Who employs your doctor? Increasingly, a private equity firm • Hacker News Board

Re: Who employs your doctor? Increasingly, a private equity firm

#361

Post by civilized » Mon, Jul 17, 2023, 2:19 AM UTC

multicast wrote: post #342

ComputerGuru wrote: post #336

Earlier quoted context omitted.

> When PE loads up a firm with supposedly unsustainable billions of debt, someone is on the other side of that transaction, lending the billions. Who does that and why? Are they perpetual suckers, unaware of the decades of experience we have doing this? In at least some of the cases, the answer is absolute corruption with PE paying the other party “on the side” to sign off on a deal only a sucker would agree to. See…

Wrong. Banks who provided billions in loans to PE firms for decades, are now getting more cautious. But not because they fear of a failed investment, but certain investors of the bank do and that means problem for the bank. The Banks actually don't care what happens to the company being bought. An investment bank which provides a loan never sits on its debt. They are bundled into financial products like CDO, CLO etc…

The comment above completely fails to address the parent's claim. The parent claimed outright corruption in some cases, and cited an article which extensively documents such outright corruption.

"Wrong" is applicable to this reply rather than the original post.

Re: Who employs your doctor? Increasingly, a private equity firm

#362

Post by chmod600 » Mon, Jul 17, 2023, 2:32 AM UTC

Buttons840 wrote: post #335

chmod600 wrote: post #326

Earlier quoted context omitted.

That would be a great cartoon. For what it’s worth, I don’t like a lot of government meddling. Not because the free market is so great but because the meddling works out poorly and is subject to worse kinds of corruption and power games.

There's a balance. Political discourse too often talks about "capitalism", "socialism", or "communism", and half the people using those words don't know the difference, only that capitalism is the good American one. I'd like it if we instead focused on more understandable clichés, like "consumer choice is good", "market competition is good", etc. When considering a new regulation it's hard to discuss whether it's soc…

“…it's easier to discuss whether it will increase consumer choice, or make entering and competing in markets easier for new companies.“

But then you also need to discuss the government power structures you need to put in place to create and implement that regulation. And when you look out ten, twenty years how that power structure will be twisted and abused.

Government always offers the same deal: grant government more power and they will solve problem X. But over time the people wielding that power change from people interested in problem X into people interested in the power. And the power is never contained to problem X.

Re: Who employs your doctor? Increasingly, a private equity firm

#363

Post by fairity » Mon, Jul 17, 2023, 2:33 AM UTC

bko wrote: post #340

YPCrumble wrote: post #188

Earlier quoted context omitted.

It feels like most answers to “who is at the losing end of any transaction” is pension funds, which are guaranteed by the government. So by your theory PE firms are sucking in taxpayer money by fleecing pension funds run by financiers who aren’t smart enough to get into PE. Basically until pension funds aren’t bailed out by the government this will continue.

Pension funds are investors in PE, they're not the debtors. In other words, if PE firms do well, their investors (pension funds) do well. They're also not stupid This whole conversation about PE is non-sensical. It's all based on this naive notion that PE firms borrow money to buy investments and use that money to pay themselves, more often than not bankrupting the original company, and since it was borrowed money, t…

> So why does this topic have such poor comments?

I’m sure this won’t be a popular opinion, but I believe it’s basically class warfare at work. You have, here, a lot of upper middle class engineers whose egos are protected if they believe that the richer class is greedy and unethical.

Re: Who employs your doctor? Increasingly, a private equity firm

#364

Post by chii » Mon, Jul 17, 2023, 2:37 AM UTC

idontpost wrote: post #324

s1artibartfast wrote: post #220

Earlier quoted context omitted.

Regarding 2, the still requires you to believe that either Banks or Pension funds are fine with hemorrhaging millions or billions of dollars buying PE debt and haven't figured it out over the course of a half century. I think the real answer is more unsettling for some. PE debt has volatility but is on net a profitable investment. You can smooth out volatility with volume and by spreading it around. This is the only…

> This is the only explanation that doesn't depend on a source of dumb money that can never learn buying this debt. No it isn't. A simpler explanation is that the people making the decision aren't the ones paying for the failure. I see this all the time at the executive level in finance -- people will knowingly make bad deals if it gets them their bonus.

but how are they getting a bonus if the deal is bad? Esp. if it has gone on for a while?

Re: Who employs your doctor? Increasingly, a private equity firm

#365

Post by thisgoesnowhere » Mon, Jul 17, 2023, 2:40 AM UTC

Havoc wrote: post #333

Must admit I find hn comments on PE anything quite strange. VC good, PE evil when in many cases it’s just different stage of life of the same company & what the means for funding sources

I think the general idea is that VC and PE are parasitic but at least VC helps to build.

PE often destroys as this article shows.

Re: Who employs your doctor? Increasingly, a private equity firm

#366

Post by boppo1 » Mon, Jul 17, 2023, 2:44 AM UTC

civilized wrote: post #109

lordnacho wrote: post #46

To me it seems like PE has simply discovered a loophole in the system. We want a system where creating value for people is rewarded, but PE has found a way to legally get the rewards without improving society. Normally this is called a scam or a fraud, and there are laws for standard stuff like taking people's money without giving them what you promised. For PE however, they've found a way around it, using the machin…

I think it should be illuminating to balance narratives like this with simple questions along classical economic lines: 1. Why is private equity ending up with all these resources? Who is selling to them and why? Why didn't this happen before? It's not like PE is new. 2. When PE loads up a firm with supposedly unsustainable billions of debt, someone is on the other side of that transaction, lending the billions. Who…

>1. Why is private equity ending up with all these resources? Who is selling to them and why? Why didn't this happen before? It's not like PE is new.

Centrally planned benchmark interest rates below market equilibrium took capital away from activities that produced value today and handed it to people who promised unrealistically optimistic future growth. Central planning doesn't work.

People have gone from criticising the FOMC to openly mocking it. Google 'transitory meme'.

Re: Who employs your doctor? Increasingly, a private equity firm

#367

Post by ramraj07 » Mon, Jul 17, 2023, 2:49 AM UTC

thisgoesnowhere wrote: post #365

Havoc wrote: post #333

Must admit I find hn comments on PE anything quite strange. VC good, PE evil when in many cases it’s just different stage of life of the same company & what the means for funding sources

I think the general idea is that VC and PE are parasitic but at least VC helps to build. PE often destroys as this article shows.

So VC is Bhrama and PE is Shiva. One monetized building and another the deconstruction. If you're mad at just the destroying entity you're missing the point. The rot of PE stems from the same incentives of VC from where I sit and see.

Re: Who employs your doctor? Increasingly, a private equity firm

#368

Post by boondoggle16 » Mon, Jul 17, 2023, 3:16 AM UTC

thfuran wrote: post #351

boondoggle16 wrote: post #79

Earlier quoted context omitted.

Don't people live long enough already? We can't pay for our retirees. Old age medical care costs $1M+. I know the morally correct thing to do when I get old - give that money to kids instead. Vampires.

What's the right age for us to start decrying someone's continued existence? Is it wrong for people with chronic health conditions to seek treatment rather than just dying?

> What's the right age for us to start decrying someone's continued existence?

It's not about age, it's about the cost of living vs the quality of life. These "miracle treatments" are often anything but. In many cases, they are a million-dollar ticket to a tortured existence.

If I live 60+ years, I've had a good run... if I need a $1MM treatment, my body is likely in a very bad state. My quality of life can't be very good at that point.

So when I think of my options:

- Extend my medical-torture hell for another 2 years

- Buy a home for both of my children

- Do a LOT of cocaine for 3 months

I'm really not inclined to go with the medical-torture hell.

I'm not afraid of death, we are all going to die, and in a finite universe, I consider it morally wrong to use limited resources on a project with awful diminishing returns. Especially when the project doesn't even make me feel good.

So what does it get me? 2 more years of talking to my children? If I've lived 60 years, I've taught them enough. My life is enough, and enough is enough. No need to be greedy about it when your life is already good.

> Is it wrong for people with chronic health conditions to seek treatment rather than just dying?

I don't think so, personally. The same arguments do not apply, this is a completely different situation.

https://slatestarcodex.com/2013/07/17/who-by-very-slow-decay...

Re: Who employs your doctor? Increasingly, a private equity firm

#369

Post by Spooky23 » Mon, Jul 17, 2023, 3:47 AM UTC

bko wrote: post #340

YPCrumble wrote: post #188

Earlier quoted context omitted.

It feels like most answers to “who is at the losing end of any transaction” is pension funds, which are guaranteed by the government. So by your theory PE firms are sucking in taxpayer money by fleecing pension funds run by financiers who aren’t smart enough to get into PE. Basically until pension funds aren’t bailed out by the government this will continue.

Pension funds are investors in PE, they're not the debtors. In other words, if PE firms do well, their investors (pension funds) do well. They're also not stupid This whole conversation about PE is non-sensical. It's all based on this naive notion that PE firms borrow money to buy investments and use that money to pay themselves, more often than not bankrupting the original company, and since it was borrowed money, t…

> But no one can answer, why would anyone lend PE firms money if it's a bad investment?

Remember the housing crisis? As long as you can align the debt with an appropriate tranche, institutional investors like diversification and risk (in that part of the portfolio).

Also, these types of debt can make money in the short term. My father in law bought a beach house with a KMart bond trade. After they emerged from bankruptcy, everything was great! (Lol)

Re: Who employs your doctor? Increasingly, a private equity firm

#370

Post by opportune » Mon, Jul 17, 2023, 4:05 AM UTC

tryptophan wrote: post #35

alach11 wrote: post #4

When possible, I prefer people who work for me to have incentives that are aligned with mine. PE-owned medical practices and even many private practices throw that out the window, with financial incentives to do procedures or run tests. I was talking to my wife’s obstetrician about this last week and he also feels strongly about it. He’s paid a flat salary and gets no financial benefit for a c-section vs. an inductio…

Flat salary is an incentive to do the easiest option or least work. You can’t win with the incentive game. One nasty way that can manifest is to under test because if you don’t find anything you don’t have to do anything.

I think there’s more nuance than that. I’m guessing you work in a job like tech where incentivizes are typically more carrot-based.

IMO the effectiveness of carrot (variable bonuses/pay, a many-tiered level structure with promos between as “carrots”, being disciplined or fired as “sticks”) incentive structures depends on how easy it is to evaluate good vs bad work at a job. In tech it can be hard to distinguish mediocre vs bad work which is why we don’t have a lot of stick incentivizes; good work is a lot easier to recognize so instead we have carrot incentives.

While for some medical jobs like being a surgeon good work is easier to recognize vs mediocre work, it’s a lot easier to identify bad work: bad medical outcomes, low patient satisfaction, less patients seen per hour. So as a result you don’t need as many carrot incentivizes as in tech and can probably get by with more stick incentives. Fwiw I think carrot incentives often have a lot of drawbacks as people optimize for the carrot directly rather than “doing a good job”. With sticks you optimize against sticks, but when you have signals like patient satisfaction to account for, you have a very strong stick signal.