Posts Tagged ‘private equity’
“You don’t have to be in shape to bowl. It’s the only sport where there’s a way to signal for a cocktail waitress.”*…
Bowling has been around for over 5,000 years; it’s played by over 120 million people in more than 90 countries, almost 70 million of whom are in the U.S. But, as Dave Denison reports, the state of play is challenged…
Bowling is an old sport—ancient, really… There’s a lot of churn in the bowling world; alleys go out of business all the time. I bowled in leagues for several years at a venerable old heap just outside of Boston. Opened in 1942 and originally called the Turnpike Bowladrome (for its location on the Concord Turnpike in Cambridge), it had one level devoted to candlepin bowling, a once-popular New England variant, and an upper floor for regular tenpin. I met people in the leagues with whom I would otherwise never have rubbed shoulders: a genial postal worker with noticeably less genial political views; a retired military man who also ran the nearby Air Force base’s bowling alley; and a Thai immigrant who told me he developed his technique by watching YouTube videos—he delivered the ball with a precise, balletic style. I even got to know the mechanic who fixed the automatic pinsetters and ran the machine that oiled the lanes. But developers had been eyeing the land for years, and finally, in its seventy-fifth year, the place then called Lanes & Games fell to the wrecking ball, replaced by a “luxury” apartment complex.
Most longtime bowlers can tell a similar story. Their home lanes were sitting on land too valuable to justify its use as a bowling alley. Or their family-owned center had no one to maintain the business. Or there just weren’t as many regulars as there used to be. It’s been said that the industry overbuilt when the development of automatic pinsetters in the 1940s led to a bowling boom in the 1950s and 1960s. Bowling leagues were especially popular in the industrial Midwest, where factory workers could bowl and drink beer after a shift. Budweiser sponsored a team in 1954 that launched bowlers Dick Weber and Don Carter to fame. Four years later, the Professional Bowlers Association was founded in Akron, Ohio, giving superstars like Weber, Carter, and the dominant left-hander Earl Anthony the chance to go on tour and make a good living.
But the number of bowling centers in the United States, which peaked at about twelve thousand in the mid-1960s, has been steadily falling for four decades. The number was down to about 3,800 in 2023, according to the USBC. Political scientist Robert D. Putnam [see here] famously cited the decline of league bowling in his 2000 book Bowling Alone as one of many indicators that civic engagement was collapsing across America, noting that league bowling declined by 40 percent between 1980 and 1993. The updated figure is even more dramatic: from a high of about 9.8 million league bowlers at the end of the 1970s, the number of USBC members in leagues for the 2022–23 season was 1.09 million. That’s a decline of 89 percent…
Denison explores the consequences of the consolidation of ownership (of both lanes and equipment manufacturers– spoiler alert: private equity) and the impact of technology. But mostly (and best), he explores the culture of the pastime.
Bowling, America’s most popular declining sport: “Changing Lanes,” from @thebaffler.com
* Robin Roberts
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As we grab our balls, we might recall that it was on this date in 1960 that Marlene Dietrich visited a new bowling facility in Knokke-le Zoute, Belgium to roll a few frames and to inspect their new automatic pin-setting equipment.
“We sort of read two or three big newspapers but we don’t get the flavor of the local events, the local news as much”*…
Your correspondent is off again– back on March 13… and then (for all your sins) around for a while…
The Media Power Collaborative (a project of Free Press) compares local news to public goods like safe roads and public education and argues that it needs– and deserves– public funding. But those funds need to support authentic local journalism, not the zombiefied private equity-mined operations currently passing for “local news.” Sarah Scire reports…
What would a local media system that prioritizes working and middle classes over corporate profits and the interests of billionaires look like? A new public policy agenda released this week has some ideas.
The Media Power Collaborative, which released its policy framework on Tuesday, describes itself as an organizing space for media workers and their allies in research, activism, and education. The collaborative grew out of a peer networking group — now known as the News Futures collective — and is part of the media reform group Free Press. If you remember the much-discussed Roadmap for Local News that argued that the future of local news is “civic information,” this is the same crowd.
The local news industry, as Nieman Lab readers well know, has been devastated by ad revenue losses, layoffs, and profit-driven corporate ownership over the past couple of decades. Over that time, local newspapers have shrunk faster than a new crop of local news sites and nonprofit newsrooms have been able to grow. Through the policy agenda, policy tracker, and a new network of regional coalitions, the Media Power Collaborative wants to push the public policy conversation toward support for some of the more community-minded local media that’s emerged to fill that gap…
… The Media Power Collaborative agenda highlights local news and information as a public good that deserves “robust public funding” whether it comes from a legacy newsroom or not. From the report:
Just like safe roads and strong public-education systems, public-service journalism and civic information are public goods that benefit entire communities. Unfortunately, the market is critically underproducing these public goods: Estimates of what it would cost annually to bridge current community-information gaps range from $1 billion to $10 billion or more. Even with promising new philanthropic investments in local news and civic media, public funding is essential to addressing a deficit of this magnitude and building toward a community-centered local-news system.
The agenda also reflects a widespread frustration with public policy proposals that would benefit legacy newspaper chain owners such as Alden Global Capital. This has been a consistent theme for civic information advocates though by no means limited to them.
“Corporate media and hedge funds and broadcasters — these are folks who have the ears of lawmakers. They have resources to lobby. And so every starting place in the conversations about media policy is something that protects their interests,” Rispoli said. “A bit of it is saying this [civic media] part of the field deserves a seat at the table. But a bit of it is saying we should be the ones setting the table.”…
… The agenda attempts to address some of the biggest questions in local news policy, including how to protect editorial independence; which local news orgs should qualify for assistance; and, given finite public funding, which communities should be prioritized. Limiting public funds to legacy news organizations does not address their history of underserving communities of color as well as rural and low-income groups. It seems more likely to reinforce existing news deserts and information gaps. Candice Fortman, a John S. Knight Fellow at Stanford and former executive director of Outlier Media, was one of the 10 members that met over the course of 2024 to craft the public policy agenda.
“Many minds are working to build the agenda for the future of local news and how we will protect and fund reporting,” Fortman said. “This initiative, however, is about more than just saving local news; it’s about rebuilding it in a way that is equitable, sustainable, and deeply rooted in community needs.”…
[Scire recounts the elements of the Media Power Collaborative’s agenda (which is resonant with the thinking that led to the Public Broadcasting Act of 1967)…
… No one is saying any of this will be easy. Those estimates for closing the local news gap are enormous and it’s unlikely public funding alone is the answer. There are also important and fair questions about editorial independence and giving anyone — never mind the government — the power to decide which journalists and news organizations will receive taxpayer dollars.
Perhaps more pressingly, though, is that although majorities of both Democrats and Republicans approve of local media, the political polarization and harsh rhetoric at the national level has trickled down to state and local policy conversations. Funding for public media — already lower in the U.S. than in many other democracies — is under threat. Even paid news subscriptions for government workers have been criticized and exploited for political purposes in recent weeks. Federal legislation seems off the table for now, and we’ll have to see how many states and cities will see proposals to support local news become law.
I noted one other ominous sign. The Media Power Collaborative’s policy agenda mentions that research tells us low-income communities, communities of color, immigrant communities, and rural communities are the most underserved by our current local media system. The report includes a link to research published by the FCC. The report, which was live in late December, now shows a “page not found” error message…
On a possiblle future for local journalism: “A new public policy agenda has a vision for ‘local news for the people’,” from @sarahscire.com and @niemanlab.org.
See also: “America Needs a Working-Class Media” from @columjournreview.bsky.social (source of the image above)
* Jane Smiley
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As we pay attention, we might recall that it was on this date in 1954 Edward R. Murrow and his CBS news program, See It Now, examined Senator Joseph McCarthy’s record and anti-communist methods, now widely understood to have been a witch-hunt.
The program is often remembered for these words:
“We will not walk in fear, one of another. We will not be driven by fear into an age of unreason, if we dig deep in our history and our doctrine, and remember that we are not descended from fearful men — not from men who feared to write, to speak, to associate and to defend causes that were, for the moment, unpopular.
This is no time for men who oppose Senator McCarthy’s methods to keep silent, or for those who approve. We can deny our heritage and our history, but we cannot escape responsibility for the result. There is no way for a citizen of a republic to abdicate his responsibilities. As a nation we have come into our full inheritance at a tender age. We proclaim ourselves, as indeed we are, the defenders of freedom, wherever it continues to exist in the world, but we cannot defend freedom abroad by deserting it at home.
The actions of the junior Senator from Wisconsin have caused alarm and dismay amongst our allies abroad, and given considerable comfort to our enemies. And whose fault is that? Not really his. He didn’t create this situation of fear; he merely exploited it — and rather successfully. Cassius was right. ‘The fault, dear Brutus, is not in our stars, but in ourselves.’
Good night, and good luck.”
It is often referred to as “television’s finest hour.”
(One notes that McCarthy’s right-hand man, Roy Cohn, went on to become a Mafia lawyer (before being disbarred), a political fixer, and Donald Trump’s mentor.)
“Private equity has absolutely no reason to exist. The private equity holder has all the upside and the banks all the downside.”*…
As private equity investors become much more active in the Global South, Farwa Sial adds local economies and their labor forces to the list of those shouldering the risks of falling into the hands of operators whose m. o. is “slash and burn” (or here). Her point of reference is, as you’ll see the U.K., where private equity has wreaked havoc with essential services. But she might well have cited examples from U.S. (e.g., healthcare [or here] or infrastructure [or here]…
The effectiveness of private equity has been a subject of ongoing debate in countries of the Global North. There is substantial evidence highlighting the extractive practices associated with private equity operations across Western nations. Examples include the decline of the British high street and the financial instability of local councils in the UK, particularly in the provision of child care. Similarly, in the United States, private equity has been linked to the attrition of an already fragile healthcare system. In France, Germany and the UK., its influence has contributed to the deterioration of care homes, raising significant concerns about its broader social and economic impact.
In a recent blog, Michael Roberts characterized private equity as “vampire capital“, encapsulating the widely recognized critique that private equity firms function through a rentier model. These firms are frequently associated with practices such as asset stripping, worker lay-offs, and opting for excess leverage that increases the debt burdens of their acquisitions, all while failing to provide compelling evidence of value creation. This perspective aligns closely with earlier criticisms of private equity. During the 2000s, private equity operations were similarly likened to a swarm of locusts, reflecting widespread disapproval of their extractive and often detrimental economic practices.
In summary, such analogies emphasize the aftermath of private equity operations, leaving behind “carcasses and barren landscapes.” Nevertheless, the evidence of a hollowed-out socio-economic landscape in the Global North has not deterred the international expansion of private equity into countries of the Global South. On the contrary, ongoing reports of American private equity capturing British markets have emerged in tandem with the globalization of Western private equity. In so-called “emerging markets,” this expansion manifests in various forms, including an enthusiasm for deploying “moral money” through international development initiatives.
This article examines the role of private equity in Global South countries, focusing on three key characteristics: the escalation of indebtedness, the weakening of public markets, and the public subsidy function of development finance in facilitating private equity investments…
Exporting pain: “Private Equity in the Global South: Locusts? Vampires? The contagion effect” by @farwasial in @DevEconNetwork.
* Nassim Nicholas Taleb
(Image above: source)
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As we muse on models of modernization, we might recall that on this date in 1995, the Japanese Nikkei index fell more than 1,000 points from 19,241 to 17,785 as traders panicked over the devastation of the Hanshin (or Kobe) Earthquake. In total, the Nikkei had fallen 7.6% since the earthquake on January 17th.
The decline was the leading trigger of the failure of the 232-year-old Barrings Bank. A young trader, Nick Leeson, had speculated on Japanese derivatives. By this date in 1995, Leeson had make big bets that the Nikkei would remain between 19,000 and 21,000. As the market sank Leeson added to his positions, eventually accumulating over 60,000 futures contracts. Within a month Leeson quit the bank and was on the run (eventually he was arrested and served 3 years in jail). The losses he accumulated took Barings down; it failed and was sold to ING for 1 pound on March 6th.
“I analogize it to sex. You realize there were certain things you shouldn’t do, but the urge is there and you can’t resist.”*…
The estimable Cory Doctorow on the incursion of private equity into health care…
As someone who writes a lot of fiction about corporate crime, I naturally end up spending a lot of time being angry about corporate crime. It’s pretty goddamned enraging. But the fiction writer in me is especially upset at how cartoonishly evil the perps are – routinely doing things that I couldn’t ever get away with putting in a novel.
Beyond a doubt, the most cartoonishly evil characters are the private equity looters. And the most cartoonishly evil private equity looters are the ones who get involved in health care.
Writing for The American Prospect, Maureen Tcacik details a national scandal: the collapse of PE-backed hospital chain Steward Health, a company that bought and looted hospitals up and down the country, starving them of everything from heart valves to prescription paper, ripping off suppliers, doctors and nurses, and callously exposing patients to deadly risk…
[There follows an illuminating– and truly terrifying (backed up sewage in the wards; bats colonizing hospital floors; stiffed employees and vendors)– an unpacking of Steward’s deeds and a location of them in the larger landscape of private equity.]
… But despite Steward’s increasingly furious creditors and its decaying facilities, the company remains bullish on its ability to continue operations. Medical Properties Trust – the real estate investment trust that is nominally a separate company from Steward – recently hosted a conference call to reassure Wall Street investors that it would be a going concern. When a Bank of America analyst asked MPT’s CFO how this could possibly be, given the facility’s dire condition and Steward’s degraded state, the CFO blithely assured him that the company would get bailouts: “We own hospitals no one wants to see closed.”
That’s the thing about PE and health-care. The looters who buy out every health-care facility in a region understand that this makes them too big to fail: no matter how dangerous the companies they drain become, local governments will continue to prop them up. Look at dialysis, a market that’s been cornered by private equity rollups. Today, if you need this lifesaving therapy, there’s a good chance that every accessible facility is owned by a private equity fund that has fired all its qualified staff and ceased sterilizing its needles. Otherwise healthy people who visit these clinics sometimes die due to operator error. But they chug along, because no dialysis clinics is worse that “dialysis clinics where unqualified sadists sometimes kill you with dirty needles“
…
The PE sector spent more than a trillion dollars over the past decade buying up healthcare companies, and it has trillions more in “dry powder” allocated for further medical acquisitions. Why not? As the CFO of Medical Properties Trust told that Bank of America analyst last week, when you “own hospitals no one wants to see closed.” you literally can’t fail, no matter how many people you murder.
The PE sector is a reminder that the crimes people commit for money far outstrip the crimes they commit for ideology. Even the most ideological killers are horrified by the murders their profit-motivated colleagues commit.
Last year, Tkacic wrote about the history of IG Farben, the German company that built Monowitz, a private slave-labor camp up the road from Auschwitz to make the materiel it was gouging Hitler’s Wehrmacht on…
Farben bought the cheapest possible slaves from Auschwitz, preferentially sourcing women and children. These slaves were worked to death at a rate that put Auschwitz’s wholesale murder in the shade. Farben’s slaves died an average of just three months after starting work at Monowitz. The situation was so abominable, so unconscionable, that the SS officers who provided outsource guard-labor to Monowitz actually wrote to Berlin to complain about the cruelty.
The Nuremberg trials are famous for the Nazi officers who insisted that they were “just following order” but were nonetheless executed for their crimes. 24 Farben executives were also tried at Nuremberg, where they offered a very different defense: “We had a fiduciary duty to our shareholders to maximize our profits.” 19 of the 24 were acquitted on that basis.
PE is committed to an ideology that is far worse than any form of racial animus or other bias. As a sector, it is committed to profit above all other values. As a result, its brutality knows no bounds, no decency, no compassion. Even the worst crimes we commit for hate are nothing compared to the crimes we commit for greed…
“When private equity destroys your hospital,” from @doctorow. Eminently worth reading in full– and following his newsletter (from whence this comes).
* David Rubenstein, co-founder and co-chairman of the private equity giant The Carlyle Group, at a Harvard Business School Conference
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As we rethink returns, we might recall that it was on this date in 1944 that Louis Buchalter (AKA Lepke Buchalter, AKA Louis Lepke) was executed in the electric Chair at Sing Sing. One of the premier labor racketeers in New York City in the 1930s, he is better remembered as the creator (in 1929) and overseer (thereafter) of an efficient system for performing mob hits; while Buchalter never named it, it became known in the press as “Murder, Inc.“
The Cosa Nostra mobsters wanted to insulate themselves from any connection to these murders. Buchalter’s partner, mobster Albert Anastasia, would relay a contract request from the Cosa Nostra to Buchalter. In turn, Buchalter would assign the job to Jewish and Italian street gang members from Brooklyn.
None of these contract killers had any connections with the major crime families. If they were caught, they could not implicate their Cosa Nostra employers in the crimes. Buchalter used the same killers for his own murder contracts. The Murder, Inc., killers were soon completing jobs all over the country for their mobster bosses…
source
Murder, Inc. was believed to be responsible for as many as 1,000 contract killings before it was exposed in 1941, and Buchalter was finally charged and convicted of murder that same year.
“We use the term risk all too casually, and the term uncertainty all too rarely”*…
How private-equity giants are overhauling the financial system, and its potential impact on pensions…
A decade or so ago private equity was a niche corner of finance; today it is a vast enterprise in its own right. Having grabbed business and prestige from banks, private-equity firms manage $12trn of assets globally, are worth more than $500bn on America’s stockmarket and have their pick of Wall Street’s top talent. Whereas America’s listed banks are worth little more than they were before the pandemic, its listed private-equity firms are worth about twice as much. The biggest, Blackstone, is more valuable than either Goldman Sachs or Morgan Stanley—and has the confidence of a winner. “It’s the alternatives era,” proclaimed the company’s ebullient Taylor Swift-themed festive video in December. “We buy assets then we make ’em better.”
This is not, though, the business that has recently boomed for them. Traditional private equity—using lots of debt to buy companies, improving them, and selling or listing them—has been lifeless. High interest rates have cast doubt on the value of privately held companies and reduced investors’ willingness to provide new funds. It does not seem to matter. Core private-equity activity is now just one part of the industry’s terrain, which includes infrastructure, property and loans made directly to companies, all under the broad label of “private assets”. Here the empire-building continues. Most recently, as we report this week, the industry is swallowing up life insurers.
All of the three kings of private equity—Apollo, Blackstone and KKR—have bought insurers or taken minority stakes in them in exchange for managing their assets. Smaller firms are following suit. The insurers are not portfolio investments, destined to be sold for a profit. Instead they are prized for their vast balance-sheets, which are a new source of funding.
Judged by the fundamentals, the strategy makes sense. Insurance firms invest over long periods to fund payouts, including annuities sold to pensioners. They have traditionally bought lots of government and corporate bonds that are traded on public markets. Firms like Apollo can instead knowledgeably move their portfolios into the higher-yielding private investments in which they specialise. A higher rate of return should mean a better deal for customers. And because insurers’ liabilities stretch years into the future, the finance they provide is patient. In banking, long-term loans are funded with lots of instantly accessible deposits; with private assets and insurance, the duration of the assets matches the duration of the liabilities.
Yet the strategy brings risks—and not just to the firms. Pension promises matter to society. Implicitly or explicitly, the taxpayer backstops insurance to some degree, and regulators enforce minimum capital requirements so that insurers can withstand losses. Yet judging the safety-buffers of a firm stuffed with illiquid private assets is hard, because its losses are not apparent from movements in financial markets. And in a crisis insurance policyholders may sometimes flee as they seek to get out some of their money even if that entails a financial penalty. Last year an Italian insurer suffered just such a bank-run-like meltdown…
Funding pension providers with private equity: “The risks to global finance from private equity’s insurance binge” (gift article) from @TheEconomist.
And lest we think that publicly-funded defined benefit pensions are less risky, see “Akin to Fraud” by Mary Willliams Walsh, an account of the sorry state of the public pension fund in New Hampshire (the state with the second-oldest population in the nation).
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As we rethink retirement, we might recall that it was on this date in 1728 that John Gay‘s The Beggar’s Opera premiered. A “ballad opera” (a satirical work with lyrics set to vernacular music), it was a huge hit– it has been called “the most popular play of the eighteenth century“– a watershed in Augustan drama.
The original idea of the opera came from Jonathan Swift, who wrote to Alexander Pope in 1716 asking “…what think you, of a Newgate pastoral among the thieves and whores there?” Their friend, Gay, decided that it would be a satire rather than a pastoral opera.
In 1928, Bertolt Brecht (working from a translation into German by Elisabeth Hauptmann) adapted the work into Die Dreigroschenoper (The Threepenny Opera) in 1928, sticking closely to the original plot and characters but with a new libretto, and mostly new music by Kurt Weill.
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