Leftist criticism of Romney’s business history is ignorant, hypocritical, and magically void of similar criticism of Democrats.
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The same liberals who are so afraid of the smallest change in climate refuse to recognize that things change in business far more dramatically, far more rapidly, and with real rather than imaginary effects on actual humans rather than on computer models.
You’ll note that Taibbi’s tale, like all anti-capitalist critiques of the Ampad story, downplays the time the saga took to play out, and the initial success of Ampad, at least in terms of revenue growth. They make it sound as if Bain bought the company and, just-barely-figuratively speaking, immediately lined up the employees against the warehouse wall. (The story-telling is little different from the unforgiveable Joe Soptic implicit lie that Mitt Romney was responsible for his wife’s death.)
But Ampad was clearly not the story of intent to “raid” a company. Nor is the sort of intentional or negligent failure Taibbi accuses Romney of causing borne out in any sort of pattern. After all, as the same Post story notes, only “about 22 percent of the companies [which Bain invested in] either filed for bankruptcy or liquidated by the end of the eighth year after Bain invested.” Considering that Bain’s investments were generally in troubled (“distressed”) companies — after all, why else would the companies have accepted capital from and control by others — this strikes me as Romney having done a remarkable job.
What I know is that if you took my investment portfolio, you’d find some horrific results mixed in with some winners; if you only focus on the negatives, you could paint a terribly negative picture of my abilities as an investor. If my compound returns had been half of Romney’s, I’d be much better off than I am now, but then not everybody has Romney’s talent — a true talent that Matt Taibbi will never understand given that he not only doesn’t have the talent, but disapproves of its results. As someone who has tried, on a much smaller scale, to do what Romney did, I can only tip my hat in admiration at his success. Furthermore, having been involved in a few private equity deals, again on a much smaller scale, my experience is that investors care a lot about a purchased company’s employees — but few, and probably not even I, care quite as much as Romney seems to.
Mitt Romney’s wealth is approximately six tenths of one percent of that of America’s second-richest man, and conspicuous friend of Barack Obama, Warren Buffett. Indeed, with Romney’s personal net worth estimated somewhere around $250 million, not even one fourth of the wealth of the lowest-ranking person on Forbes magazine’s list of the 400 richest Americans, one wonders whether Romney would have made more money had he not cared so much about the employees of the companies he and Bain invested in and controlled.
Speaking of Buffett — which Taibbi doesn’t because being rich and aggressive is apparently only a toxic cocktail if mixed with being a Republican — even Felix Salmon, the finance blogger for that well-known conservative mouthpiece, Reuters, noted in 2009 that Buffett “seems to have fired 21,000 people — 8.6% of his workforce — over the past year” including some of his poorest employees. After calling Buffett “teflon-coated” (although to stick with Taibbi’s mob metaphor I might prefer to suggest he’s paid his protection money to the Democratic National Committee), Salmon asks rhetorically, “Could anybody else fire 3,000 Salvadorean textile workers and receive essentially no bad press at all?” Actually, the answer is yes, if you’re a Democrat, as you’ll read in a moment.
SPEAKING OF INVESTMENT returns, Taibbi also quotes some insightful research by Brett Arends in which Arends explains that Bain’s results under Romney’s tenure were not as spectacular as are often reported, and that an investor in Bain did similarly to an investor in the stock market during the 1984-1998 period analyzed. However, most Bain investors did not hold those investments for 14 years, but rather “about five to seven years” meaning that “Bain Capital’s dollar-over-dollar returns would have averaged somewhere between 20% and 30% a year.” This compares to an average return of less than 19 percent a year for a period that included the remarkable stock market boom/bubble of 1995-1998. I can tell you as a professional trader and semi-professional investor that beating the stock market during a “straight up” bull market run is very difficult to do.
No doubt the Bain/Romney heyday included some of the greatest years in private equity history, corresponding to the stock market boom. But to put it in perspective, so far in 2012 only eleven percent of hedge funds are beating the S&P 500 (which is up about 10 percent for the year), and that’s down from an already very bad 26 percent in 2011. (For a Harvard study of hedge funds versus stock index returns, see here, and for an article on the same topic, see here.)
Yes, some of Bain’s investments failed and cost jobs, and Bain’s management fired people as part of trying to position companies for success. But that is no different from any other company striving to survive and thrive in the ultra-competitive business environment. Have you heard a peep from the liberal media about the Obama-donating execs at Google firing 4,000 people in the past month (of whom about one third are in the U.S.)? Matt Taibbi wants you to think only Bain does that, and does it with cold-hearted glee.
But the net effect of Romney and Bain Capital has been extraordinarily positive: According to the Wikipedia entry on the firm, “Since inception it has invested in or acquired hundreds of companies including AMC Entertainment, Aspen Education Group, Brookstone, Burger King, Burlington Coat Factory, Clear Channel Communications, Domino’s Pizza, DoubleClick, Dunkin’ Donuts, D&M Holdings, Guitar Center, Hospital Corporation of America (HCA), Sealy, The Sports Authority, Staples, Toys “R” Us, Warner Music Group and The Weather Channel.”
While I don’t want to do the math myself, it is reasonable to assume that Mitt Romney and Bain Capital are responsible for some six-figure number of jobs in America, for which they and their investors deserve to have been richly rewarded, even if the road to success was not without its potholes.
Taibbi’s criticisms of Bain are like complaining that a .320 batting average major league baseball player (of whom there have only been 51 among players who have played 1,000 games or more) should primarily be thought of, condemned, and dismissed for his strikeouts. And Romney’s batting average is far above .320.
It is also worth noting Taibbi’s critique of Bain regarding the failure of KB Toys that “Bain’s experience in the toy industry… was precisely bupkus.” Again, Taibbi displays a fundamental ignorance of business. Of course it is important, even critical, for those running a business to understand their industry. But management can learn or hire that experience; they don’t need to come into the business knowing about it.
The current CEO of Ford Motor Company, Alan Mulally, was hired away from aircraft manufacturer Boeing. Former Apple Computer CEO John Sculley came from PepsiCo. There are certain attributes of an excellent businessman that are more important to bring into a company than specific industry knowledge. These attributes — the ability to think outside the box, to execute, to lead from in front, to manage people — are rarer and more valuable than any particular knowledge of a specific industry.
And if lack of knowledge of a particular business sector were a fatal flaw, how does Taibbi explain Bain’s success in fields as diverse as steel, day care (which the Wikipedia list is missing, regarding Bain’s involvement in Bright Horizons), movies, sports gear, office supplies, and, well, whatever it is you want to say Brookstone sells? Romney’s ability to succeed in such a wide range of industries is remarkable.