AHC: Bain Capital actually was a net job creator in U.S.?

Well, it certainly would have made for a more interesting 2012 presidential election, wouldn't it?

And as far as the mechanics of how it might come about, let's say Bain for its Staples office stores and other retail outlets really embraces the idea that you've got to have sufficient employees.

Please give me a couple of medium PODs where this or more comes about.
 
Bain Capital has a venture capital arm. Have them fund a start up that becomes a huge employer.

As an aside, many of the companies Bain Capital would have purchased in their private equity arm were poorly run. As such, its almost inevitable that these companies were going to be restructured, which would have included large layoffs. We can debate the specifics and probably identify some situations where this isnt true. But the general principle applies.
 
Bain Capital has a venture capital arm. Have them fund a start up that becomes a huge employer.

As an aside, many of the companies Bain Capital would have purchased in their private equity arm were poorly run. As such, its almost inevitable that these companies were going to be restructured, which would have included large layoffs. We can debate the specifics and probably identify some situations where this isnt true. But the general principle applies.

Does it really apply? That sounds like circular wisdom.
 

Puzzle

Donor
Well, it certainly would have made for a more interesting 2012 presidential election, wouldn't it?

And as far as the mechanics of how it might come about, let's say Bain for its Staples office stores and other retail outlets really embraces the idea that you've got to have sufficient employees.

Please give me a couple of medium PODs where this or more comes about.

From just giving the Wikipedia page a quick reading Bain Capital bankrolled Staples, making all jobs they have their above zero their creation. Past that, do you have evidence that they weren't a net job creator? Looking at some of the sources from the Wikipedia article at least some of the founders claimed that they were net job creators. In any case while Bain did perform layoffs there doesn't seem to be evidence of the magnitude either way. Your POD might be nothing.
 
Does it really apply? That sounds like circular wisdom.

Well, I should add one additional feature: most of these companies are in industries no longer growing and/or in the company in question is no longer in the growth stage of their lifecycle. So, first and foremost, adding jobs will be difficult when the company is not growing.

Second, usually along the way, the prior company management made some bad investments - retailer opened up too many stores or stores in bad locations, manufacturer has too much factory space, distributor too much warehouse space etc. So, if you are going to fix these businesses, the first thing you do is fix this by closing the inefficient assets.

After this is done, then management can either look for opportunities to grow or the Private Equity firm can take the cash and do this with another company.

If you want to criticize private equity firms for stifling growth opportunities in favor of reallocating to another investment, that's probably a fair criticism. That said, remember that these guys are greedy. If they thought they could make money by reinvesting in these companies they probably would.
 
Easier to buy healthy companies and strip em down.

I'm sure there's a full discussion to be had. But truthfully, I don't see the organized piracy that passes for finance capitalism as being particularly good for anyone but the pirates.

I respect the fact that you work in the field and so you have to have a different view. I just don't necessarily buy the kool ade. So, without committing anything more to the discussion, we'll just agree to disagree.
 
Second, usually along the way, the prior company management made some bad investments - retailer opened up too many stores or stores in bad locations, manufacturer has too much factory space, distributor too much warehouse space etc. So, if you are going to fix these businesses, the first thing you do is fix this by closing the inefficient assets.
And the new owners aren't as emotionally invested in the previous decisions. That part I see. But the new owners can make their own mistakes moving forward.

And the other side of the coin, why isn't Bain just as quick to say the previous owners made huge mistakes by underfunding obvious opportunies, which we can put some capital into?
 
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Easier to buy healthy companies and strip em down.

I'm sure there's a full discussion to be had. But truthfully, I don't see the organized piracy that passes for finance capitalism as being particularly good for anyone but the pirates.

I respect the fact that you work in the field and so you have to have a different view. I just don't necessarily buy the kool ade. So, without committing anything more to the discussion, we'll just agree to disagree.

If they're consistently buying healthy companies I would question the long-term viability of the portfolio. Healthy companies need to be bought for a premium. If there's nothing to fix then their portfolio isnt likely to to be too good. Not to say it doesnt happen but its a questionable investment strategy.

It's a bit analogous to home flippers. If you buy a house in perfect condition and try to flip it in 6 months, you arent going to make any money, bubbles excepting. The opportunity comes in remodels etc. As to whether they are adding value, it depends on the fixes. Same with private equity. YMMV.

And the new owners aren't as emotionally invested in the previous decisions. That part I see. But the new owners can make their own mistakes moving forward.

And the other side of the coin, why isn't Bain just as quick to say the previous owners made huge mistakes by underfunding obvious opportunies, which we can put some capital into?

If there's opportunity to make money from growth, they probably will fund it. These guys are out to line their own pockets and they will do whatever they think will make themselves the most money, for better or worse.
 
From just giving the Wikipedia page a quick reading Bain Capital bankrolled Staples, making all jobs they have their above zero their creation.
And that's where I'd start. If Bain companies have 100,000 employees, then that's the first number I'd write on a piece of paper. Plus, I'm even of the mind that it's not just the number of good jobs, the sheer number of all jobs matters a lot, too.

But then we need to write down the number of layoffs, the number of mom and pop businesses driven under, etc.

And please remember, Romney's business record did not play to strength with the American voting public.
 

TinyTartar

Banned
The very nature of VC is to gain as much as possible expending the least as possible. Therefore, they likely aren't going to be thinking in terms of jobs. Jobs are expensive, especially American jobs.

If Bain ended up being a net job creator, it would have been by accident or by their own mismanagement of their assets.
 
The very nature of VC is to gain as much as possible expending the least as possible. Therefore, they likely aren't going to be thinking in terms of jobs. Jobs are expensive, especially American jobs.

If Bain ended up being a net job creator, it would have been by accident or by their own mismanagement of their assets.

VCs (Venture Capital) and Private Equity (PE) are rather different. VC's invest in start ups - 2 guys in a garage with the next big thing and the like. If they do their job well, they will create a lot of jobs because the start up will become a big company. PE buys mature, established companies that have stopped growing. They restructure the businesses, cut costs, and milk the businesses for cash flow before taking them public again.

So, again to the OP's point, Bain can be a big net job creator if they built out a big VC arm and invested in Google, Gilead, Yahoo, Amazon, Ebay, Facebook, and the like when they were start ups.
 
Also it is a matter of viewpoint. If Bain Capital bought a company that was on the verge of bancrupcy and it restructured it and made it profitable by laying off half of its workforce. Let's say this company by the time Bain bought it had a 1000 employees. Now did Bain destroy 500 jobs by laying off half of the people, or did it save 500 jobs out of the 1000? Did it even create 500 jobs because on paper the company was bancrupt and all its jobs were lost?

And what if the company wasn't bankrupt yet, but was in bad shape and would be bankrupt within 3 months? What if it would be bankrupt within two years provided it did not turn around by itself?

I guess it's just the nature of the business when you invest in turning around weak businesses instead of investing in starting new ones.
 
That said, remember that these guys are greedy. If they thought they could make money by reinvesting in these companies they probably would.
There was a statistical study that NFL head coaches should go for it more often on 4th down, but they don't. Perhaps because avoiding embarrassment is a big motivator, too.

In the 1990s, there was a study that women and minorities don't get offered the same good deals at auto dealerships as white men. Oh, I'm sure there was more than one, but there was at least one which made a news magazine like 20/20 or something similar. And the really interesting part, they would then teach a black man or a hispanic women, for example, the negotiating methods most likely to work, and the dealerships still wouldn't make the deals. Now, why would the dealership turn down a somewhat profitable deal, the same deal they would make to someone else? Presumably, the sales rep would be embarrassed in the eyes of his or her colleagues. And that's that. The social norms trump profit.

Oh, it's not just business people. Nuclear physicists probably conform to social norms, unless there's just overwhelming evidence to do something contrary. And doctors, some operations are more commonly done in some regions of the U.S. than others.

So, I'm just going to lay it out there. In the late '80s and early '90s, 'downsizing' became a trendy little thing in terms of the thought behind it, and a big bad thing in terms of effect. And this added to a longterm decline in the number of manufacturing jobs, particularly in the auto industry.

Just like the United States is still a big producer of agricultural products although far fewer people work in agriculture than used to, I have read that it's somewhat the same in manufacturing.
 
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So, I'm just going to lay it out there. In the late '80s and early '90s, 'downsizing' became a trendy little thing in terms of the thought behind it, and a big bad thing in terms of effect. And this added to a longterm decline in the number of manufacturing jobs, particularly in the auto industry.

DValdron said:
Easier to buy healthy companies and strip em down.

I'm sure there's a full discussion to be had. But truthfully, I don't see the organized piracy that passes for finance capitalism as being particularly good for anyone but the pirates.

I respect the fact that you work in the field and so you have to have a different view. I just don't necessarily buy the kool ade. So, without committing anything more to the discussion, we'll just agree to disagree.

Sometimes the simplest explanation is the easiest one. It is possible that the narrative written by Romney's enemies is accurate -- that Bain Capital will make money at any cost, and outsource or offshore even if the company is profitable, because American wages are too high.

Any industry that depends on a hard skill can be replaced. The less creativity and more routine and process, the easier it is to replace. Anything that can be taught, can be replaced. Even jobs that depend on soft skills and physical presence can be replaced by telepresence and remote controlled robots. Hundreds of years from now, the only real jobs might be jobs like art, acting, writing and homemade crafts. An interesting reversal. I think it is at the point that anyone who can't build a "brand" and anyone who can't build a market for himself, can lose everything. You need hard skills as a foundation and the more hard skills you get earlier in life the easier life will be later, but after that life is all about soft skills. The hard skills that matter later on are the cutting edge, until it's not then it's gone again.

Maybe the only solace for people who feel threatened by this is to hope all the predictions of China come true and their standard of living soars to the point it becomes unprofitable to hire over there. The cost needs to be in a different order of magnitude (ex. 1 dollar compared to 100 dollars an hour) for it to be profitable. If it's in the same order of magnitude, even if it's half or a quarter, it's not profitable because the advanced project management techniques needed to run a business from far won't do more than break even.
 
There was a statistical study that NFL head coaches should go for it more often on 4th down, but they don't. Perhaps because avoiding embarrassment is a big motivator, too.

In the 1990s, there was a study that women and minorities don't get offered the same good deals at auto dealerships as white men. Oh, I'm sure there was more than one, but there was at least one which made a news magazine like 20/20 or something similar. And the really interesting part, they would then teach a black man or a hispanic women, for example, the negotiating methods most likely to work, and the dealerships still wouldn't make the deals. Now, why would the dealership turn down a somewhat profitable deal, the same deal they would make to someone else? Presumably, the sales rep would be embarrassed in the eyes of his or her colleagues. And that's that. The social norms trump profit.

Oh, it's not just business people. Nuclear physicists probably conform to social norms, unless there's just overwhelming evidence to do something contrary. And doctors, some operations are more commonly done in some regions of the U.S. than others.

So, I'm just going to lay it out there. In the late '80s and early '90s, 'downsizing' became a trendy little thing in terms of the thought behind it, and a big bad thing in terms of effect. And this added to a longterm decline in the number of manufacturing jobs, particularly in the auto industry.

Just like the United States is still a big producer of agricultural products although far fewer people work in agriculture than used to, I have read that it's somewhat the same in manufacturing.

That's actually a good point. Behavior finance/economics is an interesting topic and would probably support this viewpoint.

The only thing would counter with is that, a lot of corporations in the 80's, particularly the ones targeted by private equity, were inefficient and horribly run empires built for the sole purpose of CEO ego. The American economy probably benefited from investors taking apart these enterprises and streamlining them into better run organizations. "Barbarians at the Gate" is a wonderful story that highlights the role of CEO egos and the fallibility of the private equity guys. I encourage you to read it.
 
Anything that can be taught, can be replaced. Even jobs that depend on soft skills and physical presence can be replaced by telepresence and remote controlled robots. Hundreds of years from now, the only real jobs might be jobs like art, acting, writing and homemade crafts. An interesting reversal. I think it is at the point that anyone who can't build a "brand" and anyone who can't build a market for himself, can lose everything.
Maybe the baseline for an advanced economy like the U.S. is:
20% of people have good jobs,
50% of people, mediocre jobs
25% of people, lousy jobs,
and 5% of people, no jobs at all.

And when I talk about things like this in the real world, I often get answers like, we need to improve school, or we need to think about technical or trade education like we used to have.

Sometimes I even get answers like, well, you need to have a resume which really highlights your attributes.

That is, people are almost incapable of seeing the social justice dynamics. Or, it's as if people need to believe in the just world hypothesis in order to effectively engage and maneuver in their everyday lives.

And a meritocracy is not enough. Even if it were a meritocracy, which we know it's not, or even if it's a creaky meritocracy which some might argue is good enough, how is it morally acceptable to have good jobs for only a fraction of the adult populations. And how is 5% unemployment morally acceptable at all? Well, European countries have even larger than 5%, probably in considerable part due to the wrong regulation or clumsy implementation of regulation. It's a feature of the world. In a sense we have to accept it. But I think we should question it.

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Okay, one thing, if we could move to a more multi-path world rather than a single-path world, I think that would be a big improvement. You probably know what I mean by that, but I'd be happy to explain it some more.
 
The only thing would counter with is that, a lot of corporations in the 80's, particularly the ones targeted by private equity, were inefficient and horribly run empires built for the sole purpose of CEO ego. The American economy probably benefited from investors taking apart these enterprises and streamlining them into better run organizations. "Barbarians at the Gate" is a wonderful story that highlights the role of CEO egos and the fallibility of the private equity guys. I encourage you to read it.
Here's looking at you, GM, Ford, and Chrysler!! I think oligarchy might be the term for an industry with a relatively small number of competitors? In any case, the American Big Three competed within a relatively narrow range of styling, marketing, and price.

In another discussion on the auto industry, someone said in the late 70s and early 80s that Japanese auto workers got paid about the same as American auto workers!!! (would love to see variety of references on this point) And that the difference was Japan had taxpayer-paid health care, and the Japanese auto companies had fewer managers per line worker.

PS Thanks for the book recommendation.
 
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