How private equity kills companies and communities

Key takeaways

Machiavelli’s insights remain pertinent in modern politics, especially regarding the need for democratic institutions.
Private equity has a profound and often detrimental impact on various industries, including media, retail, and healthcare.
The Deadspin case exemplifies the damaging effects of private equity on creative and media-oriented businesses.
Healthcare is particularly vulnerable to private equity exploitation, leading to diminished care for patients in local communities.
Regulatory measures are necessary to hold private equity firms accountable and ensure they align their practices with the health of the companies they acquire.

Summary

Machiavelli and Modern Politics

The podcast begins by probing what advice Machiavelli might offer contemporary politicians, emphasizing the relevance of his thoughts about institutions and the balance of power in a democracy. It raises the timeless struggle of defining values in society, particularly in the context of taxation and wealth distribution.

Understanding Private Equity’s Reach

The conversation shifts to the pervasive influence of private equity (PE) in various sectors, particularly how it fundamentally alters businesses and affects American lives. The host notes how PE's operations are often opaque, making its effects hard to see until one examines the landscape deeply. Megan Greenwell shares her insights from her experiences at Deadspin, which was acquired by a private equity firm. Greenwell discusses her book 'Bad Company,' which dissects the mechanics of private equity in industries such as media, retail, healthcare, and housing.

The Deadspin Experience and Private Equity

Greenwell recounts her tenure at Deadspin, detailing the stark transition post-acquisition by private equity firm Great Hill Partners. She highlights the operational micromanagement that stifled creativity and diverged from Deadspin's original ethos, illustrating the disconnect between PE's profit-driven motives and journalistic integrity.

Healthcare and Community Impact

A significant part of the discussion centers on private equity’s disruptive role in the healthcare sector. Greenwell argues that patients and communities suffer as PE firms prioritize profit over providing comprehensive services. She discusses case studies, particularly focusing on rural hospitals and the challenges healthcare professionals face under PE ownership.

A Call for Regulation

In closing, Greenwell reflects on potential paths forward to counteract the negative effects of private equity. She references Elizabeth Warren's Stop Wall Street Looting Act as a blueprint for reform, advocating for systemic changes that would require PE firms to bear the financial risks that result from leveraged buyouts.

Show notes

Today, I’m talking with journalist Megan Greenwell about her new book Bad Company: Private Equity and the Death of the American Dream. It comes out June 10th. It's fantastic and maddening in equal measure. I highly recommend it.

In this episode, we discussed the genesis of Megan’s interest in the subject and its genesis in media — including her time as editor-in-chief of the website Deadspin, which underwent a very public PE takeover of its parent company. We also talk a lot about the healthcare industry, another major pillar of Megan’s book. I'm excited to hear what you think of this one.

Links:

Bad Company | HarperCollins

Private equity bought out your doctor and bankrupted Toys ‘R’ Us | Decoder

Private equity Is gutting America — and getting away with it | NYT

I was fired from Deadspin for refusing to ‘stick to sports’ | NYT

Will private equity be the next ‘Big Short’? | Marketplace

The profit-obsessed monster destroying American ERs | Vox

Why your vet bill is so high | The Atlantic

The investment firms leave behind a barren wasteland’ | Politico

Credits:

Decoder is a production of The Verge and part of the Vox Media Podcast Network.

Our producers are Kate Cox and Nick Statt. Our editor is Ursa Wright.

The Decoder music is by Breakmaster Cylinde
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