a pension. “Hopefully we can get the news out there that, actually, private equity’s been a great thing for America,” Stephen Pagliuca, the billionaire co-chairman of Bain Capital, said at Davos in 2020. David Rubenstein, the billionaire founder of the Carlyle Group, another of the world’s largest private equity firms, goes further. “Private equity,” he likes to say, “is the highest calling of mankind.”
Whatever good or ill there is in private equity is not just about greedy sinners or enterprising saints. Whether acquiring a bakery that makes chocolate chip cookies or the nursing home where your grandmother is living out her days, private equity relies on the same basic business model: the leveraged buyout. These transactions – which account for roughly three out of every four dollars of all private equity deals – are frequently compared to house flipping: you buy a business using a ton of debt, or leverage, the way you buy a house with a mortgage; then you try to sell it for a tidy profit after you replace the carpets (or, better still, the market goes up). Unlike buying a house, however, the debt isn’t the responsibility of the buyer; it sits on the balance sheet of the acquired company. As strange as it sounds, it’s sort of like the company is forced to take out a loan to buy itself.
“Private equity creates value by growing great companies,” Pagliuca has said, offering a picture of the industry as a green-thumbed gardener turning mere seedlings into fruit-bearing trees. But over the past several months, as I combed through the recent trove of books on private equity, trawled through the memoirs of industry titans such as Schwarzman and Guy Hands, spoke with people who have worked inside Wall Street and City firms and interviewed scholars who study this species of finance, I came to see private equity in more virological terms, like a pandemic.
A coronavirus replicates by injecting its RNA into the cells of a target organism. Once inside, the RNA hijacks its host’s resources to build more copies of the virus, weakening and sometimes destroying the host in the process. Private equity’s business model is similar. A private equity firm pools cash from investors, then uses those funds, along with an extraordinary amount of money borrowed from other sources (the “leverage”), to take over a target company. Having acquired its target, a private equity firm may fire the management team, install new executives and decimate the workforce, or move it offshore. It can also liquidate the company’s own assets to pay back investors and line the pockets of the firm’s partners before selling the company to a new set of investors, a tactic sometimes known as a “buy, strip and flip”.
Even when a private equity takeover tries to turn a target company into a more valuable enterprise, the logic is still viral: private equity exists to replicate and enlarge itself, not to build anything in particular. “Attention is not directed towards the common wealth, but enriching the management, buyout partners and their institutional backers,” Luke Johnson, the cofounder of British private equity firm Risk Capital Partners, wrote in 2012. “That is the nature of the game. To argue otherwise is bogus.”
Private equity’s patient zero was arguably Houdaille Industries, the takeover of which set the pattern for the rest of industry. A thriving manufacturing conglomerate, Houdaille was acquired in 1979 by a firm called Kohlberg Kravis Roberts & Co, or KKR. To do the deal, KKR saddled the maker of auto parts, industrial tools and construction supplies with more than $300m in debt. It was by several multiples the largest leveraged buyout in history up to that point, and the first of a major public company. “You can’t have a trace of sentimentality,” Bryan Burrough, the co-author of Barbarians at the Gate, about KKR’s subsequent takeover of the tobacco and food giant RJR Nabisco, has said of private equity. “You have to be able to slash and burn.”
KKR soon shifted Houdaille’s focus from making high-end products to generating cash to pay the firm’s partners and investors. Within a couple of years, the company’s reputation for quality had eroded. The combination of debt and deteriorating reputation meant Houdaille was not resilient enough to survive the recession that hit in 1981 and a steady onslaught of Japanese competitors. To continue extracting money from the company, KKR carved it up and laid off more than 2,000 workers. In 1987, the private equity firm sold the remains of the manufacturer for less than a third of what it had paid.
The truly remarkable thing was that, despite buying Houdaille with hundreds of millions of dollars of debt, KKR was able to use various financial engineering strategies to reap almost the entire proceeds from the sale for itself and its investors. From the point of view of the firm and the rest of Wall Street, the hollowing out of Houdaille was a roaring success. Schwarzman called it “the Rosetta Stone” of deals.
In the annals of private equity, there are now many familiar horror stories. Firms have snatched up popular retailers, then gutted and destroyed them, along with the livelihoods of hundreds of thousands of working-class people. Private equity-owned nursing homes have been stripped of resources and staff, abandoning elderly residents to sit in their own excrement. A Blackstone-owned company that cleans abattoirs across the US has been fined for employing more than 100 children. Some of the most heinous accounts have come from private equity-owned treatment centres for young people with behavioural problems, where children have been physically abused, raped and killed. These cases are extreme, but they are not isolated. When it comes to private equity, you don’t need to cherrypick the horror stories – you have to wade through them.
It’s true that all sorts of companies mistreat workers, fleece customers and put profit above people, but the deluge of private equity heinousness is not just plain old capitalism run amok. According to its critics, the industry’s business model is what makes it particularly ruinous. Financing buyouts with huge amounts of debt not only leaves acquired companies far less able to weather downturns but also incentivises firms to prioritise paying back creditors over more useful long-term investments. “The predatory practices of private equity exacerbate inequality and eviscerate our economy by taking money from productive businesses” – retailers, hospital chains, manufacturing companies – “and giving it to largely unproductive ones,” Brendan Ballou, a US Department of Justice antitrust lawyer, writes in Plunder. Chief among these largely unproductive businesses are private equity firms themselves. Worse still, the private equity owners can make ludicrous amounts of money whether or not the companies themselves succeed – a decoupling of financial and commercial success that makes a mockery of the basic premise of capitalism.
In the years since the Houdaille deal, private equity firms – they like to call themselves “shops”, as if they machined little widgets or sold soda pop – have conjured up all kinds of techniques for extracting returns from target companies. Among the most common and innocuous-sounding are “management fees”, which can be charged to target companies by their private equity owners for a whole range of not particularly beneficial services. For example, KKR, Bain Capital and another private equity firm extracted more than $470m in fees from Toys R Us between 2005, when they bought the retailer, and 2018, when they drove it into bankruptcy. Using another common tactic called a “sale-leaseback agreement”, private equity firms pocket the proceeds from forcing companies to sell off their real estate assets, which the companies are then required to rent back.
The use of significant debt and sale-leasebacks is not unheard of outside private equity, but the industry has also created more lethal ways of sluicing profits out of once-healthy businesses. In a practice called “dividend recapitalisation”, private equity firms load companies with round after round of debt with the sole purpose of financing payouts to themselves and their investors, a form of capitalism so distasteful that even some private equity shops refuse to practise it. The billion-dollar dividend that Clayton, Dubilier & Rice, one of the world’s oldest private equity firms, extracted from Hertz, for example, was one of the debts that contributed to the rental car company’s eventual bankruptcy.
Private equity takeovers have been blamed for the terminal declines of dozens of well-known businesses, and the associated job losses, including J Crew, Kmart, Sears and BHS. According to one frequently cited analysis, one in five private equity-owned companies go bankrupt within 10 years of acquisition – a rate 10 times higher than that of publicly owned companies. And it’s not because private equity tends to target companies that are already weak; often these businesses were thriving before being consumed. (“No one wants to buy a company that is shrinking,” Pagliuca has said.)
Ultimately, making companies more “efficient” often means little more than raising prices and lowering quality. In his book Plunder, Ballou focuses on the example of US trailer parks, which major private equity firms have been amassing with the avidity of an eight-year-old playing Monopoly. Once they own these low-income residential communities, the firms jack up ground rents, transfer utility costs to residents and cut back on maintaining vital infrastructure such as sewers.
Private equity firms have learned that if they want to charge more for less, it’s smart business to target poor and vulnerable people, who can’t afford to just up sticks and move. Residents of trailer parks and nursing homes fit the bill nicely. So do people in jail, where private equity firms like HIG Capital own the companies that provide mouldy meals and deliver substandard healthcare. Best of all, these vulnerable people are the least likely to be able to fight back. And if that doesn’t sound fair? As Khajuria, the former Apollo partner, has written: “Success, defined as making money on deals, always comes first.”
If you want to know how the practitioners of private equity see themselves, it’s edifying to spend a few hours on the message boards of Wall Street Oasis, an online community for the finance industry. On a recent Sunday, one of the trending discussion threads was titled “How Do You Live With Yourself?”
The replies were a revealing mix of industry talking points, law-of-the-jungle ideology, evanescent soul-searching and unvarnished honesty. Many respondents claimed that private equity’s rapacious image is a hangover from earlier decades; others admitted that loading businesses with debt was often catastrophic. “That unfortunately is inherent in the business model,” a managing director at a buyout shop said. A few embraced the stereotype. “I’m a strong free-market believer, so in the cases where jobs are cut … the strongest players and hardest workers survive,” a principal in a software-focused private equity firm argued. “I disagree,” another asset manager countered. “I find these [layoffs] some of the most soul-crushing decisions to make.” But he apparently makes them anyway. A vice-president in a firm that specialises in leveraged buyouts offered one of the most popular answers: “How do I live with myself? In a big house in the suburbs, with my wife and kids.”
For many leaders in the industry, it is not enough to make a lot of money. They must be lauded for it. “Traditionally, we are taught to judge the success of a society by how it deals with the least able, most vulnerable members of that society,” Marc Rowan, a cofounder and now the CEO of Apollo, wrote in 2012. Endorsing the argument of a fellow financier, he proposed an alternative philosophy. “Shouldn’t we judge a society by how they treat the most successful? Do we vilify, tax, expropriate and condemn those who have succeeded, or do we celebrate economic success as the engine that propels our society toward greater collective well-being?”
Top-tier private equity firms almost exclusively recruit the top-tier talent from top-tier investment banks such as JP Morgan and Goldman Sachs. Those people are the 1% of the 1% of wealth-obsessed, hyperambitious people. As one industry insider put it to me: if you want to succeed in private equity you need to ask yourself if you are willing “to go fucking turbo”, working relentlessly day after day, week after week, in order to make more money in five to 10 years than you could have made in an entire career at almost any other job.
“As a master of private equity, you must win … This culture – this attitude – promotes a trail of personal hunger trickling down from the Gulfstream private jets to the juniors’ bullpens.” That icky description of the ethos of private equity comes from Khajuria’s book Two and Twenty: How the Masters of Private Equity Always Win. Of the people who work in the industry, he writes: “They are eager to achieve life-changing money and power.”
Khajuria’s book is an astonishing document – a record of an industry populated by people so convinced of their own intelligence and enamoured of their own success that they cannot appreciate the extent to which the larger apparatuses of law and government have been tweaked to ensure they come out on top. These are people with billions of dollars of incentive to see their industry through the rosiest of rose-coloured custom sunglasses.
The reality is slightly different. Take, for example, the lightly fictionalised story of “Plastix”, a chemicals company that Khajuria’s firm took over some time in the 00s. “Within three months, the investment has soured irretrievably,” Khajuria writes. The new executives running the business on behalf of the private equity firm have “gone too hard and too fast in slashing headcount” – that is, firing workers – and the company’s plants “are crippled by rolling strikes” protesting, among other things, “overly harsh severance terms” for the laid-off employees. So what does the private equity firm do? It fires even more workers, and uses some crafty financial engineering to ensure that if and when Plastix goes bankrupt, the firm and its investors will not only get their money back before anybody else but still be in a position to sell off the company’s assets and make double what they put into the deal in the first place. It’s failing upward gone “fucking turbo”.
According to Khajuria’s account, the deal was rescued through savvy and doggedness. There’s zero consideration of how a decades-long campaign to weaken labour protections and implement friendly regulation and bankruptcy laws created the conditions in which private equity could succeed by running a business into the ground and firing a huge chunk of its workforce. “The masters of private equity move deftly,” Khajuria writes.
In virology there is often a trade-off between virulence and transmissibility. A pathogen that tends to kill its hosts too quickly and too reliably has fewer opportunities to spread: the host is confined to their bed, and then their grave, before they can sneeze on fellow commuters. Sometimes, variants that are less deadly can exist alongside, or even outcompete, their more aggressive cousins.
Something similar is often said to have happened among the strains of private equity, particularly in the new millennium. After the leveraged-buyout bloodbath of the 80s and 90s subsided, there thrived more benign mutations that looked to make money not by stripping a company of its assets but by increasing its profitability and selling it on.
This was especially practicable in small and medium-sized private companies that were still owned or operated by the founders or their families. In such cases, private equity firms could help them grow by installing top-flight management teams or by merging them with similar companies. Once the businesses were scaled up, they could be sold to other investors or taken public for a healthy profit.
The scholars Eileen Appelbaum and Rosemary Batt, fierce critics of private equity’s worst practices, nevertheless point out that private equity firms probably saved the US steel industry from total collapse by buying up a number of mills in the early 00s. It has also frequently been claimed by industry spokespersons that private equity-owned businesses create more jobs than they destroy, though the academic research paints a much more ambiguous picture.
Even when private equity is good capitalism, it isn’t necessarily good for society. While family owned and local businesses were run for profit, many also had a connection to the communities in which they operated. They weren’t exactly jobs programmes, but they liked to employ local people and pay them a living wage. There was a virtuous circle in which local workers spent their money at local businesses, which hired more workers who had more money to spend in their communities, where the business owners also lived, spent money and paid taxes.
By contrast, when private equity took over, profits and tax receipts were funnelled away, wages went down and workers had less money to spend, which harmed local businesses, which could then afford to hire fewer workers. Private equity firms could do this in part because they were busy pursuing “roll-up” strategies: creating regional monopolies by buying up, say, all the nursery schools or grocery stores in a particular area. This not only gave the firms economies of scale – it’s much less expensive to do the back-office accounting and HR for a dozen gastroenterology practices together than for 12 individually – it also meant that consumers and workers didn’t have anywhere else to go.
The human genome is about 8% viral DNA, which is to say that nearly one 10th of the genetic code from which we are built consists of instructions from ancient viruses that once successfully infected and colonised our ancestors. Who we are is inextricable from some of the viruses that have infected the human lineage in the past. Similarly, private equity is now not only written into the way that the broader economy functions, or into the character of our cities and towns – it is also intimately bound up with our own financial futures. That is because many of us, whether we realise it or not, are directly or indirectly invested in private equity through our pension plans or, if we’re wealthy enough to have them, stock portfolios and mutual funds. Many governments – autocracies and democracies alike – also rely on private equity to help grow the pot of reserves in their sovereign wealth funds.
The largest investor in private equity in the world as of 2023 was the Canadian public pension system, which had a private equity exposure of nearly $135bn. This was followed by two Singaporean state-owned investment companies, and two from Abu Dhabi. Rounding out the top 10 were public pension funds from Quebec, the Netherlands and California. “Teachers, firefighters, healthcare workers, and other employees who are part of retirement systems depend on private equity to make the math of their pensions work,” Khajuria asserts in Two and Twenty. The virus isn’t just consuming us – in a very real sense it is us.
In some parts of the world, private equity firms may do some good by investing a portion of the money of, say, California teachers, Canadian nurses and Dutch police officers in green technologies or rural hospitals or local manufacturing. But many of the investments made on behalf of pensioners operate with the same logic of the Houdaille deal. The pension funds are investing in deals that destroy companies, threaten working-class jobs and weaken communities in order to fund the pensions of other regular people.
On top of this, in the US, the UK and many other countries, private equity firms can exploit something called the “carried-interest” loophole, which means that many of their profits are taxed as capital gains or investment returns, not income. This is a boon to the owners of private equity firms because capital gains taxes are a lot lower than income taxes.
This whole crazy system has been able to hold together in part because private equity has always promised outsized returns not only to themselves but also to university endowments, pensioners and now other retirees. But in recent years, a growing number of commentators, and even insiders, have started to question whether those returns are just another form of private equity’s financial sleight of hand. What if the maths on private equity itself don’t even cash out?
Whatever else private equity is good for, it seems to be excellent at making some people fantastically rich. Typically, private equity firms make 2% of the money under management plus 20% of the profits from each fund they run. That means a $100m fund that makes a “triple” – three times its investment – will net the private equity firm at least $2m in fees a year and $40m in profits. As a comparison, you can buy shares in an index fund that invests in a broad sample of publicly traded stocks and bonds for almost no management fee at all and zero profit sharing. What justifies the private equity firm’s price, its social status and its smugness is the proposition that it is able to make you a far greater return per unit of risk than almost any other investment on the planet.
But what if that’s not the case? According to data from the industry’s own lobbying group, in the decade between 2010 and 2020, private equity as an asset class only outperformed the S&P 500, a basket of some of the largest stocks in the US, by half a percentage point annually, and public pension funds’ private equity investments did even worse than the benchmark. Although the strip-and-flip days of the late 80s and early 90s did produce massive returns on average, that performance hasn’t been matched for roughly 20 years.
“The emperor has no clothes,” Jeffrey Hooke told me. Hooke is a senior lecturer at the Carey school of business at Johns Hopkins University and the author of The Myth of Private Equity. Before he became a professor, Hooke worked for decades on Wall Street and in the private equity industry. “There’s no independent verification of private equity’s returns, and there’s no scientific basis that private equity beats a simple index fund of stocks and bonds. These guys do not provide returns, they’re totally unregulated, they hide their fees, and they’ve mastered the art of keeping their taxes low and pulling the wool over everybody’s eyes.”
One of the problems Hooke points to is the opacity of the industry. The best databases tracking the industry only contain about 60% of private equity funds. What’s in the other 40% remains open to speculation, but it’s probably safe to assume it’s not the amazing investments that would make the industry look even more stellar than it already claims. It seems likelier to be the “dogs” and “doughnuts” – the failed investments and poorly performing funds – that drag overall returns down.
What’s more, a lot of the “value” that private equity firms report in their funds simply comes from their hand-on-heart, honest-to-goodness estimates of the price they could get from the unsold companies in their portfolios. But these are precisely the companies that firms haven’t been able to get rid of at sufficiently high valuations. In fact, as Hooke points out in The Myth of Private Equity, more than half of all private equity investments over the past 15 years have not been exited and therefore have not realised their actual returns. In May, a Financial Times analysis showed that over the previous six years, private equity had hoovered up from investors $1.5tn more than it had paid back – a worrying sign that there may not be enough returns to go around.
The arguments around private equity returns are complicated, but there seems to be an emerging consensus among scholars that private equity is at best neutral when compared to other investments and possibly negative. And it’s not just academics and the financial press that are worried about the state of the industry. On the same day that the “How Do You Live With Yourself?” thread was trending on Wall Street Oasis, the other most popular thread was “Which Funds Are Ticking Time Bombs?”
Even the firms that do have top-performing funds are subject to the inalienable law of Wall Street: past performance is no guarantee of future results. Rather than picking private equity funds based on their historical record, investors “could have earned more money by throwing darts blindfolded at a list of buyout managers”, Hooke writes. Even in the good times, most private equity returns come not from making companies more efficient but because the market as a whole goes up.
If all of this is the case, it radically undermines one of the putative moral pillars of private equity’s existence – the argument that it is necessary to secure the retirements of millions of ordinary workers. If the net returns are effectively the same as, or even worse than, a traditional 60/40 portfolio of stocks and bonds, then there is no social value at all to offset the damage that private equity has done to lives around the world. It is simply a cynical means for the affluent to transfer ever more wealth from the rest of society to themselves.
So why does this massive wealth transfer from society to private equity persist? A handful of politicians, scholars and civil society groups have been pushing governments to develop ways to inoculate society against private equity’s worst effects. Among the many medicines prescribed are ending preferential tax treatments and holding private equity firms liable for their portfolio companies’ debts.
But, as ever, the playing field is tilted in private equity’s favour. Dozens of politicians, civil servants and public administrators in the US, the UK and other countries have gone on to work or consult for private equity firms. Georges Bush senior and junior both had roles within David Rubenstein’s Carlyle Group or its portfolio companies. Obama’s treasury secretary, Timothy Geithner, is the chairman and president of Warburg Pincus. For his services as an “advisory director”, Richard Fuller, the Tories’ interim chairman, has been paid at least £300,000 by the Bahrain-based private equity firm Investcorp. “On both sides of the Atlantic, private equity’s relationships with lawmakers haven’t just been cozy, but in some cases symbiotic,” the industry-focused website PitchBook has written. “Many a firm’s employee rosters read like a who’s who of Capitol Hill and Whitehall heavyweights.” Even politicians who aren’t at the kissing gate with private equity still treat the industry with kid gloves because they pray it can help provide the growth their economies sorely need – witness the UK chancellor Rachel Reeves’s recent climbdown – sorry, “compromise” – on closing the carried-interest loophole.
Over time, some viruses achieve such a perfect balance between virulence and transmissibility that they become ubiquitous and can basically never be eradicated. Like the common cold or seasonal flu, they cause plenty of misery but not too much death. Perhaps private equity’s recent mutations are pushing it in the same direction. Many large firms have now evolved into complex organisms pursuing a range of business strategies, of which traditional leveraged buyouts are only a part. Much of Apollo’s revenue, for example, now comes from the life insurance company Athene and its European counterpart, Athora. But even in these more sprawling businesses, the self-replicating logic of private equity is still at work: the steady revenues of some parts of the business are underwriting the continuing risks of buyout investments.
In private equity, there is a saying that goes: “Every day you’re not selling, you’re buying.” It means that as long as you hold on to a company or some other asset without profiting from it, you’re betting on its longer term success. Behind it is a principle that is widespread on Wall Street: that there are only two sides to every trade – the winner and the loser. The same might be said about society’s relationship to private equity: every day we’re not regulating it, we’re letting it regulate us. We’re letting it take over our cells and replicate aggressively. It’s clear who’s on the winning side of that bargain.