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Private equity bought America's essential services

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Re: Private equity bought America's essential services

#281

Post by mikestew »

mmooss wrote: post #251
yardie wrote: post #195

Earlier quoted context omitted.

One of the tools we use was bought by PE last summer. When it was time to renew our support contract had tripled in price. I use it across 10 projects so our costs went from $200k to $500k. I let our account manager know this was unacceptable but even his hands were tied. Cancelled those contracts and let them know we were retooling with a competing tool and opensource to fill those gaps. The impression I got was we…

In this case, why doesn't someone else see a market opportunity and sell competing tools for less?

Because capitalism and customer brand awareness don’t work like your Econ class told you. There is a lot more nuance, starting with the inertia of customer’s awareness of brand reputation. But don’t listen to my ramblings, this comment in this thread does a better job than I would:

https://news.ycombinator.com/item?id=48295440

Re: Private equity bought America's essential services

#282

Post by mamonster »

elevation wrote: post #113

Not all PE problems are existential; they will be outcompeted. What keeps a newly graduated Veterinarian from opening her own clinic and undercutting the PE competition? With no massive loans on her books, she can profitably offer lower prices than PE can. She may even drive the local PE clinic out of business.

> With no massive loans on her books, she can profitably offer lower prices than PE can

Depends entirely on fixed vs variable costs. Rollups (which are very common now) work mainly because most "mom and pop" businesses can easily be "unlocked" by pooling the treasury, HR, accounting, commercial banking, supplier negotiations etc.

Re: Private equity bought America's essential services

#283

Post by regularization »

spyckie2 wrote: post #118

The irony is that PEs exist largely because of pension funds. So to sum it up (not so nicely) we are transferring value from our current standard of living to pay for retirement checks for our old folks. Pensions fund a significant part of PE and they do so because they need around a 7% return in order to look solvent. If they do not have the higher PE returns, they basically go out if cash in 10 years and everyone w…

> Pensions fund a significant part of PE and they do so because they need around a 7% return in order to look solvent.

Pensions fund PE because PE can do a short term cooking of the books in order to smooth out the growth curve. So the return is usually positive each year, not raising problems.

Also what does significant mean? Pensions are the main mechanism non-wealthy people are investing in PE. Being that millions are involved, you would expect pensions would have a sizable portion of the market, but family offices and high net worth offices dominate. If it offers above average returns, why would they not invest? PE is like every other asset class other than housing, the top 1% own a large chunk, the top 20% own the majority, and the bottom 50% own very little. Decisions are not driven by sone fireman, they are driven by the wealthy like everything else. And the origin and continuation of pushing for retirement to come from capital investment comes from the wealthy as well.

Re: Private equity bought America's essential services

#284

Post by [deleted] »

WarmWash wrote: post #220
protonbob wrote: post #201

Earlier quoted context omitted.

[flagged]

Everyday I am infinitely grateful I have the ability to understand nuance, and the mental firepower to be able to comprehend data coming from sources rather than tiktoks, twitter, and hyper-partisan news orgs. No one ever said the vaccine would prevent transmission. What they said was that it !could! prevent transmission. But no one would know before studies were done. What they did say is that it would lower mortali…

[deleted]

Re: Private equity bought America's essential services

#285

Post by parineum »

darkwater wrote: post #204
bryanlarsen wrote: post #174

Earlier quoted context omitted.

When my parents started farming they had about a half dozen large loans for the base farm, land, equipment, buildings and an operating loan to purchase seeds and other inputs in the spring. When they retired they didn't have any money in the bank besides the proceeds from their final harvest, but all their loans were paid off. That's where the profits went -- paying off the loans. The farm was their retirement saving…

But that's how it is supposed to be. You "just" need to have a system that incentives banks and small entrepreneurs to take on that risk, and makes it not a good investment for PE.

What makes that system rare is that there's a buyer who knows the business available. The new owner needs to understand the industry and convince the bank that they know how to run it as a successful business. PE do their homework on the business before they buy it and don't have to convince the bank that they know what they are talking about. The neighbors son isn't usually an expert on the your business.

Re: Private equity bought America's essential services

#286

Post by MichaelZuo »

derf_ wrote: post #254
spyckie2 wrote: post #118

The irony is that PEs exist largely because of pension funds. So to sum it up (not so nicely) we are transferring value from our current standard of living to pay for retirement checks for our old folks. Pensions fund a significant part of PE and they do so because they need around a 7% return in order to look solvent. If they do not have the higher PE returns, they basically go out if cash in 10 years and everyone w…

> So if you wanna fix or ban PE, solve pensions. We solved pensions. People have defined-contribution plans now. I would expect insurance float to dwarf pensions as a source of PE funding. The real reason PE exists is because it charges high fees. The financial industry does not make products to serve customer needs, though by happy accident that sometimes happens. It makes products to charge fees. Index funds remove…

Huh? Don’t many jobs still have gold plated pensions?

Like millions upon millions?

They need to be paid out somehow.

Re: Private equity bought America's essential services

#287

Post by zdragnar »

asolove wrote: post #229
zdragnar wrote: post #167

Earlier quoted context omitted.

> Companies can be bought and sold but not if it creates concentrations of economic power that allow them to dictate prices to vendors or customers. The policy in question (as stated) should have prevented Ma Bell and Standard Oil from getting to the point of being broken up.

1. If you are proposing something even stricter than previous antitrust rules, great. But getting back to antitrust itself is actionable is step 1. 2. You don’t have to prevent every case before it happens so much as just stochastically go after the worst ones to make it less economical for people to go take on debt to have huge swaths of consolidation. Letting the market work, after pricing in that egregious monopol…

If you want to move the goalpost of the conversation that's fine, but it's different from what the previous person was talking about, and why it doesn't make sense to blow up at them for it.

> You are a troll. There's nothing left to say. Bye.

is a wildly disproportionate response to the post, IMHO.

Re: Private equity bought America's essential services

#288

Post by _DeadFred_ »

goda90 wrote: post #77
amazingamazing wrote: post #21

Seems strange to me: 1. No one forced these people to sell. Is the idea that you can’t sell to an entity with more money? If you block that good luck with the world economy. 2. If above is ok is the idea that the new owner is inherently worse because they have more money, whereas as the smaller would be OK then where are the new entrants? 3. Going to the article it is clear enough. These industries just are not lucra…

People aren't starting competitor businesses because the hassle has become astronomically expensive, also largely due to rent seekers[0]. You need a space, but real estate is absurdly inflated. You need trained employees, but education is absurdly inflated and also poorer quality for the baseline. You need to pay a living wage and give healthcare benefits to attract labor, but cost of living and healthcare are skyroc…

Then there is regulatory capture in some markets. In this case:

You need a street legal product, which takes certification You probably need multiple firefighter associations, which takes not only meeting criteria but politicking with associations (don't know about firefighters but some associations are themselves captured and limit approval to their friends/connections).

Re: Private equity bought America's essential services

#289

Post by bombcar »

briffle wrote: post #277
spyckie2 wrote: post #118

The irony is that PEs exist largely because of pension funds. So to sum it up (not so nicely) we are transferring value from our current standard of living to pay for retirement checks for our old folks. Pensions fund a significant part of PE and they do so because they need around a 7% return in order to look solvent. If they do not have the higher PE returns, they basically go out if cash in 10 years and everyone w…

My State is essentially screwed for budgeting, because for years, our public retirement system garunteed "AT LEAST 8%" to accounts. Some years was much higher. I have a parent that make more, 10 years after retirement, then they ever did working. They moved around the year 2000 to accounts that don't have the AT LEAST clause, and they earn what they earn, but due to the backlog of people still retiring that were gran…

The "advantage" for pensions is that they get to "keep the principal" (unless it's setup even more insane than normally) whereas with a 401(k) the residual gets inherited.

Re: Private equity bought America's essential services

#290

Post by spyckie2 »

Galanwe wrote: post #207
spyckie2 wrote: post #118

The irony is that PEs exist largely because of pension funds. So to sum it up (not so nicely) we are transferring value from our current standard of living to pay for retirement checks for our old folks. Pensions fund a significant part of PE and they do so because they need around a 7% return in order to look solvent. If they do not have the higher PE returns, they basically go out if cash in 10 years and everyone w…

> The irony is that PEs exist largely because of pension funds. The irony goes way deeper than that. A large part of PE clients are university endowment funds. Harvard for instance has close to $60B in its endowment fund, 40% of which is invested in PE. At this point, Harvard is more an investment fund, with a university as side business.

I think, if you were to say there is a way where you can take $10b and have that money make more ROI with less risk than $1000 can, people would look at it and scream this is broken let’s policy this out of our economy. It defies all laws of a balanced economy (not a capitalistic one, a balanced one). It’s just like monopolies and we have strong laws against that.

But… if you were to say hey we need to pay our old people and we desperately need some way we can deploy massive amounts of money at higher rates of return, people will say… hmm well it’s broken but the alternative is worse so we’ll ignore it.

But now imagine you have a way to deploy large amounts of money and get large returns off that money. Every large amount of money (endowments basically) will jump on it because why not? That’s literally an endowment dream scenario.

So pension funds are the moral reason these other huge chunks of money to get large returns. PE firms have become a streamlined business model because they continue to improve what they are good at doing, and it’s insane that we haven’t passed laws against it yet. Except of course we can’t mess with it because it touches government workers.

So yeah even if we wanted to policy it out of our society it’s practically impossible from a social point of view.

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