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. tbrownaw · 1789950347 · focus · HN ↗

      > Can someone steelman private equity, please?

      Step back and look at what it fundamentally is.

      Person A has a business they want to sell.

      Person B has a pile of money and thinks that that business is (or can be) a good investment.

      That's it.

      So, what happens if person A is prohibited from selling their business? Are they forced to keep working because they don't have enough other savings to retire on? Do they shut the business down in order to retire? Something else?

      .

      Calls to ban private equity are attempts to play "shoot the messenger".

      1. Xirdus · 1789954947 · focus · HN ↗

         > So, what happens if person A is prohibited from selling their business?

         I actually made that thought experiment. Disallow selling businesses. Disallow selling shares. Disallow stock market. Disallow mergers. The only way to acquire a business is to found it or to inherit it. The only way to quit a business is to shut it all down, with all assets liquidated, all liabilities settled, and all contracts terminated.

         The main downside is that it's harder for to make money. Otherwise... I only see positives. And no, it wouldn't kill innovation. The investors would just have to invest the old fashioned way - by founding companies or expanding their existing businesses. As for job security, we already don't have it in the current system.

         1. alex43578 · 1789956889 · focus · HN ↗

            That's such an incredibly shortsighted view of the downsides.

            In your model, the only possible business owners would be those with major capital resources to begin with, encouraging the spread of existing businesses into a sprawl: Walmart is now your doctor, pharmacist, and pharma manufacturer. Nobody would start a small business because they'd have to carry all liability, any new ideas are limited to spread at a glacially slow pace, because companies can't be aquired or acqui-hired, but can instead only scale on their own revenues.

            1. bruce511 · 1789964624 · focus · HN ↗

               It's worse than that. When the owner retires, all staff lose their jobs. That's a fairly big bummer.

               I'm currently part of a "small" business/factory (around 50 employees). The owner is nearing retirement. Are all 50 of us gonna hit the streets tomorrow? Should our customers, many longstanding over 20 years get their contracts terminated? Do they get any warning? Can they easily switch to other suppliers? Is our offering somewhat unique?

               Frankly, I think the thought-experiment is very incomplete if you can't see major downsides.

               1. Xirdus · 1789992528 · focus · HN ↗

                  Recently, the owner of the factory my grandfather worked for the last 30 years has retired and sold their business, as a single package, fully operational, with employees and pending orders. It was still shut down and all employees were let go without any severance. From what I know, this is the norm for retirement sales, not the exception.

                  In this thought experiment, the result would be very similar to what happened, except with less wealth concentration, and with fewer Boeing-McDonnell Douglas mergers that ruin good companies in pursuit of short term profits (because short term profits are harder to realize by design).

                  Lost jobs are also a lot less of a problem in countries with functioning safety net.

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