Thread

1. NegativeK · 1789944184 · focus · HN ↗

   Can someone steelman private equity, please? I'm honestly looking for the upsides (for non-investors) of when PE moves into an industry like medicine and begins buying up businesses that traditionally aren't already large chains.

   I already hear the downsides frequently from someone whose work is directly affected.

   1. matteoraso · 1789946832 · focus · HN ↗

      PE exists because a lot of companies are poorly managed. It's better for your local hospital to be taken over by a PE firm than to go out of business. You can say that it would be even better if the government ran the hospital, and you would be right, but that would require a radical overhaul of the American healthcare system. Until that happens, PE plays a major role in keeping things working.

      1. mmooss · 1789952292 · focus · HN ↗

         > It's better for your local hospital to be taken over by a PE firm than to go out of business.

         It's a false choice. The healthcare system has long dealt with and deal with that situation without private equity.

      2. tremon · 1789993110 · focus · HN ↗

         > PE exists because a lot of companies are poorly managed.

         This is a non-sequitur. The existence of private equity has an effect on how companies are run, not the other way around. Many well-run companies are targeted by PE exactly because they're well-run and have carved out a sizable captive audience for themselves. And when PE takes over, said company usually ceases to be well-run on all metrics except one.

         PE exists because of the non-linear relationship between money accumulation and power. This effect means that it is more beneficial for any company to hoard capital as much as it can rather than "waste" it on the wider economy; after accumulating enough capital, the company can pivot away from whatever market it was in before and focus solely on asset management. PE mostly results from too low taxation on inert wealth compounded by zero-interest rate monetary policies.

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