Newt Gingrich attacks Romney for being rich like a Democrat would. William Jacobson at Legal Insurrection, a Newt supporter, cheers him on. John Huntsman, the son of Jon Huntsman, Sr., founder of Huntsman Chemical – a company built by acquisitions and divestitures- including layoffs and firings and a flirtation with bankruptcy says that he loves creating jobs… Rick Perry, a man who has spent the entire sum of 6 years in the private sector after 6 years in the Air Force and 27 years in elective office says that Romney never feared a pink slip because he had a rich daddy (sound familiar, Richard?) Rick Santorum claims to be THE conservative while having a voting record that includes “yes” votes on almost all big government efforts, spending 9 years as a lawyer/member of “think tanks” and 16 years in elective office.
I get it that the also-rans have to try to take down the lead dog to head up the pack but I hate it when a bunch of frustrated Republican candidates start attacking as if they were one of the Democrats.
Attack Romney for being successful in gaining a reward after putting his and his investor’s money at risk?
What about being pro-business? I guess that was only talk. After this performance, if I was any CEO, I would wonder if Newtie and Co. would turn on me after the election just like Obama did the bankers who supported him.
What about being for cutting spending and streamlining government? Wouldn’t what we have been talking about for 30 years look just like a private equity/venture capital leaning out?
Get real. What a bunch a sissies. Newt looks and sounds like a pissed off kindergartner after someone stole his binky. Santorum may be a social conservative but he is no fiscal conservative – look at his voting record. Perry and Huntsman – the rich sons of rich fathers sound credible? You might want to know that the Huntsman’s not only had houses in Park City, Utah – they had a family COMPOUND, 25 acres on the side of a mountain in Deer Valley where the lots are sold by the square foot and the average home price was about $8.5 million…I know, I lived down in the valley with the po folks and the house help.
If the words “I wish we had someone in office who understood business” ever came out of your mouth or you have ever condemned Obama for being an academic, a lawyer, a community “organizer” or a career politician, it would seem that to support anyone but Romney is hypocritical. There are “conservatives” who say that Romney is just like Obama and a if you are going to vote for Romney, just cut out the middle man and vote for Obama but the resume’s of the other Republican contenders look far more like Obama than does that of Mitt Romney.
Romney has spent the most time in the private sector and the least time as a politician of any other candidate in the race, including President Obama. Romney actually used his law degree in furtherance of his business acumen, not as a primary career or a prop for a political future.
This is not an election on social issues – it is an election about what socialist approaches to those issues are doing to our nation. Being anti-abortion or socially conservative won’t matter if we can’t get a bit in the mouth of government and pull back on the reins.
Romney is about to be attacked from the right and the left as a “job killer” at Bain Capital – but here’s the Catch 22 on that line of reasoning; the very reason that private equity firms exist is to invest in companies, streamline them for maximum earnings and sell the resulting value for a profit.
What the left and the right are currently pillorying Romney for are exactly the skills and drive necessary to cut government down to size. How many of us have complained about the inflation of employment in the public sector while the private sector continues to shed jobs?
How many conservatives have wished for someone with those skills to run for president?
James Pethokoukis at the American Enterprise Institute agrees with me and says that Romney has nothing to apologize for:
One of the oldest tactics in a political campaign is to try and turn an opponent’s biggest asset into a big liability. One of Mitt Romney’s supposed big pluses is that he’s a “conservative businessman” who knows how to fix the U.S. economy. But now Newt Gingrich (or at least his SuperPac) is launching an expensive attack to rebrand Romney as a Gordon Gekko whose “business success comes from raiding and destroying businesses.”
Well, the Wall Street Journal has just published its investigation into Romney’s record at Bain Capital. The paper “examined 77 businesses Bain invested in while Mr. Romney led the firm from its 1984 start until early 1999, to see how they fared during Bain’s involvement and shortly afterward.” And here is what it found:
– 22 percent either filed for bankruptcy reorganization or closed their doors by the end of the eighth year after Bain first invested, sometimes with substantial job losses.
– An additional 8 percent ran into so much trouble that all of the money Bain invested was lost.
– Ten deals produced more than 70 percent of the dollar gains.
– Bain produced about $2.5 billion in gains for its investors in the 77 deals, on about $1.1 billion invested.
– Overall, Bain recorded roughly 50 percent to 80 percent annual gains in this period, which experts said was among the best track records for buyout firms in that era.
– Academic research has shown that buyout firms during this era exited their deals on average after 5½ years, but in a large percentage of cases were still involved beyond seven years. … If the Journal analysis were limited to bankruptcies and closures occurring by the end of the fifth year after Bain first invested, the rate would move down to 12 percent. That measure would exclude several cases that have brought Mr. Romney political criticism, where businesses filed for bankruptcy seven or eight years after Bain’s investment.
So what does it all mean? Well, Romney was really good at what he did. And what he did, initially, was venture capital, providing dough to promising young firms. Then he shifted to private equity, which is a) using investor money and debt to take over a business, b) attempting to improve its profitability (which may mean cutting the workforce), and c) selling the business and, as the WSJ, puts it, “extracting fees and sometimes dividends.”
That a small percentage of the Bain deals supplied most of the firm’s gains should not be surprising. Whether you are a private equity investor or a do-it-yourself stock picker, the key is letting your winners run and limiting the damage from your losers. Recall how famed Fidelity manager Peter Lynch always said he was on the hunt for “ten-baggers”—stocks where he could make ten times his original investment. A good investor is like a good baseball hitter. A .300 average gets you on the all-star team.
See, there is something called the Pareto Principle, which states that “for many events, roughly 80 percent of the effects come from 20 percent of the causes.” So 20 percent of customers, taxpayers, and investments often produce 80 percent of sales, revenue, and profits. Bain certainly seems to be another example of the Pareto Principle at play. A few big winners such as Staples, The Sports Authority, and Domino’s may well have provided a good chunk of the firm’s profits and the “over 100,000″ jobs created (which Team Romney needs to do better at substantiating).
Of course, Romney and Bain weren’t in the game to create jobs. They were in it to make money for their investors and themselves. Then again, the same would go for Bill Gates, Steve Jobs, Michael Dell, Warren Buffett, and just about every other successful entrepreneur and investor you could name. But that is the miracle of free-market capitalism. The pursuit of profits by creating value benefits the rest of society through higher incomes, more jobs, and better products and services. This isn’t “destructive creation”—like, say, crippling U.S. fossil fuel production before “clean energy” sources are viable—but “creative destruction” where innovation and efficiency sweep away the old and replace it with a more productive and wealthier society. This is one my favorite examples:
Through this constant roiling of the status quo, creative destruction provides a powerful force for making societies wealthier. It does so by making scarce resources more productive. The telephone industry employed 421,000 switchboard operators in 1970, when Americans made 9.8 billion long-distance calls. With advances in switching technology over the next three decades, the telecommunications sector could reduce the number of operators to 156,000 but still ring up 106 billion calls. An average operator handled only 64 calls a day in 1970. By 2000, that figure had increased to 1,861, a staggering gain in productivity. If they had to handle today’s volume of calls with 1970s technology, the telephone companies would need more than 4.5 million operators, or 3 percent of the labor force. Without the productivity gains, a long-distance call would cost six times as much.
Romney’s career as a free-market capitalist? No apologies necessary.
Gee, I thought we wanted someone who understands the free market, knows how to fire unnecessary employees, deal with unions in terms that they understand and fix a bloated organization, namely the federal government.
I guess I was wrong.