I find it so frustrating that more people don't view private equity as a scourge, similarly to the way we understand stereotypes about slimy used-car salesmen and scammy MLMs -- or, alternatively, the way people understand that monopolies are bad and Amazon and Walmart are kind of evil.
This overarching cultural norm that if a business is turning a profit, and isn't selling people literal poison, it's doing what it's supposed to do, is so demonstrably flawed and still so pernicious. Here's a business model where the people who we pay to keep our kids safe are looking for ways to cut corners to make more money!! And by the way it's also happening with elder care, veterinary care, and health care at large. What will it take for us as a society/culture to put our foot down and say, "hey PE, party's over."
(Related -- how do people who work for PE firms that operate this way sleep at night???)
Many people working at these firms are either 1) deeply convinced/drunk on kool-aid that they are helping and a key part of the economy or 2) morally bankrupt and in it for the money.
It's so hard because as a person who actively doesn't use Amazon or Wal-Mart, I would argue that most people don't believe they are evil! I would argue that most Americans see Amazon, Wal-Mart, Target, etc as helpful and good for their lives. Or at the very least, they are not bad enough that people will consider not using them. When I have convos with people about how I choose not to use Amazon, they largely have their eyes glaze over and say, well it's not that bad and it's helpful for me.
I think most people have at least been exposed to the idea that Amazon and Wal-Mart frequently behave in ways that are harmful/destructive (underpaying/exploiting workers, union-busting, driving smaller businesses out of business, etc.). To your point, people might perceive that bad behavior as not their problem or not severe enough to warrant refusing to buy from those corporations. And I get it -- if you live someplace that doesn't offer you a lot of other options, and you're cash-strapped and overextended with work/family, you might not have the luxury of shopping elsewhere even thought you are at least dimly aware that these companies are guilty of some really bad behavior.
But I don't think nearly as many people are aware of private equity's harmful influence. I feel like most people hear "private equity" and think of it as an elite subcategory of the finance industry, but don't really know what it does (other than make some people really rich).
Re: How do people work for PE firms. If I remember correctly Jett of Jett and Pookie of Instagram fame shared he works in PE of dental offices. It shined a new light on the ostentatious displays of wealth on their instagram account for me.
We need to change the tax structures so they don’t have to figure out all sorts of weird place to invest their money. Such as day care, elder care, prisons, prison food etc
Hmm, can you say more? Do you mean that there should be rules about what kind of businesses PE funds can invest in? Or that corporations and wealthy individuals should be taxed less on "traditional" investments like stocks and bonds, so that they won't be incentivized to pursue arrangements like PE?
wierdly yes, though I have no idea how you could go about it,
So much of PE reminds me of strip mining in that there is little accountability or oversight, it's get in make a quick (5-15 years max) buck and get out. THe very worst of capitalism
i see it in the buying up of huge tracts of brand new houses and then renting them out instead of them being starter homes for new homeowners. This particular one it "starting" to lose its luster I'm happy to have heard recently,
I think that for many people it is really, really hard to understand the idea that a firm would want to invest in something only to intentionally ruin it. We can easily understand the concept of a greedy company, but not why a company would buy Toys R Us just to drive it into bankruptcy.
Very happy to see the shout out to DC’s work to more equitably pay early childhood educators as a bright spot. When the city budget was put together for 2025 earlier this year, some city leadership tried to make cuts to that important funding. Many voices came together against those cuts and ultimately they were for the most part reversed. We owe it to our early childhood educators to follow through on our promises to them!
DC has also has a very successful free pre k 3 & 4 program, incorporated into local elementary schools and through grants to some privately run pre schools. Not sure our city gets enough accolades for this but it’s a huge benefit to many families!
my kid started prek3 in DC last year and it has been an amazing time of growth and learning for him, while significantly opening up our family budget because we don't have to pay for 9 months of care! I want this for everyone
DC also pays their public school teachers way better than the MD counties (to my anecdotal knowledge). I have a buddy working as an elementary music teacher making six figures and he would absolutely not be making that much if he took a job closer to home in MD. From his experience, better pay means keeping better teachers on board. I’ve always respected that about DC.
I hope articles like these raise awareness about what private equity is doing across all areas of care. Childcare can be the gateway to the conversation because it’s more universal than special needs services or foster care - both of which are failing, in large part, due to profiteering from private equity investors.
I still don’t know what the route is to change, as problems like this require people to have a bigger understanding of fiscal policy than most individuals are willing / able to engage with!
Widening the conversation to frame childcare as public infrastructure and activating parents is great, my hope is that the change reaches areas which affect smaller numbers of children, but arguably the ones who need it the most - in special ed, residential homes, foster care and beyond!
Absolutely, for profit eldercare is so horrifying. There are major differences between childcare and eldercare (the existence of Medicaid for the latter is a huge one since Medicaid pays for 2/3 of skilled nursing home residents), but the ways in which caregiving is somehow both wildly expensive while the rank and file caregiving workers are incredibly underpaid is both a moral and a market failure.
As a single working parent, childcare was a crushing stressor when my kids were little…expensive, unpredictable and don’t even get me started on late pick-up fees that started at 5pm. As long as childcare is framed as a woman’s responsibility and we have Christian nationalism infiltrating our government, I fear we’re at a stalemate. In an ideal world, it should be viewed as much needed infrastructure…I can’t even imagine how productive I would have been if I had good, quality, reasonable, reliable childcare.
I have followed Haspel's work for years and he's made essential contributions that need more mainstream attention--thank you for this!
When I graduated from my MBA program in 2012, I was amazed that our Dean spent a portion of her speech talking about what happened when a PE firm took over her mother's nursing home. (If you don't think you have a stake in the child care fight you should see what PE wants to do to elder care.) It was a wake up call to her as a business leader. We need more of these wake up calls.
For more about how we got into this mess w/ childcare I highly recommend Season 1 of the podcast No One is Coming to Save Us which dives into the history of childcare in the US.
We're at a crossroads where childcare could become like healthcare (we convince ourselves to our peril it's a market when it isn't) or education (a public good where profit-seekers are marginalized). I hope for all our sakes we can pull it back from the brink.
A private equity firm took over my dentist's office and now owns 7 offices in my town alone. These firms are taking over so many facets of life and are driving up prices and reducing quality of care. This is a huge reason why prices for day care and medical care are skyrocketing while decent, equitable care remains elusive. Private equity firms are the new robber barons.
How did you come to learn that a PE firm took over your dentist’s office? I’m curious because I’ve noticed that my past few visits my dentist has been trying to sell me Botox and I wonder what on earth is behind that. Perhaps I could do some research…
The cost of childcare was the primary reason we stopped having children after one. The situation really felt like a way to punish working moms. This combo of profit-driven childcare and our society's seething hatred for women is a powerful combo!
Its obvious Private Equity model is to find a service or a product that's a basic need, buy it and squeeze any possible dollar regardless of degradation of quality to those who use it.
My Mom was buying a house in 2022, in the midst of a shortage here in Iowa, in a newly built subdivision and her realtor had to write a personal letter to the seller as a way to convince them to not sell *all* the houses to a private equity group to rent out.
I have an almost 3 year old in full time care. We found a spot at Cadence Academy which I just now see has been bought/sold by various private equity groups. We were thankful to find that spot weeks before I needed to go back to work and were heartened by caring teachers. However, there was significant teacher/staff turnover and rate increases were frequent, to almost $425/week at the end of our time at that center. Our Cadence location announced it would be closing in Nov. 2023 and they would have a spot for us at their other schools in the area. It reinforced the fragility of obtaining childcare for me.
We used this opportunity to look around and felt like a miracle when we found a spot at a church managed preschool in a month's time. In retrospect the facilities at Cadence paled in comparison, the new school seems managed much better, and I could not believe we would be able to get childcare at this new school for $240/week. Like how does this rate disparity exist?
All this to say I AM DISGUSTED that we allow childcare to be monetized this way by Private Equity.
When I was pregnant with twins, I put unnamed them on a waiting list for a university-run (and therefore high quality since it was serving professors and peons) childcare center. When my babies were 13 months old, I got a call saying there was room for one child. I asked them: so I'm supposed to pay y'all AND a babysitter? (I had gone back to work.) We couldn't afford that and I thought separating the children was stupid. At three, they started at a part-time, church-run pre-school. At four, one child went into a free, state run pre-K program that was fabulous, while the other stayed at the church-run school. The pre-K program is based on a lottery system and only one child qualified. All of this is to say, when it comes to childcare, we had to scramble like crazy. The earlier that children are in a play-based, safe place where they feel loved and valued, the better. There were 4-year-old kids in my child's pre-K class who had never eaten with a fork or sat in a chair or held a book.
The issue is bigger than private equity. You have to expect that any for-profit company, owned by private equity or otherwise, will try to maximize profits. The issue is whether childcare should be a for-profit industry.
My preferred solution would be for local jurisdictions to outsource childcare to not-for-profits whose standards of care as measured by impartial quality control experts and audits, would dictate whether they continued to get funding.
Of course there would still be room for shenanigans and dysfunction. NYC's Pre-K for all program under DeBlasio (really under Deputy Mayor Richard Buery who now runs the Robin Hood Foundation) was a great success. But the rollout of Pre-3s has been shambolic. The administration of the new mayor Eric Adams deserves the blame. Adams should not be re-elected. He's neither a competent manager nor able to consistently hire competent managers.
"You have to expect that any for-profit company, owned by private equity or otherwise, will try to maximize profits"
Do we, though? I think the idea that operating a business is a black-and-white/zero-sum game where the goal is to "maximize profit" above all other priorities is often assumed to be a foregone conclusion, but it doesn't have to be. A business owner can decide to have lower margins (or pay themselves less) so they can pay employees more. Companies have the option to grow slowly/organically instead of aggressively pursuing M&A opportunities or venture capital dollars. A founder/entrepreneur can build a succession plan that maintains the company's independence rather than selling it to a PE firm or a conglomerate that will gut the staff and flip it for a profit.
Now, if you're a publicly owned company that is chartered in such a way that you're obligated to enrich shareholders above all else, you don't have as much leeway. But the conventional wisdom that "well, if it's a business, whatever it takes to make as much money as possible and not break the law is justified" is pretty reductive (not to mention that it makes excuses for greed over integrity, transparency, respect for workers and customers, etc.).
Maximizing profits doesn't have to be a foregone conclusion, but we've kinda set up an economy where if you don't, it bites you in the butt. We've consistently defunded or chronically underfunded most things that would be considered core parts of a social safety net or social infrastructure. By that I mean care work for all ages (from birth to death), education at every level (from preschool to PhD), health care of every facet, and actual infrastructure. And in place we have an every person for themselves model. So that business owner that wants to offer benefits, good wages, fair prices, is under a LOT of external pressure to keep earnings and growth up.
And you can't just not keep growing or grow slow. Unless you're already sitting on mounds of cash and your business is just a fun project for play money, you'll eventually need to take on some kind of outside financing to keep up. Business loans are extremely hard to come by, which is why founders turn to the private markets of PE and it's cousin, venture capital, and those investors want growth because they in turn have investors who are looking for big returns to outpace the market. Those investors include the billionaire class, but also the public pension funds that have to grow faster than inflation to be able to pay out the retirement benefits they owe to the folks who've paid in, who are in turn often the same folks that private equity is pricing out of homes, childcare, dinners out, etc.
I've worked in economic development and impact investing (always with double mandate to do well and do good), and it is just really, REALLY hard to stay rooted in your values in our current iteration of capitalism. I don't mean to be doom and gloom here, but the longer I've done this work, the more I've come to see that there aren't enough individual choices (by parents, by business owners, by anyone) that can fix problems of structure. Even the most moral, ethical folks will eventually choose themselves (and their loved ones) when there is no help coming. We truly have to become a society that just cares about its people, that thinks people are worth spending on just because they're people and not because that spending is going to produce some positive return down the line.
Thank you for sharing your perspective -- I don't think you're being doom and gloom! Totally agree with a lot of these observations, and I think recognizing the systemic nature of the problems with our chosen flavor of capitalism is an important first step toward changing it.
Not to get too far off topic, but I think a lot about our housing affordability crisis: we seem to collectively agree that housing is too expensive, and yet most people's homes are their most valuable asset. They're counting on the return on that investment to help them upgrade to a bigger place for their families, or to provide retirement income after they move into a senior living facility. So the people who need home prices to go down so they can afford a place to live are directly at odds with the ones who need home prices to go up to finance other needs. Who does that serve? How can we fix it? (Getting back on topic, one step would be to discourage investors/PE funds from buying property and jacking up rents).
The last lines of your comment resonated so deeply with me: "We truly have to become a society that just cares about its people, that thinks people are worth spending on just because they're people and not because that spending is going to produce some positive return down the line." YES. I don't think there's a quick fix for this. I don't think you can force it with policy changes. It's cultural, and it will probably take a really long time.
Ok glad the tone wasn't too negative! Like I said, my work makes me think about all of this sh..stuff a LOT. Your housing comments rings so true because the "all knowing free market" just isn't working for anyone! I don't know the solution besides people of morals just not giving up and continuing to push, and the note from the author on building consensus so that when a window opens, we can push through some better solutions.
Why do they have to maximize profits? I was asking that question a few years ago.
I’m sure there is a better explanation in Plunder but here’s what I saw.
Partly because of the PE model, it’s a race – if your business doesn’t get big enough fast enough, someone else with PE funding will undercut you long enough to put you out of business because the goal is to get the biggest market share and then sell to a bigger fish.
That’s the business model – not providing better products, services or jobs - but extracting as many dollars as possible on the way to creating a monopoly that will deliver as little as possible and charge every penny they can.
There must be a sector that’s an exception, but I can’t think of one! The private equity model has infiltrated most of our economy - funeral homes, daycare, cheerleading orgs, electronic door locks, food, everything. Right now there is speculation that there will be increased government funding to move gas and oil electric heating systems to electric, so private equity firms are buying up small HVAC firms of all sizes so they can capture as many tax dollars ear-marked for clean energy as possible.
I left some wiggle room by saying that “you have to expect…”
There are certainly businesses that have priorities other than profit, but between public markets, PE owned businesses and private companies that are owned by profit maximizers, I think that having other priorities is the exception rather than the rule. I think that’s a negative, not a good thing. But I’m not sure what changes it.
In response to the sense that nobody is talking about this and just dealing with the crappy circumstances.... YES.
As a parent, I am too tired and too exhausted and too burned out from taking care of my kids (can't justify paid childcare with part-time, gig work) to be a part of the solution. And honestly, my kids won't need childcare if/when a solution arrives... So I'll white knuckle my way through.
I have a very well meaning (childless) friend who is trying to get me involved with lobbying and government efforts for more/better government funded childcare and yes I care deeply and want that, but I can't go to public meetings at 2pm on a Tuesday or 6pm on a Wednesday.... because I am taking care of my kids which is a 24/7 job. Instead of phone banking, I kind of wish she would watch my kids for an hour for me so I can fold laundry without interruptions.
Asking this gently and respectfully -- have you ever asked this friend to help with your kids? She might not think you would trust her with their care, or realize that you see her as someone who could provide that kind of support. It's entirely possible that she has time to be involved in advocacy/phone banking AND lend a helping hand to you and your family :)
It’s rather fitting this piece was published today when the Surgeon General issued the General Advisory and NUT opinion piece about parental mental health and well-being. I’ve learned from my own struggles and those around me that parenting is precarious business.
It just seems wildly obvious that in twenty or thirty years, we're all going to look back and see how much private equity ruined our society. And yet, it feels so hard to change the trajectory now.
Sometimes from the title alone I know one of these interviews is just going to make me want to punch all the things and... yeah. I was not wrong.
Great interview, thank you AHP and Elliot!
I find it so frustrating that more people don't view private equity as a scourge, similarly to the way we understand stereotypes about slimy used-car salesmen and scammy MLMs -- or, alternatively, the way people understand that monopolies are bad and Amazon and Walmart are kind of evil.
This overarching cultural norm that if a business is turning a profit, and isn't selling people literal poison, it's doing what it's supposed to do, is so demonstrably flawed and still so pernicious. Here's a business model where the people who we pay to keep our kids safe are looking for ways to cut corners to make more money!! And by the way it's also happening with elder care, veterinary care, and health care at large. What will it take for us as a society/culture to put our foot down and say, "hey PE, party's over."
(Related -- how do people who work for PE firms that operate this way sleep at night???)
Many people working at these firms are either 1) deeply convinced/drunk on kool-aid that they are helping and a key part of the economy or 2) morally bankrupt and in it for the money.
It's so hard because as a person who actively doesn't use Amazon or Wal-Mart, I would argue that most people don't believe they are evil! I would argue that most Americans see Amazon, Wal-Mart, Target, etc as helpful and good for their lives. Or at the very least, they are not bad enough that people will consider not using them. When I have convos with people about how I choose not to use Amazon, they largely have their eyes glaze over and say, well it's not that bad and it's helpful for me.
I think most people have at least been exposed to the idea that Amazon and Wal-Mart frequently behave in ways that are harmful/destructive (underpaying/exploiting workers, union-busting, driving smaller businesses out of business, etc.). To your point, people might perceive that bad behavior as not their problem or not severe enough to warrant refusing to buy from those corporations. And I get it -- if you live someplace that doesn't offer you a lot of other options, and you're cash-strapped and overextended with work/family, you might not have the luxury of shopping elsewhere even thought you are at least dimly aware that these companies are guilty of some really bad behavior.
But I don't think nearly as many people are aware of private equity's harmful influence. I feel like most people hear "private equity" and think of it as an elite subcategory of the finance industry, but don't really know what it does (other than make some people really rich).
That matches up with my experience.
Re: How do people work for PE firms. If I remember correctly Jett of Jett and Pookie of Instagram fame shared he works in PE of dental offices. It shined a new light on the ostentatious displays of wealth on their instagram account for me.
We need to change the tax structures so they don’t have to figure out all sorts of weird place to invest their money. Such as day care, elder care, prisons, prison food etc
Hmm, can you say more? Do you mean that there should be rules about what kind of businesses PE funds can invest in? Or that corporations and wealthy individuals should be taxed less on "traditional" investments like stocks and bonds, so that they won't be incentivized to pursue arrangements like PE?
wierdly yes, though I have no idea how you could go about it,
So much of PE reminds me of strip mining in that there is little accountability or oversight, it's get in make a quick (5-15 years max) buck and get out. THe very worst of capitalism
i see it in the buying up of huge tracts of brand new houses and then renting them out instead of them being starter homes for new homeowners. This particular one it "starting" to lose its luster I'm happy to have heard recently,
I think that for many people it is really, really hard to understand the idea that a firm would want to invest in something only to intentionally ruin it. We can easily understand the concept of a greedy company, but not why a company would buy Toys R Us just to drive it into bankruptcy.
and yet that is what they did
Very happy to see the shout out to DC’s work to more equitably pay early childhood educators as a bright spot. When the city budget was put together for 2025 earlier this year, some city leadership tried to make cuts to that important funding. Many voices came together against those cuts and ultimately they were for the most part reversed. We owe it to our early childhood educators to follow through on our promises to them!
DC has also has a very successful free pre k 3 & 4 program, incorporated into local elementary schools and through grants to some privately run pre schools. Not sure our city gets enough accolades for this but it’s a huge benefit to many families!
The DC programs have, I understand, had a meaningful impact on women's workforce participation.
And this is precisely the reason why so many states won't implement them: the goal is fewer women participating in the workforce. It's maddening.
my kid started prek3 in DC last year and it has been an amazing time of growth and learning for him, while significantly opening up our family budget because we don't have to pay for 9 months of care! I want this for everyone
Portland, too! We are ramping up to 100% free pre-school in Multnomah County by 2030! Lots of challenges, but it's exciting to see it roll out.
DC also pays their public school teachers way better than the MD counties (to my anecdotal knowledge). I have a buddy working as an elementary music teacher making six figures and he would absolutely not be making that much if he took a job closer to home in MD. From his experience, better pay means keeping better teachers on board. I’ve always respected that about DC.
I hope articles like these raise awareness about what private equity is doing across all areas of care. Childcare can be the gateway to the conversation because it’s more universal than special needs services or foster care - both of which are failing, in large part, due to profiteering from private equity investors.
I still don’t know what the route is to change, as problems like this require people to have a bigger understanding of fiscal policy than most individuals are willing / able to engage with!
Widening the conversation to frame childcare as public infrastructure and activating parents is great, my hope is that the change reaches areas which affect smaller numbers of children, but arguably the ones who need it the most - in special ed, residential homes, foster care and beyond!
Absolutely, for profit eldercare is so horrifying. There are major differences between childcare and eldercare (the existence of Medicaid for the latter is a huge one since Medicaid pays for 2/3 of skilled nursing home residents), but the ways in which caregiving is somehow both wildly expensive while the rank and file caregiving workers are incredibly underpaid is both a moral and a market failure.
As a single working parent, childcare was a crushing stressor when my kids were little…expensive, unpredictable and don’t even get me started on late pick-up fees that started at 5pm. As long as childcare is framed as a woman’s responsibility and we have Christian nationalism infiltrating our government, I fear we’re at a stalemate. In an ideal world, it should be viewed as much needed infrastructure…I can’t even imagine how productive I would have been if I had good, quality, reasonable, reliable childcare.
I have followed Haspel's work for years and he's made essential contributions that need more mainstream attention--thank you for this!
When I graduated from my MBA program in 2012, I was amazed that our Dean spent a portion of her speech talking about what happened when a PE firm took over her mother's nursing home. (If you don't think you have a stake in the child care fight you should see what PE wants to do to elder care.) It was a wake up call to her as a business leader. We need more of these wake up calls.
For more about how we got into this mess w/ childcare I highly recommend Season 1 of the podcast No One is Coming to Save Us which dives into the history of childcare in the US.
We're at a crossroads where childcare could become like healthcare (we convince ourselves to our peril it's a market when it isn't) or education (a public good where profit-seekers are marginalized). I hope for all our sakes we can pull it back from the brink.
A private equity firm took over my dentist's office and now owns 7 offices in my town alone. These firms are taking over so many facets of life and are driving up prices and reducing quality of care. This is a huge reason why prices for day care and medical care are skyrocketing while decent, equitable care remains elusive. Private equity firms are the new robber barons.
How did you come to learn that a PE firm took over your dentist’s office? I’m curious because I’ve noticed that my past few visits my dentist has been trying to sell me Botox and I wonder what on earth is behind that. Perhaps I could do some research…
Yes, and myself and multiple other people I know have had bad experiences at these PE owned dentistry office. Would love an AHP story on this
The cost of childcare was the primary reason we stopped having children after one. The situation really felt like a way to punish working moms. This combo of profit-driven childcare and our society's seething hatred for women is a powerful combo!
Same here
Its obvious Private Equity model is to find a service or a product that's a basic need, buy it and squeeze any possible dollar regardless of degradation of quality to those who use it.
My Mom was buying a house in 2022, in the midst of a shortage here in Iowa, in a newly built subdivision and her realtor had to write a personal letter to the seller as a way to convince them to not sell *all* the houses to a private equity group to rent out.
I have an almost 3 year old in full time care. We found a spot at Cadence Academy which I just now see has been bought/sold by various private equity groups. We were thankful to find that spot weeks before I needed to go back to work and were heartened by caring teachers. However, there was significant teacher/staff turnover and rate increases were frequent, to almost $425/week at the end of our time at that center. Our Cadence location announced it would be closing in Nov. 2023 and they would have a spot for us at their other schools in the area. It reinforced the fragility of obtaining childcare for me.
We used this opportunity to look around and felt like a miracle when we found a spot at a church managed preschool in a month's time. In retrospect the facilities at Cadence paled in comparison, the new school seems managed much better, and I could not believe we would be able to get childcare at this new school for $240/week. Like how does this rate disparity exist?
All this to say I AM DISGUSTED that we allow childcare to be monetized this way by Private Equity.
When I was pregnant with twins, I put unnamed them on a waiting list for a university-run (and therefore high quality since it was serving professors and peons) childcare center. When my babies were 13 months old, I got a call saying there was room for one child. I asked them: so I'm supposed to pay y'all AND a babysitter? (I had gone back to work.) We couldn't afford that and I thought separating the children was stupid. At three, they started at a part-time, church-run pre-school. At four, one child went into a free, state run pre-K program that was fabulous, while the other stayed at the church-run school. The pre-K program is based on a lottery system and only one child qualified. All of this is to say, when it comes to childcare, we had to scramble like crazy. The earlier that children are in a play-based, safe place where they feel loved and valued, the better. There were 4-year-old kids in my child's pre-K class who had never eaten with a fork or sat in a chair or held a book.
The issue is bigger than private equity. You have to expect that any for-profit company, owned by private equity or otherwise, will try to maximize profits. The issue is whether childcare should be a for-profit industry.
My preferred solution would be for local jurisdictions to outsource childcare to not-for-profits whose standards of care as measured by impartial quality control experts and audits, would dictate whether they continued to get funding.
Of course there would still be room for shenanigans and dysfunction. NYC's Pre-K for all program under DeBlasio (really under Deputy Mayor Richard Buery who now runs the Robin Hood Foundation) was a great success. But the rollout of Pre-3s has been shambolic. The administration of the new mayor Eric Adams deserves the blame. Adams should not be re-elected. He's neither a competent manager nor able to consistently hire competent managers.
"You have to expect that any for-profit company, owned by private equity or otherwise, will try to maximize profits"
Do we, though? I think the idea that operating a business is a black-and-white/zero-sum game where the goal is to "maximize profit" above all other priorities is often assumed to be a foregone conclusion, but it doesn't have to be. A business owner can decide to have lower margins (or pay themselves less) so they can pay employees more. Companies have the option to grow slowly/organically instead of aggressively pursuing M&A opportunities or venture capital dollars. A founder/entrepreneur can build a succession plan that maintains the company's independence rather than selling it to a PE firm or a conglomerate that will gut the staff and flip it for a profit.
Now, if you're a publicly owned company that is chartered in such a way that you're obligated to enrich shareholders above all else, you don't have as much leeway. But the conventional wisdom that "well, if it's a business, whatever it takes to make as much money as possible and not break the law is justified" is pretty reductive (not to mention that it makes excuses for greed over integrity, transparency, respect for workers and customers, etc.).
Maximizing profits doesn't have to be a foregone conclusion, but we've kinda set up an economy where if you don't, it bites you in the butt. We've consistently defunded or chronically underfunded most things that would be considered core parts of a social safety net or social infrastructure. By that I mean care work for all ages (from birth to death), education at every level (from preschool to PhD), health care of every facet, and actual infrastructure. And in place we have an every person for themselves model. So that business owner that wants to offer benefits, good wages, fair prices, is under a LOT of external pressure to keep earnings and growth up.
And you can't just not keep growing or grow slow. Unless you're already sitting on mounds of cash and your business is just a fun project for play money, you'll eventually need to take on some kind of outside financing to keep up. Business loans are extremely hard to come by, which is why founders turn to the private markets of PE and it's cousin, venture capital, and those investors want growth because they in turn have investors who are looking for big returns to outpace the market. Those investors include the billionaire class, but also the public pension funds that have to grow faster than inflation to be able to pay out the retirement benefits they owe to the folks who've paid in, who are in turn often the same folks that private equity is pricing out of homes, childcare, dinners out, etc.
I've worked in economic development and impact investing (always with double mandate to do well and do good), and it is just really, REALLY hard to stay rooted in your values in our current iteration of capitalism. I don't mean to be doom and gloom here, but the longer I've done this work, the more I've come to see that there aren't enough individual choices (by parents, by business owners, by anyone) that can fix problems of structure. Even the most moral, ethical folks will eventually choose themselves (and their loved ones) when there is no help coming. We truly have to become a society that just cares about its people, that thinks people are worth spending on just because they're people and not because that spending is going to produce some positive return down the line.
Thank you for sharing your perspective -- I don't think you're being doom and gloom! Totally agree with a lot of these observations, and I think recognizing the systemic nature of the problems with our chosen flavor of capitalism is an important first step toward changing it.
Not to get too far off topic, but I think a lot about our housing affordability crisis: we seem to collectively agree that housing is too expensive, and yet most people's homes are their most valuable asset. They're counting on the return on that investment to help them upgrade to a bigger place for their families, or to provide retirement income after they move into a senior living facility. So the people who need home prices to go down so they can afford a place to live are directly at odds with the ones who need home prices to go up to finance other needs. Who does that serve? How can we fix it? (Getting back on topic, one step would be to discourage investors/PE funds from buying property and jacking up rents).
The last lines of your comment resonated so deeply with me: "We truly have to become a society that just cares about its people, that thinks people are worth spending on just because they're people and not because that spending is going to produce some positive return down the line." YES. I don't think there's a quick fix for this. I don't think you can force it with policy changes. It's cultural, and it will probably take a really long time.
Ok glad the tone wasn't too negative! Like I said, my work makes me think about all of this sh..stuff a LOT. Your housing comments rings so true because the "all knowing free market" just isn't working for anyone! I don't know the solution besides people of morals just not giving up and continuing to push, and the note from the author on building consensus so that when a window opens, we can push through some better solutions.
Why do they have to maximize profits? I was asking that question a few years ago.
I’m sure there is a better explanation in Plunder but here’s what I saw.
Partly because of the PE model, it’s a race – if your business doesn’t get big enough fast enough, someone else with PE funding will undercut you long enough to put you out of business because the goal is to get the biggest market share and then sell to a bigger fish.
That’s the business model – not providing better products, services or jobs - but extracting as many dollars as possible on the way to creating a monopoly that will deliver as little as possible and charge every penny they can.
There must be a sector that’s an exception, but I can’t think of one! The private equity model has infiltrated most of our economy - funeral homes, daycare, cheerleading orgs, electronic door locks, food, everything. Right now there is speculation that there will be increased government funding to move gas and oil electric heating systems to electric, so private equity firms are buying up small HVAC firms of all sizes so they can capture as many tax dollars ear-marked for clean energy as possible.
I left some wiggle room by saying that “you have to expect…”
There are certainly businesses that have priorities other than profit, but between public markets, PE owned businesses and private companies that are owned by profit maximizers, I think that having other priorities is the exception rather than the rule. I think that’s a negative, not a good thing. But I’m not sure what changes it.
In response to the sense that nobody is talking about this and just dealing with the crappy circumstances.... YES.
As a parent, I am too tired and too exhausted and too burned out from taking care of my kids (can't justify paid childcare with part-time, gig work) to be a part of the solution. And honestly, my kids won't need childcare if/when a solution arrives... So I'll white knuckle my way through.
I have a very well meaning (childless) friend who is trying to get me involved with lobbying and government efforts for more/better government funded childcare and yes I care deeply and want that, but I can't go to public meetings at 2pm on a Tuesday or 6pm on a Wednesday.... because I am taking care of my kids which is a 24/7 job. Instead of phone banking, I kind of wish she would watch my kids for an hour for me so I can fold laundry without interruptions.
Asking this gently and respectfully -- have you ever asked this friend to help with your kids? She might not think you would trust her with their care, or realize that you see her as someone who could provide that kind of support. It's entirely possible that she has time to be involved in advocacy/phone banking AND lend a helping hand to you and your family :)
Quickly noting the interviewee's name is Elliot, not Eliot
thank you so much — I am usually so diligent with checking name spellings but thought I was okay with Elliot, apparently NOT!
It’s rather fitting this piece was published today when the Surgeon General issued the General Advisory and NUT opinion piece about parental mental health and well-being. I’ve learned from my own struggles and those around me that parenting is precarious business.
I meant to say NYT
**screams in 2 working parent household with small children**
It just seems wildly obvious that in twenty or thirty years, we're all going to look back and see how much private equity ruined our society. And yet, it feels so hard to change the trajectory now.